Greetings to all members! Following the excellent initiative by Brother Nordicsupreme, I have decided to contribute to this project with my knowledge on this subject, as I am involved in finance and busniess management everyday.
I will devote my energy to this because it is necessary for all Zevists to have at least a basic understanding of how money works.
|Disclaimer: All the information I provide will be general in nature, as each country/nation has its own laws and regulations in terms of finance and legislation. I invite everyone to research and customize the information provided.|
I LIQUIDITY
Used for daily expenses. The amount of liquidity to keep depends on your monthly needs. Generally, cash is kept in a checking account, but be aware of deposit fees. There's not much to say here; don't squander your money.
II EMERGENCY FUND
Used for unpredictable expenses, this sum is also generally kept in a checking account, but be careful because, as we mentioned above we pay deposit fees.
A good alternative is a Savings Account, which generally earns an average of 4/5% per annum (depending on the period). The only things we can do with this account are transfer money into it and transfer money out of it directly. There are no restrictions.
Otherwise, there is the Certificate of Deposit, which is the same type of deposit account but with restrictions, meaning you cannot withdraw money whenever you want.
Personal tip: (don't choose one that is totally restricted, but one that you can withdraw from whenever you want). In any case, remember that if you withdraw, you will not receive interest.
At this point, I imagine you are wondering, "Edward, now that I have set aside cash and some money for unexpected events, can I invest everything else"... Well, yes, but it depends on the duration of your investment. Usually, the most profitable investments are 10-year ones; the further down the line we go, the more volatile and risky the situation becomes.
Let's see how to do this by looking at the third pillar...
III PREDICTABLE EXPENSES
This is the amount used for expenses that we can expect to have in the near future, or rather between 1 and 10 years (taxes to pay, house to paint, car to repair, etc.).
In the meantime, instead of letting the money rot away with inflation, we can invest it in other ways.
A form of low-risk investment is bonds, particularly government bonds. One example is T-Bills in the US, so-called 1-year short-term treasury bills, which yield between 0 and 15% depending on the historical period.
When we talk about bonds, we are talking about money that you lend (usually to your State/Country) in order to receive interest.
There are many types of bonds, both in terms of duration and the type of entity that issues them, so you can choose the one that suits you best.
Your interest will be paid once a year with a “coupon.”
The risks are low, but it is possible that your state could go bankrupt and not be able to pay you back (very rare).
Another example of where you can put your money allocated for predictable expenses is the ETF (acronym for Exchange Traded Fund), which is an investment fund listed on the stock exchange, i.e., a container that collects many financial instruments (stocks, bonds, commodities, etc.) and can be bought and sold like a normal stock.
All expenses that occur between 1 and 10 years should be included in this third section of predictable expenses.
IIII STOCKS
A stock is a piece of ownership in a company. Those who own stocks are called Stockholders.
Stockholders have three rights:
1. You will receive dividends (money that the company decides to pay to stockholders based on the number of shares each person owns and at certain times). Dividends are a signal to the market: if a company pays less dividends than in previous years, the market thinks it is doing badly.
Insight: ( some companies, such as Apple, do not pay dividends, preferring to reinvest their profits in the company.)
2. You can attend the ordinary shareholders' meeting (they give you a nice buffet). There is also an extraordinary meeting, but that is not for you.
3. You are entitled to liquidation of a company in the event of, for example, acquisition by a larger company. This means that you will still be paid even if the “management” changes. If, on the other hand, it goes completely bankrupt, it means that it has no more money, and in this case, you will have lost everything. (This is a very rare situation).
A STOCK may or may not be listed on the stock exchange; for now, we will only work on those that are listed. Companies are usually listed more positively on the local stock exchanges of their main market.
"So what are stock indices?"
A stock index is an indicator that measures the overall performance of a group of stocks listed on the stock exchange.
In practice, it is like a “basket” that collects multiple stocks and summarizes their performance with a single number.
It is documented that the highest success rate for an investment made in stock indices, as mentioned above, is over a 10-year period. After 20 years, they always show a positive percentage return. Indices are volatile, but their growth is constant in the long term.
Some of the world's most famous indices are the Dow Jones, the NASDAQ, the Shanghai Stock Exchange and the S&P 500.
One tip is not to look at the daily or monthly price fluctuations, which are normal in the market but of no interest to us in the short term.
Conclusion: This was just a basis for understanding how to organize your money.
I recommend using pillar 4 only if you really have a sum available that you can invest in the medium to long term.
I pray that all Zevists will prosper.
- Edward666
I will devote my energy to this because it is necessary for all Zevists to have at least a basic understanding of how money works.
|Disclaimer: All the information I provide will be general in nature, as each country/nation has its own laws and regulations in terms of finance and legislation. I invite everyone to research and customize the information provided.|
Guide to managing your wealth (for beginners)
Your assets should be divided into Four Pillars. The goal is to maximize your return while maintaining a high degree of certainty.
Your assets should be divided into Four Pillars. The goal is to maximize your return while maintaining a high degree of certainty.
I LIQUIDITY
Used for daily expenses. The amount of liquidity to keep depends on your monthly needs. Generally, cash is kept in a checking account, but be aware of deposit fees. There's not much to say here; don't squander your money.
II EMERGENCY FUND
Used for unpredictable expenses, this sum is also generally kept in a checking account, but be careful because, as we mentioned above we pay deposit fees.
A good alternative is a Savings Account, which generally earns an average of 4/5% per annum (depending on the period). The only things we can do with this account are transfer money into it and transfer money out of it directly. There are no restrictions.
Otherwise, there is the Certificate of Deposit, which is the same type of deposit account but with restrictions, meaning you cannot withdraw money whenever you want.
Personal tip: (don't choose one that is totally restricted, but one that you can withdraw from whenever you want). In any case, remember that if you withdraw, you will not receive interest.
At this point, I imagine you are wondering, "Edward, now that I have set aside cash and some money for unexpected events, can I invest everything else"... Well, yes, but it depends on the duration of your investment. Usually, the most profitable investments are 10-year ones; the further down the line we go, the more volatile and risky the situation becomes.
Let's see how to do this by looking at the third pillar...
III PREDICTABLE EXPENSES
This is the amount used for expenses that we can expect to have in the near future, or rather between 1 and 10 years (taxes to pay, house to paint, car to repair, etc.).
In the meantime, instead of letting the money rot away with inflation, we can invest it in other ways.
A form of low-risk investment is bonds, particularly government bonds. One example is T-Bills in the US, so-called 1-year short-term treasury bills, which yield between 0 and 15% depending on the historical period.
When we talk about bonds, we are talking about money that you lend (usually to your State/Country) in order to receive interest.
There are many types of bonds, both in terms of duration and the type of entity that issues them, so you can choose the one that suits you best.
Your interest will be paid once a year with a “coupon.”
The risks are low, but it is possible that your state could go bankrupt and not be able to pay you back (very rare).
Another example of where you can put your money allocated for predictable expenses is the ETF (acronym for Exchange Traded Fund), which is an investment fund listed on the stock exchange, i.e., a container that collects many financial instruments (stocks, bonds, commodities, etc.) and can be bought and sold like a normal stock.
All expenses that occur between 1 and 10 years should be included in this third section of predictable expenses.
IIII STOCKS
A stock is a piece of ownership in a company. Those who own stocks are called Stockholders.
Stockholders have three rights:
1. You will receive dividends (money that the company decides to pay to stockholders based on the number of shares each person owns and at certain times). Dividends are a signal to the market: if a company pays less dividends than in previous years, the market thinks it is doing badly.
Insight: ( some companies, such as Apple, do not pay dividends, preferring to reinvest their profits in the company.)
2. You can attend the ordinary shareholders' meeting (they give you a nice buffet). There is also an extraordinary meeting, but that is not for you.
3. You are entitled to liquidation of a company in the event of, for example, acquisition by a larger company. This means that you will still be paid even if the “management” changes. If, on the other hand, it goes completely bankrupt, it means that it has no more money, and in this case, you will have lost everything. (This is a very rare situation).
A STOCK may or may not be listed on the stock exchange; for now, we will only work on those that are listed. Companies are usually listed more positively on the local stock exchanges of their main market.
"So what are stock indices?"
A stock index is an indicator that measures the overall performance of a group of stocks listed on the stock exchange.
In practice, it is like a “basket” that collects multiple stocks and summarizes their performance with a single number.
It is documented that the highest success rate for an investment made in stock indices, as mentioned above, is over a 10-year period. After 20 years, they always show a positive percentage return. Indices are volatile, but their growth is constant in the long term.
Some of the world's most famous indices are the Dow Jones, the NASDAQ, the Shanghai Stock Exchange and the S&P 500.
One tip is not to look at the daily or monthly price fluctuations, which are normal in the market but of no interest to us in the short term.
Conclusion: This was just a basis for understanding how to organize your money.
I recommend using pillar 4 only if you really have a sum available that you can invest in the medium to long term.
I pray that all Zevists will prosper.
- Edward666
