Betting Vs Bookies
Difference 2 - Investors have more control over their money
Imagine betting on a horse race and being able to choose if you are paid for coming out fifth, or being able to draw out your money …show more content…
A clever investor may know the head of a new company was appointed because she is the daughter of the previous owner, and so may invest in that company’s competitors.
Believe it or not, gamblers can use more than luck if they are clever about it. They cannot beat the bookies consistently, but some are able to balance the books so that they come out on top more than they fail, and that is what investors may do too. Again, there are no guarantees. For all we know, coca cola could fail tomorrow when scientists find out that it is the cause of US obesity. You can make clever investments just like you can make clever bets, but there is still no guarantee you will come out on top--you are just “more likely” to come out on top.
How Shares Fit In To Your Finances
Putting your money into shares and then forgetting about them for twenty years is not the worst thing you can do, but it is not a great idea in most cases. Ideally, you are going to have to find the time every week to check the health of the companies that you have shares in. You will also need to check their share prices to see if now is the best time to sell and put your money in another …show more content…
The investment may be dissolved very quickly without losses, which means putting your money into flexible savings accounts that usually only produce a small amount of interest.
You need to add to your emergency fund every month. This means it is going to grow increasingly large as time goes on, but if you are building wealth correctly, then you will need a larger emergency fund.
The point of an emergency fund is to help ensure you do not dip into your investments in any way. It is your guarantee of future wealth. People without emergency funds will become strapped for cash at some point, usually because of unforeseen bills or accidents. They then have to sell their investments quickly and take massive losses just so that they may get to their money. You need an emergency fund to help ensure this never happens to you, or you are really going to struggle to build wealth in the long term.
Do not be silly and put 20% of the net from your wages into your emergency fund. It only needs a small trickle of money every month to ensure it grows at a similar rate to your wealth. After all, if your assets grow from $500 to $5mil in ten years, then your emergency fund of $700 isn’t going to do much good. A nice rule of thumb is to divide your current investment amounts by