Knowing the great enemies of the investor
Invest our savings is a process that involves taking risks. The investor enemies lurk and threaten to destroy our investments if we are not vigilant.
We know that investing in stocks or real estate is a very profitable investment alternative for medium and long term. As discussed in previous notes, on average you can expect an annual return of 11% average if I invest in a basket of the largest stocks in the United States. And the real estate returns are very close to this level.
But as we know, these returns are not a straight line, stable and calm, are very variable.The volatility of the markets, which currently is very high, causes the returns are variable from year to year. Some positive and some negative years, giving the average mentioned, but with many variations.
Why is this?
The answer is implicit in the logic of capitalism. Two events that exist in capitalist economies get a little complicated the picture:
* Business cycles
*The Process of Creative Destruction
Understand how these two phenomena will give me peace of mind knowing the context in which we operate. And I will make investment decisions more effective.
Type of investor: This advice is important for active investors and long-term investing in stocks and real estate
Risks: It is very difficult to predict the movements of the cycles and anticipate the winners of the process of creative destruction
Potentiality: I am a general framework that explains many movements, therefore, prevents me from making irrational decisions
