Most people think they are above the average level of intelligence, relationship status, and professional achievement. Sociologists call this “illusory superiority.” However, there is an area where even people who are objectively smart, rich, successful professionals seem to be waving the white flag and admit that they do not understand money and investment.
Sounds like you? If so, do not worry. You are not alone. Two-thirds of people in the world cannot pass a test of five financial literacy test.
And this is because the fundamentals of finances are boring and aggressive. To understand it, you need to understand the interaction of money and time, and this is difficult for people. Both money and time are abstractions. Understanding how they work is a real challenge.
The result is that even people with diplomas and professional success can fail.
The first group of people say they do not understand the money and delegate the responsibility to a professional. They find someone who seems able to invest their savings and just forget about them for several decades.
The second group of people is slightly more educated. They open a trading account, spend a few thousand dollars and start trading in stocks.
Perhaps the beginner makes some money, or maybe he loses little, but he usually fights with the market and stays with him, buying and selling alone without any help.
Both approaches are extremely risky.
In the first case, people get good advice but pay extremely high transaction fees, which are not as profitable in the long run.
In the second case, encouraged traders can lose their money by entering non-liquid instruments or with a high percentage of risk on a small account.
This happens because the small investor thinks he knows what he is doing. So, there are many purchases and sales.
What are rich people doing then?
The key is to reduce your costs, to be consistent in your investment process, and of course to save enough money to be comfortable on the market. Also, one of the most important rules in trading is to be emotionless. If you succeed in achieving this, you have a great chance of succeeding in the market.
Trader Milko Zashev