I'm just going to use my common sense and I also want to make you aware that I've never traded in my life and have no deep knowledge at all.
And my strategy with shares, which is a really simple one, but so many people, seems to do the opposite. I feel that people are doing so many illogical things in life and don't use their mind even though they have capacity.
Here are some examples, one with shares first:
1. One should buy a share when it's increasing in value and sell it when it's decreasing in value. Yet so many people seem to do the opposite- they are selling the share when it's increasing in value, and hold to it then it's decreasing in value because they believe it might go up in value again. I’m just a newbie so I guess there is more to it, cause if it was this simple everyone would do it, so please tell me what obstacles there is in this simple method. If it is time constraints, I can gladly tell you that e trade offer programs that let yet you atomise your sell and buys of shares.
If you buy a share for 10 dollar from 10 different companies, and if one share drops to 9.9 it will sell the share automatically and invest the money on the shares that are going up, and if the share increases to 10.1 you will buy more shares and so on which makes you earn more money progressively all the time even if the probability of the share going up is 50% since you are investing the money you got by selling the shares that devalued into shares that increased in value. This will make your less diversified after a while so you have to keep looking for new shares that are increasing in value so that you always have a very diversified portfolio and also add to the fact that the market return in a bull market maybe is 10%. Which gives a major advantage as opposed to losing your investments which is why one should invest in a bull market since you have the odds on your side (also common sense). Yet many people lose all their money in casinos and games where the odds are really against them. And remember you can dramatically decrease your risks by knowledge and experience(because there are a lot of successful investors who have got an average return of over 25% pa continually for over 10 years, which suggests that one can get good return with the right knowledge and experience.)
2. It's not very logical to pay your rent. Why so many people pay their rent even when they have the money to afford a house is mystery to me. If you have been working for two years and have a stable job you can borrow 300 000 dollar from a bank for a house. The interest of the loan is lets say 7 percent. And you can rent out the flat for 1200 dollar every month, but in this case you prefer to live in your own house so you don’t have to care about finding a tenant on a regular basis.
RETURN=And 1200/300 000=0.004 so the return is 0.004 every month and every year 0.004multiplied by 12=0.048 which is 4.8% in annual interest.
INFLATION=And lets say that the inflation is 3 percent, so the bank interest is 7-3=4%
RETURN-INFLATION=So you earn 4.8-4=0.08 percent in return of 300 000 each year which is 2400 in return in one year
And since you have bought the property you don’t have to pay the rent and you are literally paying for the property when you are paying back the loan
HOW MUCH YOU HAVE PAID OFF=Lets say you have paid 20% of your loan which is 0.2 multiplied by 300 000=60 000
And then you sell you property for 300 000 or more, if it has gone up in value which is very likely, but I'm not even going to include that.
And since you have paid 60 000 of 300 000 of your loan, you only have to pay back 300 000-60 000= 240 000 dollar. So you make 60 000 dollar from thin air less maintenance costs and rates, which on average is 4000 every year, for a house of this price. It does vary though, but expect something between 2000-8000 depending on what sort of property you have. But you have still made at least 50 000 dollar from thin air. This is why you should never pay a rent, because you can pay for the property instead.
Many rich people get rich by people who give money to them, and if you also want to get rich or get comfortable you should never give money to them, it's your money after all. Usually hard earned money, for which you have worked long hours to get. If your salary is 20 dollar every hour, you give away 35 hours of your life to pay a rent for 700 dollar. You do only have one life after all.
Every time I buy something, say a pair of shoes for 50 dollar, I will compare it to my hour rate, and calculate how many hours of my life I give away and ask myself if it's worth it. You should show respect to money
3. I'm living in Australia and so many people are doing a joint degree that takes 5 years (doing two degrees at the same time) and it doesn't make sense to me when they say that their sole reason for doing it is to their increase job prospects and salary. I've looked up in statistics that a graduate who have done a business degree for 3 years and then an MBA for 2 years earn much more money and have a much higher employment rate than a person who have done a joint degree for 5 years.
4. Why are people just putting their money in accounts with low interests when they can invest their money and earn a good return for a very minimal risk. They are losing money everyday, when they can make money work for them like money machines. Warren buffet invested every penny he earned when he was young, and when he was an adult, and look at him now.
And my strategy with shares, which is a really simple one, but so many people, seems to do the opposite. I feel that people are doing so many illogical things in life and don't use their mind even though they have capacity.
Here are some examples, one with shares first:
1. One should buy a share when it's increasing in value and sell it when it's decreasing in value. Yet so many people seem to do the opposite- they are selling the share when it's increasing in value, and hold to it then it's decreasing in value because they believe it might go up in value again. I’m just a newbie so I guess there is more to it, cause if it was this simple everyone would do it, so please tell me what obstacles there is in this simple method. If it is time constraints, I can gladly tell you that e trade offer programs that let yet you atomise your sell and buys of shares.
If you buy a share for 10 dollar from 10 different companies, and if one share drops to 9.9 it will sell the share automatically and invest the money on the shares that are going up, and if the share increases to 10.1 you will buy more shares and so on which makes you earn more money progressively all the time even if the probability of the share going up is 50% since you are investing the money you got by selling the shares that devalued into shares that increased in value. This will make your less diversified after a while so you have to keep looking for new shares that are increasing in value so that you always have a very diversified portfolio and also add to the fact that the market return in a bull market maybe is 10%. Which gives a major advantage as opposed to losing your investments which is why one should invest in a bull market since you have the odds on your side (also common sense). Yet many people lose all their money in casinos and games where the odds are really against them. And remember you can dramatically decrease your risks by knowledge and experience(because there are a lot of successful investors who have got an average return of over 25% pa continually for over 10 years, which suggests that one can get good return with the right knowledge and experience.)
2. It's not very logical to pay your rent. Why so many people pay their rent even when they have the money to afford a house is mystery to me. If you have been working for two years and have a stable job you can borrow 300 000 dollar from a bank for a house. The interest of the loan is lets say 7 percent. And you can rent out the flat for 1200 dollar every month, but in this case you prefer to live in your own house so you don’t have to care about finding a tenant on a regular basis.
RETURN=And 1200/300 000=0.004 so the return is 0.004 every month and every year 0.004multiplied by 12=0.048 which is 4.8% in annual interest.
INFLATION=And lets say that the inflation is 3 percent, so the bank interest is 7-3=4%
RETURN-INFLATION=So you earn 4.8-4=0.08 percent in return of 300 000 each year which is 2400 in return in one year
And since you have bought the property you don’t have to pay the rent and you are literally paying for the property when you are paying back the loan
HOW MUCH YOU HAVE PAID OFF=Lets say you have paid 20% of your loan which is 0.2 multiplied by 300 000=60 000
And then you sell you property for 300 000 or more, if it has gone up in value which is very likely, but I'm not even going to include that.
And since you have paid 60 000 of 300 000 of your loan, you only have to pay back 300 000-60 000= 240 000 dollar. So you make 60 000 dollar from thin air less maintenance costs and rates, which on average is 4000 every year, for a house of this price. It does vary though, but expect something between 2000-8000 depending on what sort of property you have. But you have still made at least 50 000 dollar from thin air. This is why you should never pay a rent, because you can pay for the property instead.
Many rich people get rich by people who give money to them, and if you also want to get rich or get comfortable you should never give money to them, it's your money after all. Usually hard earned money, for which you have worked long hours to get. If your salary is 20 dollar every hour, you give away 35 hours of your life to pay a rent for 700 dollar. You do only have one life after all.
Every time I buy something, say a pair of shoes for 50 dollar, I will compare it to my hour rate, and calculate how many hours of my life I give away and ask myself if it's worth it. You should show respect to money
3. I'm living in Australia and so many people are doing a joint degree that takes 5 years (doing two degrees at the same time) and it doesn't make sense to me when they say that their sole reason for doing it is to their increase job prospects and salary. I've looked up in statistics that a graduate who have done a business degree for 3 years and then an MBA for 2 years earn much more money and have a much higher employment rate than a person who have done a joint degree for 5 years.
4. Why are people just putting their money in accounts with low interests when they can invest their money and earn a good return for a very minimal risk. They are losing money everyday, when they can make money work for them like money machines. Warren buffet invested every penny he earned when he was young, and when he was an adult, and look at him now.
