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7 financial advice that is a true stolen

13/07/2015

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Recommendation and reprobation

Signs of approval and disapproval: Know frequent recommendations on money that are not valid in any situation

It is natural to hear advice from friends, relatives and even consultants on how to manage their finances, but these recommendations should be analyzed carefully. Some are so repeated that sound like absolute rules, but are not true or valid in any situation.

To build a solid heritage one must understand that there are no formulas ready to enrich. Unforeseen situations and changes in the economic scenario requires those plans to be adapted constantly. In such cases, we can not continue to follow a recommendation that no longer makes sense.

Below are some financial advice that instead of helping you to accumulate money, may end up generating losses.

1) Property is the safest investment

The claim that buying a property for profitability with rents is the safest investment is far from true.

So says Fabio Gallo, a finance professor at the Pontifical Catholic University of São Paulo (PUC-SP). "Just like any other investment, real estate have different risks. Although the initial investment is high, the profitability that the buyer expects to derive from the rent of space or the property value is not guaranteed."

Generally, to make the investment, you must obtain a monthly return with rents falling between 0.5% to 0.7% of the property value. But with rising prices in the real estate market in the country in recent years, who bought the unit for a high price has more difficulties to get these returns now, says Professor at PUC-SP. "The weakening economy reduced the demand for rental and purchase of real estate, which causes price drop in the market."

Even if the owner can get that profitability range in the unit rental, Gallo points out that, historically, it is possible to achieve equal or superior returns in the financial market.

Compared to other more conservative investments, investment in real estate has a drawback: low liquidity. It's harder to sell the house or apartment than a financial basis, particularly if investors insist on selling the unit at a higher value than buyers are willing to pay.

2) Break your credit cards

Who has not heard the recommendation that the best thing to do is get rid of the credit card to go through a financial lack? Unless you are a compulsive consumer, the plastic should not be seen as the embodiment of all evil that harm the budget.

If used in a controlled manner, the credit card can actually be a financial planning tool, says Gallo. "By splitting the payment of purchases that can not be delayed, consumers can control their spending."

The secret, says the professor, is to use plastic only when necessary. "Consumers do not have to expect to pay a visit to the washing machine, for example, as long as the purchase plots fit in your budget."

3) Save 10% of your salary for retirement

It is common for experts recommend saving a certain percentage of income for retirement, as 10% of salary. But this recommendation only serves as a stimulus, and should not be followed to the letter.

The percentage does not take into account, for example, the age and investor earnings. One thing is to join 500 thousand dollars in 30 years. Another is to accumulate the same amount in just ten years. In the second case, you need to save more money, which will require that the consumer has a higher income or invest a higher percentage of their salary.

The most appropriate, Gallo says, is to establish a value to be received during the period of retirement. Set that amount, you can estimate how much you need to invest every month for the amount. "Made this estimate, the consumer may have to save 3% or 50% of what you earn to reach the target, depending on your salary," says the professor at PUC-SP.

It is important that the values are flexible. If there is money left over, why not increase the amount invested? Thus, in case of a possible loss of income, it is possible to reduce or suspend the application of values until the budget returns to stay balanced without this interruption has an impact on the reserve for retirement.

4) Diversify investments

Diversifying investments is often recommended by financial advisors strategy. However, the board is not valid for any investor. The strategy makes sense only if you already have a reasonable amount applied.

Divide the amount invested between different applications aims dilute risks and increase the possibility of gains. Those who have little money to invest should have initial focus more conservative investment. If only because it is difficult for the little guy can access more sophisticated and profitable applications.

5) Investing is always the best way

Apply money just because it is indicated, without having a definite goal may not be worth it. Accumulate money should not be seen as a goal but as a means to carry out projects.

For those who are starting a career, for example, you can make more investment in courses and travel in order to improve professional skills. The return on these investments may be higher than the yield recorded in a financial investment.

6) Falling prices? It's time to buy

How often have you not heard, after a significant stock market crash, which stock prices are a bargain and it's time to buy?

Put money in the low to sell high is a maxim that requires caution. After all, it is necessary to consider whether the price decline of investment has reached rock bottom and when to return to recover.

Just remember cases such as OGX, the oil former billionaire Eike Batista. The company's stock, which was worth 23.29 reais, began to register fall on allegations of financial irregularities and problems and some investors decided to buy the papers downtown, in the hope that the action to rise again. But the company eventually asked bankruptcy and faced several lawsuits in court. Result: the shares were worth pennies, and investors continue to wait for the implementation of the return.

7) Pay a college always pays off

Investment in a college is always valid because it ensures better jobs and higher wages? From a financial point of view, expect such compensation, especially in the short term, it is risky.

If the student has to finance the payment of fees, this risk increases even more because you must add the value of monthly interest rates charged in the chosen line of credit.

If the option is for a career with saturated labor market, it may be harder to get a good job and, consequently, achieve the return on investment. On the other hand, attend a reputable university can enlarge the chances of having such compensation.

A study done in 2014 by Payscale, American consulting comparing wages, points out that the financial return obtained by students of American renowned educational institutions such as the Massachusetts Institute of Technology (MIT), could reach 2 million dollars in 30 years, while the compensation received by opting for colleges with low rating may be only U$ 148,000 in the same period.

Just as it is necessary to choose calmly in which applications to invest the financial return is satisfactory, the student must also choose their career and educational institution with great care not to invest in the wrong college.

Source: Survey

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