Money Management

3 Key excerpts on "Money Management"

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  eBook - ePub

  A simple approach to equity investing

  An introductory guide to investing in equities to understand what they are, how they work and what the main strategies are

  • Stefano Calicchio(Author)
  • 2022(Publication Date)
  • Stefano Calicchio

    (Publisher)

  Money Management

  Money Management is a key issue for the success of any investor entering the financial markets. It is an indispensable tool to know and put into practice in order to preserve your capital and develop it over time.

  Money Management refers to all aspects and processes of budgeting, investing and overseeing expenses related to the purchase and sale of equities. In fact, it involves all aspects of portfolio management, influencing its results.

  Investors have access to a wide range of shares and other financial products on the market. Navigating through these and understanding how to allocate your capital is therefore crucial. If you don't have a good money management system in place, the chances of losing money over time are very high no matter what strategy you choose to follow.

  Unfortunately, this subject is often underestimated by investors approaching the market for the first time. The reason is simple: in many cases it is a boring and unpleasant activity.

  Carrying out careful risk analysis, monitoring your positions and verifying the exposure of your securities portfolio can in many cases seem exhausting. However, understanding how to prevent large losses from affecting your portfolio is crucial in the long term.

  To understand this immediately, it is enough to understand how difficult it is to recover from a loss. An investor who realises a 25% loss on his portfolio will need to earn 33% to restore the value of his original net worth. With a 50% loss, this rises to 100%, while with a 75% loss, a 400% gain will have to be earned.

  Finally, a 1000% gain will be required to break even after a 90% loss. Statistics show that only 1% of investors are able to achieve a performance capable of doubling their capital in a short period of time.

  Unfortunately, many investment books focus on how much money can be made and not on the risks of loss. This is a serious fact that can cost inexperienced investors thousands of dollars. However, stories about investors who have wiped out their accounts or who have been ruined by poor money management are an everyday occurrence. Many are looking for big profits in the short term, but underestimate the potential of wiping out their real and psychological capital.

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  eBook - ePub

  The Job-Ready Guide

  How to Set Yourself Up for Career Success

  • Anastasia de Waal(Author)
  • 2019(Publication Date)
  • Kogan Page

    (Publisher)

  13

  Budgeting and money skills

  Budgeting and money skills will make life easier at every point in your life: whether you’re still at university or college, job hunting or starting a new job. Being on top of your finances – from how much money you have, to how much you are spending – makes a huge difference, not just to your peace of mind but also to the opportunity and freedom you have to pursue what you want to do. Getting into financial difficulty, on the other hand, can be hugely restricting, as well as stressful.

  When you start a new job, you want to be in a well-organized and stable financial position rather than chaos. Beginning your career with money problems can limit your options, distract you from your overall goals and negatively affect your performance at work. Money problems very quickly take their toll, and creating an orderly financial life is an essential investment in guarding against them.

  In this chapter we’ll look at the approach, strategies and skills that will help you to manage your money well, from how to make the most of what you have, to the money traps to avoid. The theme running through the chapter is taking care of your money by being systematic and shrewd in equal measure. Ultimately, managing your finances well is about getting familiar with your money as much as it is about being on top of your financial admin.

  Value every penny

  The first step of good Money Management is getting into the right mentality about your money: ‘Look after your pennies and the pounds will take care of themselves’ is the financial motto you want to live by. Why? Because being careful with your money is the key to financial security. Too many of us don’t know what we have, how much we are spending, what we are buying and where all our financial information is. The result is that we’re unable to plan ahead, save or make sound decisions about our money, meaning we end up wasting it.

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  eBook - ePub

  The Tools & Techniques of Financial Planning, 13th Edition

  • Stephan Leimberg, Robert J. Doyle, Michael S. Jackson, Martin J Satinsky(Authors)
  • 2019(Publication Date)
  • The National Underwriter Company

    (Publisher)

  BUDGETING AND CASH MANAGEMENT

  CHAPTER 14

  INTRODUCTION

  Budgeting can be defined as the ability to estimate the amount of money to be received and spent for various purposes within a given time frame. For purposes of this text, however, one should think of budgeting as a deliberate plan for spending and investing the resources available to the investor. It ultimately serves as a yardstick against which to measure actual investment results.

  HOW DOES IT WORK?

  In simplest terms, the budgeting process works as a result of the establishment of a working budget model by an investor, followed by the comparative analysis of actual investment results with the expected results used to create the planning budget. It is the comparison of budget results with expectations that yields the benefits of the process to the user.

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