04 August 2022

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Economic health 5 tips

Author: Luigi Campopiano

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"Finance", understood as the knowledge and use of the correct financial instruments, is the means to achieve one's life goals (a better and more fulfilling life). The financial system: it is a decidedly complex system, but you don't need to be a super finance expert to invest with awareness and achieve your financial goals.

Here are some tips to avoid pitfalls and achieve your goals:

1. Don't overestimate your merits and don't underestimate the role of luck. If you've been lucky enough to get 4-5 stocks that went strong and earned you money, that's no indication that you are a smart, or particularly skilled, investor. You may have fallen into the trap of overconfidence (one of the behavioral mistakes that made those who thought they understood the rules of the game lose a lot of money);

2. It's easy to let go of good habits at times of maximum pressure. It is precisely in these moments that you may be tempted to abandon the good habits of saving, of periodic investment, of diversification, of a long-term mentality

3. The info you find for free on the Internet are useless. The problem with this kind of information is that in the midst of generic, but still good search results, one can find quacks promising easy money and safe, profitable investments. When a person is looking for a solution to solve a problem, he risks falling victim to these charlatans, because he would only want a result, he would want it quickly, he would like it guaranteed, he would like it with as few "breaks" as possible. The real world doesn't work like that. To obtain satisfactory results, it is right to get information and work hard to solve a problem as soon as you become aware of having it, but this requires sacrifice and commitment;

4. Do not believe those who promise you that "he will take care of everything". It is right to give your trust to those who have chosen to rely on them after careful selection, but this does not mean a "blind delegation". This does not mean that you should not turn to professionals and experts, but you cannot blindly delegate the care of your savings (to sort out income and expenses, you have to think about it) and you cannot blindly delegate your investments (to identify the objectives investment, you have to think about it). The professional figure can still help you;

5. Do not underestimate the importance of fundamentals. Knowledge and rigorous application of the fundamentals is what distinguishes those who get results from those who don't, because it is on the fundamentals that a solid foundation is created for the construction of something that stands over time. There is, however, an abyss between knowing "what" to do, and knowing "how, when, how much and why" to do it. We know that we have to diversify (many, however, have lost everything by investing in a few assets), we know that we have to invest for the long term (many, on the first downside, sell everything even if the retirement goal is in 20 years or more), we know that the higher the potential return, the greater the potential risk and that inflation will erode the real value of our savings over time (it is a pity that Italians have billions and billions deposited in current accounts). There are specific answers, but it is not enough to know the fundamentals, because they must also be applied and inserted in a process.

Avoid do-it-yourself and, after a selection, rely on a professional: your "financial form" is worth it.