Investing mistakes in fixed-return investments often do not appear as sharp losses, but rather as unearned profit. That makes them harder to spot. But waiting unnecessarily long for the right moment, choosing a term based on the rate alone, idle periods between investments and failing to use the compound interest effect can all easily become the reason why the number in your account does not grow to the maximum realistically possible extent.

In brief:

• The most common investing mistakes in fixed-return investments do not always mean lost money. Often they simply mean a smaller amount earned than was possible in that particular situation.

• Waiting for the right moment to start investing means leaving your money idle. If an investment is suitable, what matters is not only the return, but also how quickly the capital starts earning.

• An annual return is not the same as the annual income in the first month. Illustratively, if an investment has a 6% annual return, 10,000 euros over one month gives approximately 50 euros before taxes, if the calculation is made proportionally to time.

• The investment term should be chosen not only based on the return offered, but also on the moment when the money will be needed. The investment time horizon is one of the most important factors when choosing an investment.

• By reinvesting the interest earned, capital can start earning from previously received interest as well. It is precisely compound interest that makes a substantial difference over a longer period.

Why do investing mistakes look different for a fixed-return investor?

A large share of popular content about investing mistakes is created with an investor in mind whose result changes depending on the price of an asset, market rises and falls, crises and the like. In fixed-return investments, however, the situation is different. If an investment has a set fixed return and the payment provided for in the contract is made in accordance with the terms, the main question is not whether the price is higher or lower on a particular day.

A different way of thinking applies here.

If the return is contractual and fixed, the result is largely determined by three practical things:

• How quickly the money starts working.

• How long it works without interruptions.

• Whether the interest earned is reinvested.

This is precisely where most mistakes arise.

Is it worth waiting for the right moment to start investing?

If there is no specific reason to postpone investing, for example the money will be needed in the near future, then the simple answer is no, it is not worth it.

In investing, too, the saying that time is money holds true. While your funds are not invested, they also generate no return.

For example:

Let us assume that 5000 euros are available for investing and the contractual annual return of the investment offered is 6%. If the money is invested immediately for 3 months, in a simplified calculation the gross interest income would be approximately 75 euros.

If those same 5000 euros are held idle for three months, those approximately 75 euros become unearned profit. It does not appear as a loss on an account statement, which is why it is so easy to overlook.

This calculation is illustrative only, presented as a gross result and does not take taxes into account. The actual result will depend on the terms of the specific investment and other factors.

You will find more valuable advice for beginner investors in the article about the first steps in investing.

Does an annual return mean I will receive the annual profit within the first month?

No, an annual return is an annual return, not the amount you receive in the very first month.

This is a typical investing mistake among beginners and those using fixed-return products for the first time.

Illustratively, if 10,000 euros are invested and a 6% annual return is set, in a simplified calculation the annual gross interest would be 600 euros. If that is divided across 12 months, the interest income for one month would be approximately 50 euros before taxes.

How to choose the investment term?

The term should be chosen based on when the money will be needed, and only then should you look at the possible return.

The investment time horizon is the period over which you plan to hold the money in an investment. Recognised investor education resources, including Investor.gov, also emphasise that understanding when the funds will be needed is essential when choosing an investment.

Let us imagine two options

You have 5000 euros that will be needed in six months. One investment has a six-month term and a 6% annual return. The other has a 12-month term and a 7% annual return.

The second option looks more attractive on paper. However, a higher return in itself does not make it more suitable if you will need the money in six months.

In this case, the cost of the mistake may not simply be a smaller profit. It may be the need to look for other financing or to give up on the planned goal. The exact cost of such a choice cannot be calculated in advance, as it depends on the specific situation.

If an investor does not know when the money will be needed and the priority is greater flexibility, one of the options is TWINO FLEXI, which we offer. It is an investment product with a fixed 6% return, but it is important to remember that it is not a bank deposit and is not covered by the state deposit guarantee. The investment is exposed to investment risk, while the actual return on investments depends on the performance of the portfolio. Before making a decision, familiarise yourself with the product prospectus and terms.

What happens if money sits idle between investments?

This is another one of those investment mistakes that investors tend to overlook. Money waiting for the next investment generates no return at all.

Illustratively, one 8000 euro investment in TWINO FLEXI ends on 1 March, but the next one is only planned for 1 May. If this money had continued earning the 6% annual return offered by FLEXI for two months, in a simplified calculation the unearned gross amount would be approximately 80 euros.

This is not a loss. The investor still has the same 8000 euros. But there is also no approximately 80 euros that the capital could theoretically have earned during this time.

That is why it is important not only to choose the next investment, but also to think about how to reduce unnecessary interruptions between investments.

Why is it important to reinvest the interest earned?

Reinvesting allows the interest itself to become part of the capital and earn interest.

Investor.gov explains compound interest as receiving interest not only on the initial capital, but also on previously accumulated interest.

Illustratively, let us assume that 10,000 euros are invested with a hypothetical 6% annual return and the interest is reinvested once a year.

After three years, using a simplified compound interest calculation, the amount would be approximately 11,910.16 euros. If the interest is not reinvested and is withdrawn each year, the total interest income over three years would be 1800 euros, so 11,800 euros in total.

In provisional calculations, not taking taxes into account, the difference is 110.16 euros.

The longer the capital remains invested and the more interest is reinvested, the greater the significance of compound interest becomes. That is precisely why reinvesting is not a complicated investment strategy, but a way to let capital work continuously.

How to avoid the most common investing mistakes?

Assess an investment not only by its return, but by the entire cycle of how the money works.

Before investing, it is worth asking yourself five questions:

• Is the money currently invested or simply waiting?

• How long will it actually work?

• Does the chosen term match the moment when the money will be needed?

• What will happen to the interest earned?

• Do I fully understand the risks, liquidity and terms of this specific investment?

This perspective helps to notice those investment mistakes that are often not visible in a return comparison table.

This does not mean that a higher return is always a bad choice or that a lower return is always better. The return should be assessed together with the risk, term, liquidity and the purpose the money is intended for.

In conclusion

Investing mistakes do not always look like an obvious failure. In fixed-return investments they often simply reduce the final result.

That is why the result is not determined only by the return chosen. It is also determined by how quickly the money starts working, how long it works without interruptions and whether the interest earned continues to work.

If you want to better understand the opportunities in fixed-return investments, it is worth comparing not only the return but also the terms, liquidity, risks and reinvestment options, and always familiarising yourself with the terms and documentation of the specific product before making any investment.

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This material is for informational purposes and is not individual investment advice.