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Once you have money, you have to invest. It seems almost as evident as “if you want to live, you’ll have to breathe.” Private bankers are lining up to help you to invest your money wisely. Unfortunately, there are so many service providers, so many different approaches to investing, and so many different financial products to choose from. And then there are these annoying cocktail parties, where you have to listen to those wise Midas-type guys who seem to transform everything they touch into gold. It is confusing. What am I missing? What am I doing wrong? Climbing Mount Everest seems so easy compared with crossing the jungle of the investment world.

In this part, we follow a step-by-step approach to unmask the secrets behind investing. This approach doesn’t make investment necessarily an easy thing to do, but it will help you to be much better prepared for your meetings with investment advisers.

The first step is to begin with the right question. Rather than asking, “How should I invest my money?” we recommend you to first spend some valuable time understanding why you should invest. As long as you don’t know why you invest, don’t invest.

We assume that everyone agrees we should not invest just for the sake of it, nor just to amass as much wealth as possible or to legitimize the existence of our banks. Investing should have a purpose for you. Why would you invest? We address this question in Chapter 2.

Only once you grasp the rationale of investing does it make sense to have a closer look at the investment process itself. It should be noted that with regard to investments, it is not sensible to take a one-size-fits-all approach. As you can’t approach investments in generic terms, the second step in the process toward investing is to define your personal financial situation as well as your investment personality. The more accurate this definition, the higher the likelihood that you will invest in a manner that really suits you and your situation. This second step, better known as risk–return profiling, is the subject of Chapter 3.

The main objective of the risk–return-profiling step is to understand how much risk you are able and willing to take, and how this relates to the expected return. As a rule, the more risk you are prepared to take, the higher the expected return. However, the reverse also applies: The more risk you take, the higher the potential loss. This explains why it is essential to have a basic understanding of investment risks as well as of the ways these risks can be mitigated. That is why in Chapter 4 we focus on investment risk.

We are still not ready to invest. Chapter 5 addresses the importance of discipline. To ensure investment decisions are not dependent on your mood or on the mood of your investment manager, you agree on a certain approach. These are effectively the rules and principles guiding the investment process, thus making it more transparent and predictable.

As an investor you have different options. You can make your own investment decisions or rely to a greater or lesser extent on the expertise of specialists. Whatever you decide, you’ll have to select an institution to work with. In Chapter 6 we share considerations with regard to deciding on your desired level of involvement in the investment process, as well as on the selection of the most suitable service provider.

Once you have walked through these steps you should be well-equipped to get the most out of the investment management relationship with your private banker.