Discover the Magic of Investing Gradually"

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Camilo Pinto
Publisher

One of the most viable forms so that you manage to accumulate an important capital and really “to set the money to work for you” is across the potency of doing investments gradually.

Although obviously between major the total of the investments, major the capital that you will be able to accumulate, I believe that the really important thing is to initiate this process; that is to say, acquiring the habit of doing investments of a periodic way. My recommendation is that you can organize yourself to do it whenever auto-employee receives his monthly revenue, independently if you are used, etc.

In my experience, this habit is one of that it is going to give more benefits to him in his financial life... it is more, it would dare which to say that if you manage to apply this habit in his financial life, all his way is going to be easier.

Now then, to arm a capital of this form can allow him to have the platform to be able to enter the world of the economic flexibility and why not, of the financial freedom. This moment in which you will have a quality of life without precedents since by means of a winning habit like this one, you managed to buy his time.

Namely it managed with discipline to set the money to work for you by means of a capital that he constructed across the time and that now is a hereditary base that allows him to generate income without necessary working due to the yields that it produces to him.

We saw already in the previous edition of “My Personal Finance” as between more rapid you begin investing, richer it will be able to turn. If he read well, richer it will be able to turn! I understand that this can dream too well to be true, but really it it is.

If it is true of that time why are no any more persons who manage to accumulate important capitals?

I believe that the reasons are basically two:

The first one is that almost none of us was formed by proper habits of a really intelligent person from the financial point of view. Namely very few persons were taught by his parents, in the school or by some type of mentor on the importance of there not wearing out everything what they gain and of being able to invest a small part of his monthly revenue.

Otherwise almost all the persons learned (therefore the persons nearest to them saw doing), to be raising permanently his expenses level and therefore they entered a cycle without end of not being able to generate free cash flow... or said in a way simpler to it wear out quite what it brings in to them monthly.

I am a convinced one that for many persons this situation is a product exclusively of bad habits... of destructive wealth habits.
Of wanting to support a status, which often is simply a false appearance.

One day I heard a very successful person of the world of the business saying that status is to buy things that one does not need with money that it does not have one to impress those that we do not like... and I believe that many Latin Americans do or stop doing things thinking about this form.

Allow to wonder him in a most respectful way,

Who takes the meal to his house?

Who pays or is going to pay for the university of his children?

Who pays for his trips and holidays?

Who pays or he will pay for his housing?

Who will give him money to arm an important capital that works for you?

If you are as almost all other persons,

the one that pays for these things is you!

Therefore that imports what the others think of us! Often we prefer to buy a very pretty car to top of a bad debt by means of a costly super credit, instead of directing our resources towards those things that will make us more prosperous and free financially speaking!

With this I do not mean that there is badly to buy to him a pretty car; what I try to say is that there are ways of doing it in that one does not end up by doing a financial suicide and less if the real reason of why to do it is therefore the others say.

I would dare to say also that if a person can live with 100 % of his revenue also he can live with 90 % of his revenue, inclusive with 85 % or with 80 %!

Simply he needs to apply simple methodologies for the administration of the revenue like handling a budget, like to pay to if same first, how to learn to handle the emotional part as for the acquisition of some consumer goods and how to have a real decision to want to have the money working for you.

Be promised in yourself to live inside his possibilities. Decide from today not to acquire any more unnecessary debts nor to spend too much to support his life style. Decide that sanear his finance... often to do this is a process that can be late months to correct this situation and to change his cash flow pattern, but if it does it, in a few years he will be grateful to me for it.

Good this is the first reason for which according to my experience many persons do not manage to accumulate big capitals: they wear out quite what is gained.

The second reason is the absence of discipline. The truth is that many persons lack discipline to do small periodic investments - monthly for example, during long periods of time.

Some of them start applying this strategy of gradual investments with the target to construct an important capital that could work for them, but those who end really with the plan that they designed (often with the help of a consultant in financial planning) tend to be very few.

I believe that to begin something is extremely easy, but the success almost always is hoping for those that they finish what they begin. I have never heard histories of persons' success that only initiated projects or some special plan, but if I have heard exciting histories of persons who finished what they began.

Of what group does he want to be you?

Almost always elements exist distractores that they remove to many of the possibility of having the money working for them. The key therefore is a consistency and what really fills with enthusiasm me of this is that it is within reach of many persons, because we are not speaking of investing US$ 30,000 or US$ 50,000 or US$ 100,000, but rather of acquiring a habit potencializador of wealth: to invest gradually.

Really I see it like a decision and this decision is in his control circle: it is in his power... nobody more can bring over or remove more to the possibility of constructing a capital that works for you that yourself.

Therefore, my recommendation is that it develops the habit of investing regularly.

Once it has this habit, to find the briefcase or the investment adapted for you is a children's thing and if he feels comfortable with our advice on the subject of investments with great pleasure we can help it. But the really important thing is that it starts, does not hope any more for time!

I suggest him that the following questions to be risen:

1. What capital do you want to go so far as to accumulate?

2. How much can he invest per month?

3. During how long is it ready to invest?

And possibly the question more important than all...

Why is it important for you to achieve it?

This concept of investing gradually is going to serve to him very much also like strategy to diminish the risk of entry to many types of financial assets or vehicles of investment. Especially to those that are highly volatile; said of way simpler, those investments that in the long term have normally a tendency to the rise, but that can present changes in the short term, both positive and negative.

Example of volatile investments they are: actions, funds of actions, currencies, hedge funds, investments in forex, options, futures, between others.

This process of doing periodic investments gets technically the name of DCA for his abbreviation in English Dollar Cost Average.

This strategy DCA allows him to promote these market movements in his favor, when he has decided to invest in volatile assets and of major risk.

In fact if you are doing monthly contributions to some type of briefcase of investment, without realizing it is using a strategy of Dollar Cost Average (DCA).

How does the DCA work?

As he was saying previously, the DCA is not any more that to buy regularly his financial assets (actions, bonds or shares in a mutual fund) during a widespread time period.

The reason for which this strategy works the fact is that the total of money that he decided to invest periodically will buy more units or actions when the price is cheap, he will buy less when the price is expensive and will end up by buying finally at an average price.

Since nobody has a “ball of crystal” to know with 100 % of accuracy when there is the precise moment in which the financial asset that you are going to buy is in his rock bottom, when it is not even the moment in what it will be in his highest point to sell it, then when you use this strategy in long time periods, not also the average of the cost of the units or actions that you bought almost always it will be minor than the average price of the assets what it means: profit!!!.

When is advisable to use a DCA?

1. When the assets finaciero in the one that you are investing are highly volatile.

Investments in actions of companies in growth, in actions of small companies, in funds of actions of growth (Growth), in currencies, in funds hedge, in futures, in options, in the market forex, are examples of some investments that can be considered to be highly volatile.

2. When you do not have a lot of experience in this type of investments.

The reason of recommending a DCA when you are beginning in investments that imply a little more of risk and therefore of volatile nature it is more than quite psychological.

Normally the persons who are raw in this tend to evaluate the performance of his briefcase of investment in the short term. (One month or a few months), this way they have established that his investment horizon was more than 2, 3 ó more years.

How are you persons tend to evaluate the results of his very rapid briefcase, if for some motive a depreciation of the same one has appeared, tend to become nervous and to show his dissent with the management of the same one... like that, they have specified that were ready to assume the associate risk and this way they have made sure that the first evaluation of the results of his briefcase of investment was going to be after one year.

3. When if the person or the company that is helping it with his investments briefcase has not an active and dynamic system of handling of briefcase that allows them to do repairings of a proactive way and in accordance with certain criteria defined with base in the profile of risk of every investor.

I explain to myself that... it is very common inside the industry of the financial services that many persons do investments in funds in several coins, in funds of actions in USA expressed in dollars, in funds of actions in Europe expressed in euros, in funds of actions on a global scale expressed in dollars, in bonds of countries, etc.

Many persons are advised on what investments to acquire for different financial advisers who tend to operate in the different countries... even there we are fine.

The problem often begins when the company that administers the briefcase is not provided with the systems to be able to do the changes that he considers to be suitable in certain market conjunctures. Namely many persons for example arm his briefcase of certain way, but on not having been provided with a system of management of briefcase that is moving them constantly, what for them it usually happen is that they remain with the same briefcase composition for years and years.

I believe that it is important to invest in the long term, but it is not necessary to fall down in the point of hoping that the years should happen without giving him an active handling to the resources that are had invested.

Therefore if the company that administers his investments is not provided with a proactive system of reswinging of his briefcase, to use a strategy DCA can be adapted for you.

In conclusion, if you are inside some of 3 previous cases, of not choosing for the strategy DCA and deciding to invest everything at the same time it might bring with it bad consequences because it would be limiting his moment of entry to the investment to the particular conditions of market of the day in which it did the investment.

Him one allow to explain this a little better with an example...

One be imagined that there are two persons; Juan and Pablo who want to begin investing in a little riskier financial assets (and therefore volatile). For both it is the first time that they do this.

Both Juan and Pablo count with US that $ 12,000 (Twelve thousand dollars) The difference is that Juan chooses to do his investment by means of the only contribution and Pablo (who had read this article) decides to be a little more prudent and use a strategy DCA therefore US decides to invest $ 1,000 of a monthly way for 1 year.

They invest both in the same briefcase...

At the end of the first year, the evolution of the briefcase was like that:

First let's see what happened with Juan:

US invested $ 12,000 in January, managing to buy 1,200 units of the briefcase to a value of US $ 10 each one. In December his briefcase present a balance of US $ 10,800 given by 1,200 units to a value of US $ 9 every unit.

In short the following thing happened:

Inverted whole: US $ 12,000
Number of bought units: 1,200
Value of the unit at the end of the year: US $ 9
Value of the investment at the end of the year: US $ 10.800
Valuation / Depreciation in one year:-10 % annual Cash

Namely the risky investment of Juan presents a depreciation of US $ 1,200, after one year, with which Juan is a little nervous and for nothing satisfied with his results... largely for his little experience in this type of risky investments.

Now let's check that it happened with Pablo:

Pablo invested US $ 1,000 every month, of the following form:

• In January US invested $ 1,000 buying 100 units to a value of US $ 10 every unit.
• In February US invested $ 1,000 buying 111.1 units to a value of US $ 9 every unit.
• In March US invested $ 1,000 buying 125 units to a value of US $ 8 every unit.

... it kept on doing the same for each of the months of the year.

In short the following thing happened:

Inverted whole: US $ 12,000
Number of bought units: 1,515.7 units
Value of the unit at the end of the year: US $ 9
Value of the investment at the end of the year: US $ 13,641.7
Valuation / Depreciation in one year: 26.22 % annual Cash

Namely the risky investment of Pablo presents a valuation of US $ 1,641.7, after one year, with which Pablo apart from being I satisfy with his results, he confirmed with his own experience the value to use the DCA when a person is raw in the topic and when it is invested in briefcase of high risk.

I believe that it is super important to do emphasis on some points that were determinant so that Pablo had a few satisfactory results:

1. For long-term investments the falls on the market can turn like positive events, since we buy more units

It is important to clarify that what I have just shared with you, is something very general done only with didactic ends to show in a simple way the value of a strategy as the DCA. For nothing he tries to replace the personalized advice that there can give an expert in financial planning, which will give him based recommendations his personal situation and that for obvious reasons they are salted of the scope of this bulletin.

My recommendation is that he does not hesitate to contact a consultant in this field since not to do it can turn out to be expensive to him at the time of doing his investments.

I say goodbye of you hoping that it should put into practice these recommendations and that he should begin making use of the magic of investing gradually.

For his financial success,

Camilo Pinto
Publisher

Tel.: (571) - 6914692

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