I suggest we talk today about the philosophy of money, savings and smart investments.
It is sometimes so not obvious and so far from the financial stereotypes prevailing among ordinary people that you are simply amazed at how one can be so wildly mistaken.
At the same time, this is perhaps the most effective way to gain material wealth and financial well-being.
So, here are the main principles of wise investment and increase of money:
1) Investments are not only about finances
To a much greater extent, investments “reflect” our behavioral patterns, habits and other subconscious (i.e., extremely poorly understood by us) triggers.
Yes, stock price charts are fascinating in their intricate incomprehensibility, but financial markets are driven by the emotions of many people, and not by dry numbers and ratios instantly calculated by powerful computers.
Therefore, if you have a good understanding of people and their motives, then you will always have a significant advantage in the stock market.
2) Investing money is not an analogue of gambling
The problem of “bad” investment behavior is the most difficult problem in investing.
The best minds have been struggling to solve this issue for centuries, but still cannot find the key to the “vulnerable soul” of an investor who has decided to increase his money using various financial instruments.
The point is in our human (in many ways remaining primitively animal) nature, i.e. in our biology and the chemical processes occurring inside our body.
Let me explain this thesis: We make wrong decisions regarding investing our money under the influence of emotions raging within us.
Mainly, this is (1) the fear of losing what was invested and (2) the greed of missing out on potential benefits.
And our emotions are caused by hormones that “automatically” enter our blood when risky situations arise — this is exactly how Mother Nature “programmed” us with the deep goal of continuing the human race.
3) Ignore news and financial media reports
This is especially important when the stock market is in turmoil.
In turbulent times caused by a crisis in the economy or geopolitics, a negative news background only oversaturates our blood with adrenaline.
But, at the same time, it does not contain any significant information useful for our long-term investments.
Therefore, you can completely ignore it — without damaging your financial capital.
And we will leave disputes about the current events to economists, politicians and journalists.
But they only confuse us.
4) Always stick to your investment strategy
By and large, an investor should make transactions for only two purposes:
* bring new money into the market (monthly buying currency, index funds and other assets);
* cash out your financial capital (this is done only once — immediately after the formation of capital in sufficient volume, capable of covering the daily expenses of your family due to the income generated by it).
5) Financial markets are full of madness
It is difficult to find a crazier place (of course, except for the madhouse, where the insane are forcibly kept).
On the stock exchange, insanely high stakes are combined with insanely strong emotions.
Therefore, try not to fall under the influence of the insanely raging emotions there.
Otherwise, your money will quickly “burn out” in a fit of greedy passion and greed that overshadows common sense.