Investing and raising equity is not a trivial matter, especially when investors move between risk aversion and the pursuit of profitability. In this context, seven good habits can. Help to accumulate capital with calm and serenity. After all, your money has to work for you, not the other way around. According to Allianz Global Investors, they would be the following: Behavioral Finance the financial theory of behavioral sciences is an increasingly popular approach to investment.
From a psychological perspective an alternative to the assumption, so far accepted, that the human being, like homo economics, makes purely rational decisions. These two psychologists were able to demonstrate patterns of behavior that cannot be explained rationally. Probably the prospective theory found room in financial research thanks to Richard.
Conservation of purchasing power
At present, it seems that everything revolves around the topic of security often being understood by security the absence of fluctuations of the quotations. In recent years, we have seen that investing in the equity market can be like a ride on the roller coaster. That is why it is understandable that investors want to avoid fluctuations in prices. However, they overlook the risk of a real loss of purchasing power, which is even more unpleasant if we consider that today the interest rates of savings accounts are practically zero. Nor do sovereign bonds serve anymore. By mid-2016, about 50% of all euro-zone sovereign bonds offered negative returns.
Go for risk premiums
Successful investors know this: without risk, there are no risk premiums. This is the true fundamental law of all investment. The underlying rationale is that everyone who invests assuming greater risk should be able to expect that over time these investments will generate higher returns than other risk-free alternative investments and therefore promise less profit.
Invest before speculating
It is not necessary to be an expert and to follow continuously the evolution of market quotations and events to identify the opportune moments to invest and to dis invest. Unfortunately, nobody in the stock market rings the bell to tell us when to enter or exit an investment. I knew that even to my grandfather. The good thing is that he who wants to grow his capital in the end does not speculate but invests. By speculating I mean short-term betting by price movements and with investing putting our money to work in the medium to long term.
Ulysses, the Homeric hero of Greek mythology, had the reputation of being the most intelligent man of his day. In the Odyssey, he has to overcome a long series of dangers. One of the challenges he faces is to pass the Island of Sirens without suffering any damage. Mermaids are known for their beautiful songs. Which have only one purpose to attract sailors to the reefs of the island, to wreck and die? Ulysses wants to survive the passage of the island.
The solution that finds is to cover with wax the ears of his companions and to make tie to the mast of the galena. As much as he struggles to get rid of, his bonds the sailors cannot hear anything and make the ship surpass save the island of Sirens. Distribute the investment among the various asset classes taking into account long-term strategic aspects. In this respect, the general rule is not to put everything in a letter; In other words, diversify.
Who decides for the active management not only bets that the professionals who manage the fund generate an additional profitability. In addition, there is less danger of dead horses in their wallets, meaning titles that at one point were the favorites of the stock market. That is the passive management does nothing but represent yesterday.