Investing is the allocation of capital into assets or projects with the goal of increasing one’s capital over the long term, while being aware of market fluctuations. For many people, the word “investment” is often associated with something complex and accessible only to experienced financial professionals or individuals with significant savings. However, this is not the case. To get started, you do not need in-depth financial knowledge or to spend countless hours analysing financial markets.

The core idea is simple: invest a portion of your money today to grow your capital over time and expand your financial opportunities in the future. Investing is a way to use savings purposefully instead of keeping them in a savings account, where money gradually loses value. The most important thing is to understand what investing is, what your goals are, and which factors to consider when making decisions.

What is an investment?

In finance and economics, an investment is most commonly defined as allocating resources with the aim of gaining benefits in the future. This definition highlights two key aspects: the investment is made today, the result is expected in the future, and that result is never fully guaranteed.

This leads to an important conclusion: investing is not simply “putting money into” a product. It is a conscious decision about how to use your resources to increase future opportunities.

To better understand what investing is, it is also important to distinguish it from activities that are often mistakenly considered investments.

An investment is not:

• everyday consumption

• impulse purchases

• hoping for “quick success”

• taking on debt in the hope that it will “somehow pay off”

Why do people choose to invest?

Money has a time value. €100 today is not the same as €100 in ten years. Over time, prices change and so do opportunities to use or grow money. This is why investing is important: if money simply sits unused, inflation gradually reduces its value.

Investments typically serve one or more of the following goals:

• Capital growth – increasing value over the long term

• Regular income – interest, dividends, or rental income

• Future financial security – savings for retirement, education, or housing

The key takeaway: investing is a tool that not only helps preserve the value of money but also grow it, creating greater opportunities for the future.

Where does investment return come from?

Investment return is what an investor earns in exchange for the money invested and the risk taken. Returns can take different forms and are not always immediate.

Typically, returns come from three main sources:

• Value appreciation – the investment increases in value over time (e.g. shares)

• Interest – income from lending money (e.g. bonds)

• Dividends or profit distribution – income from companies or funds

Costs must also be considered: commissions, management fees, taxes, and currency exchange differences. Many beginners focus only on potential profits, but costs can significantly affect long-term results.

Types of investments: stocks, bonds, ETFs, P2P, ABS

In everyday terms, investments answer the question: “Where is my money being invested?” Common investment types include:

• Stocks – ownership in a company with potential for price growth and dividends

• Bonds – lending money to governments or companies in exchange for interest

• Investment funds and ETFs – diversified portfolios that help reduce risk

• Real estate – income from rent or value growth, though liquidity may be limited

• P2P lending – financing loans to individuals or businesses for interest income

• Asset-Backed Securities (ABS) – loans secured by real assets (such as consumer loans or car loans), where investor income comes from principal and interest payments, and collateral helps reduce risk

Investments are not limited to financial markets. In economics, investments also include spending on equipment, inventories, technology, or human capital such as education and skills.

What are the risks of investing?

This section is for informational purposes only and does not constitute individual investment advice. Investment outcomes may vary depending on the instrument, term, and market conditions.

Generally, the higher the expected return, the higher the risk. Safer investments usually offer lower returns, while riskier ones provide higher potential gains but also losses.

Main risk types include:

• Market risk – value declines due to market movements

• Credit risk – the borrower may fail to repay

• Liquidity risk – inability to convert investments into cash quickly

• Platform or intermediary risk – importance of understanding platform reliability and regulation

Diversification helps reduce the impact of individual investments on overall results.

How to start investing: steps for beginners

Starting to invest may seem complex due to decisions about goals, time horizon, amounts, instruments, and providers. The key is to start with small amounts and gradually learn the process.

Starting early with small investments is often better than waiting for the “perfect moment”, as time and consistency help smooth market fluctuations.

Taxes and costs: what to consider in Latvia

Before investing, it is important to assess applicable fees, currency exchange costs, and tax obligations. In Latvia, income from capital investments is subject to a 25.5% personal income tax (PIT), which applies only to Latvian tax resident individuals, in accordance with the Law “On Personal Income Tax”.

Legal entities are responsible for declaring and paying taxes independently, in line with the tax regulations applicable to their legal form and country of residence. Investors who are tax residents of other EU countries may be eligible for a reduced personal income tax rate, depending on the double taxation agreement and the applicable tax regime between Latvia and their country of residence.

In certain cases, tax may be withheld automatically, while in others investors are required to declare income themselves.

How to choose a reliable investment platform?

When choosing an investment platform, consider indicators that support investment safety. For example, TWINO as a licensed investment platform offers:

• Regulatory compliance – operating under EU financial regulations (MiFID II) and supervised by the Bank of Latvia

• Investor protection – funds protected up to EUR 20,000

• Market experience – over 10 years of experience, supporting 22,000 investors

• Transparency – regular reporting and clear portfolio information

Investing – a tool to preserve and grow wealth

Investing is not just for professionals. Even small, regular investments can help grow capital and provide financial security.

Remember: invest thoughtfully, compare risks and costs, and take a long-term view.

For more information about TWINO investments, please contact our support team.