This investment is too expensive!

This investment is too expensive! When we talk about products or services, we divide them into: cheap or expensive, at first glance. Why at first glance? Because in the first stage of perception we have the product/service and the price.

We dichotomously categorize the things that come into our sphere of perception: fat-weak, good-bad, beautiful-ugly, cheap-expensive. In reality, there are more nuances, but it is much easier for us to sort things in order to be able to find them more easily.

 

This investment is too expensive!?

We talked in the previous article about the fear of investing. Before investing, we think about what we gain and if there is a risk of losing, then we also relate to the costs. The second fear is that of high costs or large amounts that we have to invest.

At first glance, the decision to invest is based on the yield. The yield should be very high; as much as possible consisting of two digits and the first digit should be from 2 upwards, if possible. (But these high returns also imply high risk.) Thus, we come to the discussion regarding the cost. Oh, do I have to pay to invest my money? Yes, it is necessary! It is a service. To invest you need knowledge – information in this field and time to invest, otherwise you let the experts invest and you pay them for their experience, time and information so that you can take care of, all this time, what you have on your list according to the roles you fulfill: employee, parent, son/daughter, friend.

All this information, experience and time are aspects that provide success in investments.

Active investments vs. passive investments

We live in a century of speed. Everything is dynamic and we have learned this way. Nowadays we do many things. We have graduated from college and maybe we work in a different field than the one we studied. Now, we can learn anything and from here comes the desire to invest on our own. I also hear the lack of trust in the management of money by someone else.

I completely agree with the lack of trust in the management of one’s own money by someone else, especially, an individual, but not only, in the absence of a contract and even in the absence of safety nets. (An important safety net is the guarantee of the fund.) Under other conditions, I am not afraid. And let’s think: why could we be afraid when we choose to work with companies that with this and take care of having all these safety nets.

Would you like to fly the plane when you go on vacation, working in engineering, IT, commerce or in a field other than that of piloting planes, or would you prefer to get on the plane and have a professional who has experience and knows what he is doing fly it? This comparison involves investing actively or investing passively. Do you want to invest: to allocate time, energy, learn to invest or leave an entire team to take care of your investments?

What should I invest in, how?

I recommend that your first investment be a passive investment. Why? Because by investing you have access to good returns, without effort or time involved. If you want to invest actively, with a first investment of the passive type, with its help you learn how to invest, what an investment entails and most importantly: you mature your emotions regarding an investment, namely market fluctuations.

Passive investments are those that allow you to see how the market works, how to relate to an investment and gain confidence (if we are talking about the fear of investing). Even more so since you earn from passive investments, and you can invest the profit actively. You already have some money that your money produces. During all this time that you invest passively, you can accumulate the experience necessary to invest yourself.

You choose a company and a financial product through which you can have access to the capital market.

How much does it cost to invest?

It doesn’t cost much, if you choose the cheapest product on the market in its category. There is always a more expensive or cheaper product and yes, I agree and I encourage you to take the cheapest product / investment option, because that way you have a higher profit. Why would you choose something more expensive if it has the same features?! Only if it has the same features and benefits.

So that you don’t get confused by costs, I will help you compare the costs of an investment fund. Going beyond the fact that you encounter terms that need to be “translated” for you; each has its own name, but we simplify things, so as to keep the idea of ​​the cheapest product. We have a cost of 3% and one of 6%. Wow! 6%. Clearly it is the most expensive. No, it’s not really like that! Let’s see!

How not? Mathematically 6 is greater than 3. Yes! Correct! But let’s see where that cost comes from.

If we have 3% /year that is taken from the account balance (the account balance is made up of the amount you invested and the profit received), and the other product has 6% of what you deposit (x lei, which does not affect the account capitalization). Now, which is more expensive? Wow! The 3! Yes, exactly: the 3 is the most expensive product.

The 3% product is the most expensive because it is applied to the account balance that targets capitalization. For more information on how capitalization works, find here: https://laurentiumihai.ro/puterea-dobanzii-compuse/

The more expensive it is: you pay high costs, it is also expensive in terms of the time you invest to be at the level of another cheaper product that takes you faster to your destination.

Is this investment too expensive?

There are possibilities in the market. You have a choice. First of all, you have to have confidence, not be afraid and then determine what you are looking for. You determine what you are looking for because investments are vehicles to achieve your financial goals: whether it is your pension or the account for your financial independence. That product must fit your goals, so it doesn’t matter if it’s cheap: it’s not good!

It’s necessary to know what you’re looking for because that way you determine what you need and you’ll be comparing the same type of product, not “apples to pears”. That way you have no way of determining which is cheap or expensive.

Success in becoming aware of money and finding the right solutions for you and your financial future!