Thinking of not keeping money in a current account is a utopia: a tool for managing your savings is necessary. In fact, it is unlikely that the current account will be at risk and that what has been deposited may be lost.
Yet, there is a however and it is represented by different factors: current inflation is at an all-time high and the sting of some traditional current accounts contributes, from year to year, to a slow and continuous erosion of one’s capital.
Where should you keep your money then? How to prevent too many current account savings from decreasing over time, between management costs and the economic crisis? Here are some solutions to consider.
Market volatility
What is market volatility? Market volatility is an indicator of the variation of the prices with which the securities are exchanged on the market, often measured by the standard deviation of returns or by the measurement of the variance of possible yields compared to the average.
Share markets can record volatility episodes at any time, both in the up and down phase. Sometimes, significant or exceptional prices of prices can induce investors to make impulsive investment decisions. However, with a long-term perspective, these short-term deviations can level up to outline a different trend during more prolonged periods. Based on our analysis of the markets, historically, this trend has given rise to equivalent equity returns in the long term (for example, in periods with a duration of over 20 or 30 years).
Fearing volatility is completely normal, and the periods characterized by change and uncertainty can prove to be extremely complex. Nonetheless, the oscillations of the price lists are often unpredictable and can end rapidly. Trying to predict market timing and avoiding the episodes of negative volatility is an almost impossible operation, with which you risk penalizing your yields during the planned investment horizon. It is also important to remember that market oscillations are not necessarily synonymous with negative volatility. Of course, the downward deviations could erode the value of their investments, at least in the short term, but the rag-up oscillations can equally benefit the wallet.
In reality, for many investors in shares, negative volatility is the price to pay to grasp the yields recorded by the markets in the long run. As difficult as it may be to maintain calm and discipline in the face of positive or negative episodes of volatility, it could be this resolve that determines or affect the achievement of your financial objectives. If you fall into the category of investors who struggle to maintain discipline during periods characterized by market volatility, you may use a financial consultant who can understand your long-term goals.
Investing in stocks means buying part of a publicly traded company. The goal is to make a profit when the stock price rises. Holders of a stock can also receive a dividend if the company makes a profit.
In fact, things are slightly more complex; we’ll talk about it in depth in the next paragraphs: to say, it’s possible to earn even when the share price falls (we’ll see how).
What is important to know is that to invest in shares, it is essential to use the services of investment platforms or a bank (independent investment platforms are much better, however).
What is a stock?
Before starting to analyze the best techniques for investing in shares, it is better to start from the definition of stock.
A share or stock represents the share of the capital of a company. Owning a share, therefore, is equivalent to owning a small share of a company (usually a very small one).
Owning a share entitles you to receive a share of dividends, i.e. the profits generated by the company. How are dividends received? Periodically, listed companies are required to present a balance sheet with the profits generated in the period.
The company may decide to distribute all or part of these profits to its shares (owners) in the form of a dividend. In the simplest case, the profit that is decided to be distributed is divided by the number of shares. In some cases, there may be shares (preferred shares or savings shares) which receive a larger share of the profit.
The owners of the shares have the right to participate in the management of the company, with a right to vote that is proportional to the stake holders. In fact, it is a purely formal fact: small shareholders count for absolutely nothing. Some attend assemblies mainly to take advantage of the free buffet.
But how do you invest in stocks today?
The most classic type of equity investment is to buy shares directly. For many readers, this is probably the only way that exists to invest in the stock market online. Unfortunately, it is a rather expensive method because usually the platforms that allow this type of operation apply exaggerated trading commissions: buying shares is usually not convenient.
In fact, if you decide to make a stock investment by directly purchasing the shares of a company, you can make money when this company distributes dividends and when the share price rises. But what happens when the stock price falls? Money is lost.
The best way to make a stock investment is to use derivative instruments that allow you to make gains both when the stock price falls and when it rises. Obviously, in order to earn, you need to correctly predict the trend in the price of the share you are investing in.
Anyone who works with derivative instruments, in any case, loses the right to participate in corporate meetings. In reality, it does not lose anything (except the possibility of participating in the related refreshments) since the vote of the small shareholder counts for nothing and, above all, in Italy, the decisions that matter are always taken separately.
