Financial Safety Advice

Since the international financial crisis has exploded worldwide, the first reaction of the market is the stay, but it is for people who face a global crisis, the first thing to do is decide to protect their funds at home and leave there until the end of the crisis.

These reactions are very common in much of the population, but nothing is worse than making that decision. Why? Simply because as the crisis progresses, prices increase and inflation rises, the money that we keep under the mattress will lose value purchase. If before, EUR 10 bought two milks, tomorrow will buy one-thirty, due to the rise in prices.

Then it is clear that cash, paralyzed, does not work. Here the best approach is to invest the money, however little it is, in several different assets together. Although it is very common, you should not invest all savings in a single asset, because if it does not work lose all the money.

Here, it is best to invest, for example, in a fixed time in a mutual fund, stock or perhaps advised by someone you trust. It could also be one of these financial assets plus the capital contribution to another project, in exchange for future profits. The options may be several, some of our country and others with specialist advice. The truth is that nothing will save it under our mattress.

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