Welcome to this page dedicated to investing only. Investing as a general theme, will be conceived by my personal view and divided into categories from my point of view. There will be no definitions, no citations from books, nor can something be compatible from time to time to a precise economic theory. Why? Because everything I write here, draws info from my practice and from how it really works whether in commercial investments, or in those, you probably have never heard about. I think, that economic theory is firstly described and than someone tries it on, if it really works. Of course not always.
But that is not my main point. My understanding of investments as a whole is driven by two things: risk and time horizon. In most cases, these two relate to each other closely, but it doesn’t have to be the case. So that means, high risk = short time period of investment = high return. And vice versa.
I will give a simple example. You have really aggressive forex strategy or you invest in manager, which this strategy runs (for example PAMM). As an investor, I see return of approx. 1-2% per day and strategy runs for a week. If I am willing to accept high risk which can correlate to high drowdown in very short period of time, I will invest for a couple of days. Let’s say that my aim is to gain 20%, so I let it sit there for approx. 10 days (forex, so 10 business days). Of course, there is a lot more going on in preparation including analysis, some calculations, not just what I want to gain. But that is another story not for this article. In one week of gaining interest there is some data for next analysis for me. After analysis I know, what to do with the funds next. That is one example – short exposure = high risk = high return.
In comparison to, for example, saving with bonds (not investing, because that is offensive to this word ), where we can gain return 3% p.a., we can get 20% in 6 and a half year. Not including fees, tax, inflation and so on. Risk is almost zero. But our money just sit there and do nothing, while time is passing by. And time is money, isn’t it.
I don’t want to say, that conservative investments are bad, capital should be diversified and therefore we need them. But if you are interested in investing, that is not the main way to go.
Note: I know, a lot of words may be new to the beginners in investing. Therefore we will have an article with abbreviations that is only explaining verbal terms from economic world.
I am dividing investments and capital distribution into 3 categories:
I think, that this dividing is enough. There is no need to complicate things with high-risk, low-risk or active and passive and so on.
What do I mean with all of this. As a short term investments I consider time frame from 1 week to one or two months. Exceptionally it is more or less, but this is very rare. High risk investment, that can last for more than 2 months always brings joy.
Mid term are in time frame of 2 months to one year. That is not according to theory, but these are mine numbers.
Long term for me are 2 to 6 years approx. I am usually not holding money in one place for more than 6 years.
When we are talking about interest, we are coming to interesting numbers. You can definitely make a living only by investing. And it is an easy life, because you need only couple of hours a day for controlling and analyzing your data and moving money where it is more needed and that’s it. That’s why we are talking about passive income (more or less). If you don’t have time or you don’t feel like it, you can skip one or two weeks and nothing big would happen (watch out for short-terms).
Of course, for investing one needs a capital, which not everybody has. If you are not inheriting or winning big money in lottery, your beginnings could be though. But it is not impossible. I was also facing big risks, lost money a couple of times and beginning with small amounts. It is difference with the same percentage to invest 100€ or 10 000€. I do not want to encourage this kind of behavior, especially with beginners, but you can invest also lent capital. But that is for another time.
I cannot tell you exact interest for each and every category, everything differs over time. But for a bigger picture, my view for an interest is this (monthly):
Short Term – they can make from 30 to infinite number of % per month. Not literally of course. But I was in some that made hundreds of percent per month. Everything seems very nice and unbelievable till you know how much money did you loose in order to get to a such place. You are not as rich as you may think. From 10 times you are trying something like this, you end up gaining plus from investment for 2 or 3 times.
Mid Term – we are talking about 5 – 25% a month. Numbers are just approximate and not always in this range. This category is for investor the most exciting, as you can do some analysis and play with your money in opposite of short-term, when you just “hope”.
Long Term – 1 – 5% a month. I am not usually investing in something with less than 1% a month. Paradoxically, these numbers are pretty accurate in long-term. They are not changing very much and we are talking within range of couple of years. 5% a month can happen in these, but it is really rare and you are certainly hitting the jackpot here, so don’t let it go.
In conclusion of this article I would like to mention really quick bank and commercial products. Someone could have other (and lucky) experience, overall it is just money put into your upper drawer. They are making no interest. They cannot even cover the inflation of given currency and state, if it has some. That’s why I am not calling it investing, only saving. And that is also an exaggeration.
When 10 000€ makes 200€ a year, that is really a mockery. Bank made a double of your deposit and gave you something to shut you up. If you are really conservative and are afraid of your money, there are still a lot and lot of better products to put your money in. If you have spare one thousand, and don’t know anything about investing and don’t even want to know anything, put it in p2p products. They are making at least some interest and you don’t have to be economic shark to do it.
Just think about your investments. Happy investing and welcome to this site.