Beginners guide to investing

In the same way, that the theory of evolution explains much about biology to know some cognitive characteristics may explain the psychology of individuals works, there are some basic principles that reach to convey most of what you need to know investment matters. With this premise, specialized in finance site The Motley Fool identified four golden rules of finance.

Compound interest is what will make you rich. That takes time

Warren Buffett is a great investor, but be more than two thirds of a century is what made him rich. Currently, its heritage is equivalent to 60 billion dollars, of which only 2,700 million made them since he was 50 years old. A decade later, increased their wealth by 57 billion more. If Warren had retired at age 60, we had not heard of it. The secret of Buffet is time.

Most people do not start saving in significant quantities until a decade or two before retirement, which greatly limits the power of compound interest. The important thing is to teach young people to start saving as soon as possible.

Simple is usually better than smart

Someone who bought an index fund S & P 500 Low cost in 2003 obtained a yield of 97% in late 2012. That is great! In addition, they did not need to know anything about the portfolio management and technical analysis.

Meanwhile, hedge funds more attractive at the time lost 4.7 percent in the same period, according to data from Credit Suisse.

Investing not a computer looks like this: simple and basic can be more powerful than complex and cutting edge. In addition, it is not like golf: Viewers will have a very good chance to humiliate professionals.

There is a 100% chance that the market will experience a long-term volatility

Most investors understand that actions produce greater long-term profitability, but at the cost of greater volatility. However, each time a touch of volatility arises the same cry was heard from the investing public, "What's going on?"

Nine times out of ten, the correct answer is the same: its okay. This is what the stock.

Since 1900, the S & P 500 had a return of 6%, but the average difference between the years was the highest close and the lowest is 23%.

Someone once asked JP Morgan to what the market will do. "It's going to fluctuate," was allegedly said. Truer words were never these listeners.

Vendors and charlatans dominate the industry

People whose only interest in their wealth is the amount of fees that will be charged No experience sell the vast majority of financial products or credentials or even the best common sense to be a financial expert is needed. This is perhaps one of the most important theories of the world of finance