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What do people need to know about finance?

Category : TAGCulture · No Comments · by Oct 11th, 2013

1. Should you be investing?

I know that before I said “anyone with a salary should be investing,” but there are particular cases in which this might not be true, at least for some time, some people would rather sleep on their best pregnancy pillow. If you have debt at a high interest rate (almost all credit card debt will match this definition) you should pay it off entirely before even thinking about putting any Money fall into the market. It is simple to understand why. If you owe money and the interests are, fore example, 10%, it doesn’t matter if you can invest in the markets and make an average return of 9%. You are still losing 1% in comparison with the situation in which you pay off all this debt. Now, if you have a mortgage with an interest payment of 3%, you should not pay off the whole mortgage before you start to invest. In this case you can make, using our previous example, 9% investing and only pay 3% interest for the mortgage. Give your house a makeover from https://www.palmbeachroofingexpert.com/. It will look better. So you will make 6% more than if you just completely pay off the mortgage. The relationship is oversimplified in this explanation, for example that 9% returnis not secured; it might vary depending on the market conditions, while the debt will still be due regardless. This is why a lot of radical risk-averse people would prefer to pay off the debt before investing, despite of proven fact that, in average, they are losing money. Click here https://moneybolt.co.uk/ The second situation in which you should not invest, even if you have a salary, is that one in which you don’t have an emergency fund. Every rational person should keep between 6 to 12 months of expenses in an account just to make sure that an adverse event does not challenge her financial situation and that she doesn’t need to pull money from her investments. However, if you are debt free, you have an emergency fund, and you have a salary… You better be investing! Protect your intellectual property, find the best patent attorney in Chicago today!

2. What are you investing for?
Are you investing to pay for your kid’s university, to buy a new car, to take that around the world vacation that you have always dreamt of, to enjoy a nice retirement, to have a passive income? As you can see, there are a limitless number of reasons to invest. You need to understand yours because depending on what you want to invest for; you are going to use different investment vehicles to achieve your goals and you need to be cautious of the Low-Risk Processing on every business. Let’s give a few examples to better understand it. Read some of the transactional smtp from our website.
If you have a sizable amount of money and you want to leave of it, or just have it produce some income for you, you can buy dividend stocks and bonds that will assure you a stream of cash. If you get the right mix, you can enjoy a steady income over the years in order to use as you please, on remodeling your apartment or maybe customizing the car, with the use of services from sites as www.detailingsyndicate.com, so it looks the way you wanting it to look..
If you meet the following criteria
You are in your late 20s or in your 30s
You have an emergency fund
You have a salary
You are debt free
You don’t have the need to pull money out in the next decades
you should create a balanced portfolio with a high level of risk. Most likely it would include a high percentage of equities and a sizable exposure to emerging markets with a high growth potential.

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3. There is no return without risk
No one, wait I’ll repeat: NO ONE is telling the truth if they say they can offer a return higher than the risk free with no risk. It is just not possible. In our post Risk in finance and the why of risk management we gave a comprehensive explanation of what risk is and how to measure it, so take a look to refresh your mind.

4. You have an optimal risk target, find it!
In the investment world, you should not aim for a particular return; it is never the right strategy. The process should start by identifying your level of risk, and only then maximize the level of return for that particular level of risk. The real key variable is risk because at the end of the day, if you risk too much you might go bankrupt and you don’t want that! This is why we need to decide what level of risk is appropriate for us. How do we do it? We need to assess our risk profile. In most developed countries, registered financial advisers are required to assess the risk profile of their clients. These financial advisers will provide a questionnaire that will try to gauge the following characteristics of the investor:
Time horizon
Cash requirements
Attitude towards risk
Financial situation
At the end of the day what the financial advisers are trying to find out is what amount of money are you willing and able to lose within a particular level of probability. You should try to find this number before committing any money to the financial markets. It will be truly dangerous to invest in a vehicle in which you can lose more money than the amount you are comfortable with losing. As you can see, you not only have to understand your level of risk but also the different investment vehicles in order to know what is the risk of investing in them.

5. Diversification is key
If you want to know more of why you should diversify check our post on diversification Yes we can… DIVERSIFY!
In order to diversify you need to know about the different asset classes. We are currently building a database with as many possible investment vehicles that exist with their description and characteristics for this we use the services of the best data center logistics you can find online. For now, this are some of the most common investment vehicles, including alternative assets: stocks, bonds, derivatives, real estate, commodities, derivatives, hedge funds, venture capital, private equity…

6. Economies follow boom/burst cycles
Economies, as human emotions, rise and fall. Understanding how the economic cycle works, in which phase do we stand, and which type of companies and investment vehicles perform better in each particular phase of the cycle is completely crucial to perform in the investment world. Fidelity has a really nice paper explaining its Business Cycle Sector Approach to investment in which they explain how cycles work and how to benefit from them.

7. Always question your investment selection
Understand that if you are selling, someone is buying and that if you are buying, someone is selling. So, there is someone in the other side of the trade that is, on average, as smart as you. Try to find out why that person is taking the other side of the trade. In other words, take your strategy and try to see how it could go wrong and with what probability. This reflection might show you that your strategy is not as robust as you thought or it might give you even more reasons to invest, regardless; it is a necessary and sometimes forgotten step.

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