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  • Writer's pictureSerpent Forex Club

Escape The Rat Race: Step two

Saving has been known since the dawn of mankind. Then primitive people set aside part of the meat of the killed mammoth to have food for a longer time. Then there is a story in the bible with seven emaciated cows that symbolize seven hungry years after plenty and it comes to the present day where people are saving for things like a new Iphone.


Where your savings come from I will not comment here. My advice is to save at least 1/10th of your income.


So, you've already collected a certain amount of money known as "White money for rainy days" or "I'm human too" fund and you're wondering what to do with it. And they look at you so temptingly and whisper things like a new TV, an iPhone, or that 5-channel home theater that's on sale. You need to do something quickly so you don't end up in some store.


There are several ways to save or increase savings that are available to everyone:


Money Box


This is the safest way to keep your savings, but under certain conditions. You should take some measures against theft or fire for example. If the amount is larger, it is better to insure them. The bad thing is that thieves are becoming more and more inventive, and as it was said in a bank advertisement - "If we know where you keep your money, then everyone knows".


Another type of saving is to store the money in a public vault, but even there, in case of theft, it is insured only up to a certain limit. With these methods of storing your savings, however, you cannot take advantage of the most important ability of money - to grow over time. They will even decrease because you have to set aside a portion of them for insurance or an annual fee for the vault.


Bank deposit


Personally, I recommend it to people who don't have a lot of free time to manage their savings and don't have in-depth financial knowledge. Deposits are generally divided into standard and flexible. Standard ones are for you if you know that for a certain period (for example 1 year) you will not need the saved money. With flexible, you get a lower interest rate, but you can withdraw part of your money at any time without losing the yield.


Bonds


Bonds are debt divided into many shares. When a given company needs money for a new production building that costs, it can issue bonds of the same amount, guaranteeing them with a pledge of its administrative building. Usually, the interest rates that companies offer on their bonds are higher than the interest rates on bank deposits and are for a longer period (over 1 year). The interest is paid over some period (eg 6 months) and at the end of the period you receive the original amount.


Stocks


Stocks are shares of companies that give you certain rights. You can earn from them in two ways - either from the increase in their price or from dividends.


Mutual funds


These are funds that invest for you. Since you don't have time to do analysis and track company information every day, these funds do it for you. Sometimes you cannot invest in some assets yourself. For example, you want to invest in real estate such as a commercial building, but it costs 10 million. Since you don't own that amount, it goes to a mutual fund that can buy it. He divides this 10 million into 1 million shares of 10 each. So, if you buy 100 shares, you become the owner of 0.01% of the building. This all sounds very good, but in practice things are different.


Mutual fund rise at a slower pace than the market in a rising market, and in a falling market they fall with the pace of the market. In numbers, it looks like this - you have invested a certain amount in a mutual fund that invests in the pharma sector. At the beginning, the shares cost 10$. At the end of the year, their price is already 12$ (your yield is 20%). At the same time, if you had invested the same amount in several pharma companies, at the end of the year your return would have been 25 or 30%. This is of course a very generalized example and there are many factors involved, but you get the idea. Conversely, in a falling market, if the yield on the mutual fund is -5%, then the market has fallen more or less at the same rate.


In yourself


It is the best investment and in the long run it is always profitable. Invest in education, courses and anything else you can think of. Even if there is no quick return, you certainly won't lose. Education related to money management is especially important.


When I say invest in yourself I don't just mean mental development. Investments in your health and body will also be successful.




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