The Most Important is saving? Or monetize?

in #leofinance5 months ago (edited)

Today i will talk a little about savings or profitability, sometimes we confuse both and it can be a beautiful headache if we cannot distinguish both

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Nowadays, people are very concerned about the return on investment and tend to save. “I bought the shares in Company X and made 20% a year, which is great!” It is much sexier than "I can save 50% of my salary". But when we want to accumulate wealth, is profitability the most important? I will mention two examples from Jon and Mary. Let's say that both receive a net salary of 2,000 euros per month in 12 months. JON saves 10% of his salary, which means that he saves 200 euros per month, obtaining an average annual return on investment of 10%. On the other hand, Mary only manages to obtain an annual rate of return of 5% on average, but saves 50% of her salary, which is 1,000 euros per month.

Assuming that two people invest the money saved every month, 20 years later, Mary's net worth will be about 413,000 euros and Jon's net worth will be just 153,000 euros. Astronomical difference! Although Jon saves half of Mary's savings, which is 500 euros a month, and gets twice the rate of return on investment, which is 10% (5% for Mary), but 20 years later Jon accumulated 383 thousand euros , less than Mary 30,000 euros. In addition, Jon can spend a lot of time acquiring information and investing, because to have such a high profitability he may have to invest in high risk products, which not only takes a long time, but also chooses them correctly and performs the monitoring.

On the other hand, Mary must make rules, make reliable financial plans and make concessions to achieve that savings. However, since it is relatively easy to arrange an investment with an average annual yield of 5% - what Mary can do is invest in low risk index funds or real estate and have a property manager - she will have little or no time to think. . to invest in her investment. Mary not only has a bigger monetary gain than Jon, but also in terms of time and pressure!

Profitability is important and economy is essential!

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What about Bob who became millionaire trading options with x500 leverage ? :D
Just kidding, being able allocate a large part of your salary into investment is essential as you said.
Nowadays finding a safe investment is barely impossible but still you have to find an acceptable risk for the reward you want.
Investment is a marathon, not a sprint :)

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