What exactly does "prudence" mean in prudent financial management?
Since we want to "manage our finances steadily", we need to deeply understand what "prudent" means. For some people, it is better to keep money in the bank or buy bank wealth management products than to leave money at home and suffer ruthless devaluation. Therefore, this is a relatively stable financial management strategy in the minds of such people.
In the eyes of some radicals, the interest income of putting money in the bank can't run away from the depreciation caused by inflation. Therefore, they don't think saving money is the most stable way. We can see that the same financial management method and different judgments before and after come from the different financial income expectations of two types of people. Those with high expectations are considered unstable, while those with low expectations are considered relatively stable.
How to achieve sound financial management?
Through the analysis of the second point, we know that "the significance of prudent financial management lies not only in the pursuit of the safety of principal, but also in the pursuit of a certain considerable return." Therefore, to achieve "sound financial management", we need to analyze it from two levels: as steady as possible and as high as possible.
Obviously, high income and stability are contradictory. It is almost impossible for a certain financial investment method to take small risks and achieve high returns. Therefore, here I provide you with a relatively balanced and decentralized financial thinking. To facilitate understanding, here is a simple example.
For example, if you have 1 10,000 cash at present, then we can take out 800,000 of them to buy wealth management products with a bank income of 5%. This financial management can bring you 40 thousand yuan a year The remaining 200,000 can choose to buy shares of high-quality companies and hold them for a long time, or invest in representative index funds in batches to strive for higher returns. Because you will have 40,000 fixed bank wealth management income every year, this 200,000 yuan equity investment can bear a maximum loss of 20%. When this extreme situation happens, you haven't really lost money that year, and the bank wealth management income only offsets the loss of your purchase of equity assets.