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Short practical guide for the new investor

Investing:how to get started

Do you want more returns for your savings? Do you want to build a nest egg for your retirement? At some point, do you plan to give a little extra to your children or grandchildren? Investing can help you with that.

It’s never too early or too late to start investing. If invested over the long term, your money will potentially earn you more than leaving it sitting in a savings account.

The purpose of this guide is to show you the benefits of investing. You will also discover the main pitfalls to avoid, as well as valuable tips to get you started.

Happy reading!

Stock market terms – the basics p. 41 >

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1 Why you should consider investing 4

2 Saving or investing: what’s the best option? 6

3 Do you have to be rich to invest? 12

4 I don’t know anything about the stock market How do you invest? 14

5 Which products should you invest in? 17

6 And if you only retain one important principle? 21

7 How to choose the right time to invest? 24

8 Investing, what are the risks? 27

9 Investing, how much does it cost? 31

10 Keep your feet on the ground 34

11 Investing at ING, the alternatives 39

Contents

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* Source: https://statbel.fgov.be/fr/themes/prix-la-consommation/indice-des-prix-la-consommation That means

All-time low interest rates

For the past three years, savings interest rates have stagnated at 0.11% in Belgium. Therefore, 1,000 euros placed in a savings account will pay out exactly 1.10 euros per year. But, at the same time, inflation is increasing.

At the end of January 2020, inflation in Belgium reached 1.41%*

Inflation 1 - Savings 0

In the long run, investors are generally better off than savers, especially when the return on savings is at an all-time low. In the short term, however, investors may face market fluctuations. We’ll come back to this point.

You’ve never thought about investing? Here are some good reasons to get started.

Why you should consider investing1

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• The price of goods and services has increased by 1,41%, while savings have stagnated at 0.11%. By saving, you therefore lose purchasing power

• In the long term, investing has the potential to pay back more than saving

In a nutshell

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Only invest money that you don’t need in the short term.

A reasonable investment horizon would be at least five to seven years. Spreading your investments over a longer period will allow you to offset any losses caused by stock market fluctuations.

To mitigate the impact of these fluctuations, you can opt for a periodic investment.

This involves investing the same amount at regular intervals (every month for example).

If, on the other hand, you are planning to buy a house or envisage significant expenses in the near future, it is best to keep your capital available rather than investing it.

Saving or investing: what’s the best option?

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Avoid investing too much capital. It is better to keep a savings reserve, in order to cover daily expenses and unforeseen expenses, for example: a faulty household appliance, surgery, a new car...

The ideal savings reserve amount can vary greatly from one household to another. Do you have a partner or are you married or single? Are your children at school? Do you rent or do you own your home?

Saving

A reasonable savings reserve represents on average three to six months salary

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Once you have built up your reserve and are saving for your pension, think about how to use the money you do not need in the short term. A good option is to invest it.

The chart on the next page illustrates the potentially higher long-term return on investment relative to savings.

Choose long-term investments to absorb the ups and downs of the stock market. The market is cyclical and has always recovered from past declines. However, it can take some time.

Invest

As soon as you have enough money, set up a supplementary pension with the best savings plan for your future needs.

Under certain conditions, you can deduct from your taxes a part of the money invested in your pension savings.

In 2020, payments of less than or equal to 990 euros are entitled to a tax reduction of 30% of the amount paid. Pay in from 990.01 to 1,270 euros and the tax advantage decreases to 25%.*

Building your pension

Find out more about how you can save for your pension and the different solutions we can offer you at ing.be/pension

* These figures apply to the 2020 income year (tax year 2021). This tax regime applies to a non-professional customer who is a tax resident in Belgium. Taxation depends on your individual situation and may change in the future

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Evolution of a capital of 10,000 euros invested over 20 years

• Indices used, expressed in euros - Shares: MSCI World NR (Net Return) USD - Bond: Bloomberg Barclays Global Aggregate TR (Total Return) USD - Cash: EAA Fund EUR Money Market

• Period: from 1/01/2000 to 01/06/2020

01/2001

25,000

20,000

15,000

10,000

5,000

0

€

01/2005 01/2008 01/2010 01/2016 04/2020

06/2020

£€ 19.058€ 20.505

€ 12.831

Cash Bonds Equities

Lehman BrothersBrexit

Coronavirus

Attacks on the WTC

• Past performances are not a reliable indicator of future returns.

• The evolution of the euro is influenced negatively or positively by exchange rate fluctuations.

• Possible costs and expenses are not taken into account.

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The investment horizon differs according to age. A long-term investment horizon makes it possible to invest more aggressively. If you are willing to accept more risk, it also means you will potentially get a higher return.

As you get older, it is better to build up more savings, for example to deal with unexpected health expenses. This is also the time for lower risk investment. Bear in mind that stock markets often take several years to recover from a crisis; this is less of a problem when you are younger.

What to do with your investments when you become older?

Nowadays, youth and old age have become very relative concepts. Life expectancy continues to rise. It now stands at 81 years.

This is why we often recommend the following principle: from the age of 50, hold 50% in equity funds and 50% in less risky assets (liquid assets, Belgian real estate, quality bonds).

However, everybody is different. Your ING advisor will help to create a strategy tailored to your profile and needs.

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• Only invest the money you don’t need in the short term

• A reasonable investment horizon would be at least five to seven years

• A reasonable savings reserve represents on average three to six months of net salary

• Take out a pension savings plan before investing

In a nutshell

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Small or big salary, everyone can invest! Tailored solutions exist for all amounts and for each and every investment profile.

25 euros per month is enough to take your first steps in the world of shares and funds, at your own pace.

If you’re wondering whether to invest 5,000 euros, 10,000 euros or more from the outset… it’s entirely possible.

Invest is not the

prerogativeof the rich!

Do you have to be rich to invest?3

“

”

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• 25 euros per month is enough to start investing

• Tailored solutions for different investment profiles

In a nutshell

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Many investors struggle to understand the mysteries of the stock market. Why did the share price increase from 12.07 euros to 12.09 euros in less than a minute? Or why does the share price plummet when a company contemplates hiring 8,000 additional employees?

I don’t know anything about the stock market. How do you invest?

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Lacking financial knowledge?Entrust the management of

your funds to experts who know the financial markets inside out

No time to track your investments?

Each quarter, you will receive a report detailing the performance

of your funds.

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Investment funds could be an accessible option*

* Fund means ‘Undertaking for Collective Investment’ (« UCI »). UCI is a general term used for different undertakings collecting money from the public and whose activity consists of managing an investment portfolio. The term ‘fund’ covers collective investment schemes in the form of an investment company (such as the Sicav), as well as mutual funds, and their sub-funds. On p. 41 we give a more detailed definition of the funds.

Guided open architecture to respond to your profileIf you decide to invest in funds, opt for a bank that practices guided open architecture, namely a bank that, as well as internally managed products, offers funds from other financial institutions or other management funds. ING has been operating with this type of architecture for many years by selecting the best funds from an offer of external firms.

The stock market is a tool that companies use for self-financing by directly matching supply and demand for capital. Companies need funds to grow: to build factories, develop drugs, market new services and more...

They obtain this money from:

• banks • private investors • the stock market, by issuing shares or bonds

which they offer to investors in return for the money they invest.

You can, of course, sell the shares and/or bonds you have purchased at any time, at a price that varies according to the supply, demand and performance of the company. Every day, hundreds of millions of shares and bonds change hands around the world.

Stock market in a nutshell

Thanks to guided open architecture, ING objectively offers funds tailored to the profile, interests and needs of every investor.

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• Lack of time or interest is not a barrier to investment

• An investment fund is your best option

• Choose a bank that operates guided open architecture

• A periodic report will help you track the performance of your funds

In a nutshell

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It all depends on your investment profile, which is like a kind of financial passport.

This profile is based on your financial circumstances, your investment knowledge and experience, your investment horizon (i.e. the period during which you are able to invest a given amount of money without needing it), the risk you agree to take, your tolerance for loss, your ability to understand market fluctuations, etc.

Which products should you invest in?5

Only invest in products that suit your

investment profile and which you feel comfortable with.

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There are four types of investment profile

Dynamic You seek the growth of your capital in the long term. In order to achieve a potential high return, you dare to take risks on your capital and fluctuations can be significant and sudden.

Moderated

Protection of you capital is important to you. In order to benefit from a potential additional return, you are prepared to take moderate risks on your capital, and you therefore accept moderate fluctuations.

Balanced You are looking for a balance between stability and growth of your capital. With a view to a potential higher return, you are willing to take a calculated risk on your capital and you accept that this can fluctuate.

Conservative

Protection of your capital is essential for you. In order to benefit from a potential additional return, you are prepared to take a limited risk on your capital.

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Shares Bonds

Conservative 10 %* 90 %*

Moderated 25 %* 75 %*

Balanced 50 %* 50 %*

Dynamic 75 %* 25 %*

In order to establish your investment profile, you will be asked to complete a questionnaire, either online or in a branch office. It is important to answer the questions carefully. Your investment profile is designed to protect you against risks. Transactions are only performed in accordance with your risk profile, meaning you can avoid products that sooner or later may make you feel uncomfortable.

*gemiddeld

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• Invest in a product that fits your investment profile

• There are four investment profiles: conservative, moderated, balanced and dynamic

• Your advisor will help you determine your profile via a questionnaire

In a nutshell

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Diversification: an investor’s key word

D i v e r s i f i c a t i o nAs a novice investor, you certainly hope to get a good return. But you also want to protect yourself from risk.

One way to do that is to diversify your investments.

In order to obtain a potentially higher return, you have to invest for the long term and diversify your investments.

No matter how enthusiastic some investors are about a given asset, do not make the mistake of putting all your eggs in one basket. Investing is not about gambling or speculating.

And if you only retain one important principle?6

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Diversify your investment products: by spreading your available capital across different investment products, you limit the impact of a potential poor performance. A fund could be a pratical solution because it includes dozens, even hundreds of shares and/or bonds. You invest in a single product (the fund), without having to buy the securities that interest you individually.

There are also other types of investments such as structured products or investment insurance.Find out more on pages 39 and 40 of this guide or on ing.be/investment

Diversify using themed funds: themed funds focus investment in a specific business sector or specific theme (real estate, sustainable energy, robotics, etc.) or a specific geographical area (for example Asia, Europe, United States). If your goal is to earn regular income, you can opt for a distributing fund, which is a fund that pays a dividend, usually on an annual basis.

Diversify over time: it is not wise to invest all of your available capital at once. Market developments are rarely linear. An investor’s trajectory involves alternating highs and lows. A reasonable solution is to make a regular investment of a portion of your capital (for example, monthly or quarterly). For some, it may be 50 euros, for others, larger amounts. Investing at regular intervals helps mitigate the impact of stock market fluctuations and achieve a balanced return over time.

Diversify among partners: if you invest in funds, it is also worthwhile choosing different fund managers. This helps to mitigate risk in the event that an issuer defaults. ING also offers funds from other financial institutions or other management companies. This is called Guided Open Architecture. For many years, our experts have been selecting the best funds from five external asset managers.

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• Diversification is an investor’s key word

• Diversify: - in different investment products - using themed funds - over time - your choice of partners

• ING proposes funds from: AXA IM, BlackRock, Amundi, Franklin Templeton and NN Investment Partners

In a nutshell

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Trade friction, Brexit, sluggish growth... there are many reasons to put off investing. Of course, it is better to get started when the stock market is in an upward phase and to withdraw profits just before the market dips. But uncertainty is inherent in any form of investment. Events that may keep you from investing today may not be important in the long run.

Trade friction, Brexit, sluggish growth... there are many reasons to put off investing. Of course, it is better to get started when the stock market is in an upward phase and to withdraw profits just before the market dips. But uncertainty is inherent in any form of investment. Events that may keep you from investing today may not be important in the long run.

How to choose the right time to invest?7

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Highs and lows

If the fear of bad timing is preventing you from getting started, regular investment can be a good option. Each month or quarter you invest a certain amount in a fund.

In this way, you avoid investing the savings you have available “too early” or “too late”. By investing on a regular basis, you mitigate the impact of the stock market highs and lows and may achieve a potentially higher average return.

However, it is important to maintain certain regularity. Above all if the stock market shows signs of weakness. The opposite is also true: it is irrational to invest on the pretext that the stock market is performing well.

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• Nobody can predict stock market movements

• Start investing as soon as possible: the longer your money is in the stock market, the more likely it is to grow

• Fortunately, there is a way to avoid the risk of bad timing: regular investment

In a nutshell

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Although savings and real estate are investments with (relatively) low risk, no investment is 100% certain.

Low risk investments mean low profitability. If, on the other hand, you opt for risky investments, the potential return will be much higher than that of a savings account.

For example, shares and bonds offer no capital guarantee. You can however expect a higher return than from a savings account, which is undoubtedly less risky but also less attractive.

Investing, what are the risks?8

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It is better to be aware of the risks associated with investing before you get started:

Counterparty risk: this term refers to an investor’s risk of loss in the event of a debtor’s failure (public authorities, companies, etc.) to meet its repayment obligations at maturity.

Market risk: this is the risk of loss resulting from fluctuations in asset and financial security prices. The different risk factors related to the market are interest rates, foreign exchange rates, stock and bond prices, and commodity prices. Prices vary constantly. A share bought today for 19 euros can quite easily be listed at 18.91 or 19.09 euros tomorrow.

Concentration risk: this is the risk associated with a significant concentration of investments in a given geographical area, sector of activity, asset class or market. If, for example, you invest exclusively in shares in the Japanese health system, your concentration risk is extremely high.

Foreign exchange risk: assets denominated in foreign currencies (US dollar, Japanese yen, Norwegian kroner, etc.) are likely to be impacted by fluctuations in currency rates. If the exchange rate is unfavourable, your return may decrease. On the other hand, if the rate is favourable, your investment will increase in value.

Be aware of the risks

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• Hold on to capital you may need in the short term, for example to buy a house or a new car.

• Hold a reserve amount for unplanned expenses.

• Invest your capital gradually, for example through a periodic investment plan.

• Diversify types of asset (stocks, bonds, etc.).

• Invest in products that fit your investment profile and that you understand.

• Avoid buying and selling compulsively, as this may expose you to significant transaction costs and long-term yield loss.

• Avoid investing in speculative products such as crypto currencies.

Seven tips to limit risk

Inflation risk: this is the risk related to the increase in the consumer price index. Bonds offer a guaranteed nominal interest. To obtain actual interest, you deduct the rate of inflation from nominal interest. The higher the rate of inflation, the lower the actual interest

Liquidity risk: the risk of not being able to trade an asset within the expected time and at the expected price. This may include, for example, assets that cannot be sold from one day to the next. Another possible cause is a lack of interested buyers.

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• No investment is 100% certain

• Investors must be aware of inherent risks before diving in

• Risky investments offer potentially higher returns than savings accounts

In a nutshell

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Investing inevitably involves fees. Fees and taxes related to transactions have a direct impact on the final return.

Fees vary depending on the type of investment:

• shares: stock market and brokerage charges • funds: entry fees and management fees

Does this mean that funds cost more than stocks or bonds? Not necessarily. An investment fund often achieves economies of scale by pooling the capital of several investors. It buys and sells a greater quantity of stocks and/or bonds, all in one go, thereby reducing transaction costs compared to what a small investor has to pay when buying smaller amounts to build up a diversified portfolio.

More information on the

charges applied can be

found in the brochure

Charges applied to the main

securities transactions and

in the document Overview

of costs and charges on

financial instruments. You

can find those documents

on www.ing.be/charges

Investing, how much does it cost?9

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Income from investments in BelgiumIncome from investments in funds, bonds and conventional shares acquired through a Belgian bank (e.g. ING) should not be included in the tax return. ING retains a withholding tax at source and pays it back to the State. This tax is definitive and does not need to be mentioned in the personal income tax return.

Which income should you declare to the tax authorities?

Income from investment abroad

If you have an investor account or life insurance abroad, you must declare the interest and dividends received. If interest is paid into a bank account that you hold abroad, it has not been subject to withholding tax in Belgium, thus requiring you to declare it.

In order to prevent a taxpayer from being taxed both abroad and in Belgium, the Belgian tax authorities have entered into numerous agreements aimed at avoiding double taxation.

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• Fees vary depending on the type of investment

• A fund is not necessarily more expensive than shares or bonds since you avoid paying transaction costs that you would have to pay if you were to buy dozens or hundreds of individual shares

In a nutshell

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In the long term, investing offers a higher potential return than a traditional savings account. However, if you invest in stocks, bonds or funds, market fluctuations should be taken into account in the short term.

If, based on your investment profile, you prefer potentially low-return investments in order to protect your capital, fluctuations will generally be limited.

If, on the other hand, you are targeting higher potential returns, expect more significant fluctuations.

When there is a sharp increase, you will probably experience a feeling of great satisfaction. If, on the other hand, the market shows obvious signs of weakness, you risk feeling overwhelming anxiety.

How we cope with adversity varies from person to person. Some investors will panic and rush to advisors at the slightest sign of decline, while others will greet the news with a shrug of the shoulders, confident that the markets will self-regulate.

Keep your feet on the ground10

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A degree of imitation

Although investing is primarily driven by individual initiative, many investors tend to model their behaviour on their counterparts. When stock markets are overflowing with cash, the prospect of profitability and growth translates into higher prices. But a buying frenzy can also cause prices to soar. The underlying value or outlook therefore has a very small part to play. Rather it comes down to an emulation effect. The opposite is also true: when sellers are in the majority, investors tend to follow suit. Result: this attitude sometimes drives some investors to buy high and sell low.

Behavioural finance

For a long time, economists considered investors to be rational beings, always looking for a balance between risk and return. Since the late 1970s, behavioural finance has considered the premise that economic actors often display irrational behaviour when making decisions and are easily swayed by their emotions. Two investors with comparable investment profiles will tend to react in a different way when faced with gain or loss.

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Many investors are guided by their emotions. When it comes to investing, decisions do not necessarily arise from rational behaviour. It is no coincidence that we speak of “market sentiment”.

The following graph illustrates this point perfectly:

Term

Stoc

k Ex

chan

ge P

rices

The stock market is picking up again. Maybe it’s time to buy?

What’s going on? Another dip?

Let’s try again?

The stock market is looking more bullish. Maybe it’s time to buy.

I’m unsure. I’ll wait a little longer.

It is plummeting. What if this continues?

Eek. It is going down. Don’t panic. It will bounce back.

The trend continues. I’m buying!

The stock market is on the up. I am going to buy!

I don’t want to suffer further losses. I’m selling!

Stop. I’m selling!

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In the event of a deep depression, the best-performing investors are those who remain patient. Investors who refrained from panicking during the 2008 financial crisis saw their market positions regain or even exceed the original level a few years later. According to Bill Gates, the art of waiting is even considered “a key success factor”.

So, rather than making panic decisions or, conversely, letting euphoria take over, it is better to stick with the chosen strategy and investment horizon than buying and selling impulsively and chaotically.

Patience is always rewarded

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• In the short term, investments are affected by market fluctuations

• Avoid checking share prices on a daily basis. That can lead to compulsive buying and selling behaviour

• Patience is always rewarded; the stock market always ends up bouncing back

• Periodic investments help to limit the impact of stock market fluctuations

In a nutshell

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Thanks to this guide, you will have a better understanding of the advantages and pitfalls of periodic investments and mutual funds. These two simple solutions will help you take your first steps into the investment world.

Structured products

Structured products with full or partial capital protection at maturity are investments whose yield depends on a specific scenario and an underlying value. The return can, for example, be linked to the evolution of basket of shares over five, seven, or ten years. If the shares perform well over that period and in accordance with the product conditions, you will receive a coupon (profit distribution). Regardless of how the underlying index performs, you will receive a predetermined percentage of your invested capital back at the end of the term (unless the issuer goes bankrupt). In other words, these products concern solutions with capital protection, not a capital guarantee.

ING also offers you other solutions that

may be tailored to your investment profile and

your needs

Investing at ING, the alternatives 11

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The branch 23 investment insurances is a policy whereby the policyholder entrusts their capital to the insurer, who invests it in investment funds. This enables you to combine the characteristics of an investment fund with those of branch 23 life insurance. The (non-guaranteed) return on this branch 23 life insurance is linked to the performance of the policy’s underlying funds. You can therefore have a positive or negative return, where capital gains or losses are possible.

Any more questions?Your contact person will go through your financial situation and your needs with you and offer you the solutions that best fit your investment profile.

The branch 23 investment insurances

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Share A share is proof of a (redeemable) participation in the capital of a company.

As a shareholder, you are partially a co-owner of the company. It also means that you participate in potential profits. Investing in stocks may lead to greater returns than bonds, meaning that it’s also riskier. You can invest directly in equity, or through an investment fund. The characteristic of a fund is that it often invests simultaneously in dozens or even hundreds of different shares. The advantage is that it automatically spreads the risk and the fund manager does all the work for you.

Asset class An asset class is a category of resources that has an economic value and can bring

income to its holder. Within the same class, assets therefore have similar characteristics. The main classes are cash, stocks, interest rates, commodities, derivatives, real estate and collector’s pieces.

Dividend This is the income that a beneficiary company regularly pays out to its

shareholders (usually once a year or quarterly). For shareholders, dividends are therefore a potential source of regular income. Please note: some companies do not pay dividends and rather reinvest profits.

GlossaryThe ABCs of Stock Exchange

Bond Buying a bond is a way of lending money to the issuer, usually a public authority

or a company. In exchange, the buyer receives interest at regular intervals (the coupon). Upon maturity, the issuer reimburses the purchaser for the borrowed capital. Bonds are safer securities than equities for example, but they are also potentially less profitable.

Fund A fund pools several investment products (equities, bonds, cash, government bonds, derivatives, etc.) in one basket based on a specific strategy. It enables

you to invest in different asset classes (companies, sectors, regions). The total amount of invested capital is divided into shareholdings or participations. As an investor, you can buy and sell these investments. As a result, you do not buy stocks or bonds from a single company, but rather a fund that pools investments in various companies or public entities. A small sum is enough to build a diversified portfolio. Specialists, the fund managers, are responsible for identifying the best investment opportunities for you, analysing risks, anticipating returns, analysing economic indicators, etc. They can then manage this fund actively or passively. In the former, they make specific choices to try tooutperform the performance of the benchmark index, while in the latter they let the fund track that index’s performance. Active management is often more expensive in terms of management fees, but it can adapt to changing market conditions and capitalise on new opportunities. Funds have many advantages. They are a way for those with limited financial knowledge to access the stock market and ensure broad diversification, allowing you to spread your investment and thus reduce risk.

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However, the flipside is that you cannot choose the stocks and/or bonds that they contain. Since management costs are deducted directly from the fund’s returns, returns can often be lower than if you build your own portfolio.

Index A stock index shows the highest performing stocks in a given stock exchange

or market. In Belgium, the Bel20 index includes the 20 most representative Belgian shares listed on the stock exchange (other criteria are also taken into account). Other examples of indexes: Dow Jones Industrial Average, S&P 500, Nasdaq Composite and Nikkei 225. For many investors, these indexes are a barometer that they use to track how the stock market is performing.

DerivativesDerivatives are financial instruments underpinned by real estate securities or

market indexes (futures, interest rate options, indexes, securities, etc.) that either mitigate the consequences of poor market performance or increase the effect of an investment by anticipating expected changes. Disadvantage: the use of derivatives is limited in certain markets, especially in emerging countries. Their value is also linked to the value of major currencies. If the dollar depreciates for example, derivatives that track in dollars lose value.

Structured productsA structured product is a pre-packaged set of financial instruments that

enables a financial institution to offer its clients a risk profile that suits their expectations. The returns on structured products depend on an underlying asset (asset, index, basket of shares, etc.) and they tend to have a limited investment period. At maturity of the product, the investor recovers his capital less or increased by the performance of the underlying asset. Structured products therefore make it possible to limit risk but the formula can be expensive, thus limiting yield. Your savings will also be locked in throughout the term of the investment.

Volatility Volatility is used to measure fluctuations in the price of a financial asset. It

characterises the risk attached to the asset. Thus, the higher the volatility the riskier the investment in this asset and the higher the expected return (or risk of loss). Conversely, a risk-free or very low-risk asset has very low volatility because its repayment is almost certain.

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ING Belgium S.A./nv • Bank/Lender • Avenue Marnix 24, B-1000 Brussels • Brussels RPM/RPR • VAT BE 0403.200.393 • BIC: BBRUBEBB • IBAN: BE45 3109 1560 2789. Insurance broker registered with the FSMA under the n° 0403200393 • www.ing.be • Publisher: Sali Salieski • Cours Saint-Michel 60, B-1040 Brussels • Z717133E_STRY1746364 • 09/20

• Make an appointement with a contact person at ING• Visit our website ing.be/investing

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