Stijn Fockedey
Co-editor-in-chief Trends Kanaal Z ai
A sure way to ruin Christmas dinner is to start talking about money. However, it is desperately needed. Time and time again, studies point to the massive and inadequate knowledge about money. This week Trends contains a large extra supplement, Investing in 2024, packed with tips to make better financial decisions in 2024. Somehow I hope that this appendix will be passed on at a Christmas gathering to someone less interested in investing, and preferably to a young adult.
It is precisely those late teens and twenties that can benefit most from good financial literacy. They start to earn more than an allowance and build up their first reserves. They should not let those savings idle. It is also the best time to pay tuition before too much is at stake. The most important asset of young people is that they can look for a long investment horizon. They can correct mistakes, and starting to invest young increases the chance of a real success. Even a very small amount of smartly invested savings can grow into a nice amount. All it takes is patience and the magic of compound interest.
Albert Einstein once described compound interest as the eighth wonder of the world, and I regret that I learned that lesson too late. Twenty years ago I bought an Apple iPod for 300 euros with my savings, earned from weeding. Being able to listen to music anywhere was good for sentiment, but for the return I would have been better off investing a comparable amount in Apple on the stock market at the time. When my MP3 player gave up the ghost after five years, Apple’s stock had already risen 1,400 percent. Now, twenty years later, that missed return on a fictitious investment has exploded into a heartbreaking amount. It’s always easy to say in retrospect, but at the time it was clear that Apple had enormous momentum. I should have taken that calculated risk, even if I could only spare a modest amount.
Albert Einstein once described compound interest as the eighth wonder of the world, and I regret that I learned that lesson too late.
Financial literacy is also the best antidote to blinding greed. The first rule of investing – sufficient diversification over time and per investment – is often ignored. And if the line on the graph goes up really steeply, reason goes completely overboard. There were plenty of hallucinatory examples during the WallStreetBets hype or the crypto hype, which landed ordinary people in extreme financial misery. Recently there was the sensational case of former minister Luc Martens, who incurred debts everywhere after a failed crypto investment. So things certainly don’t just go wrong among young people.
Success with one type of investment, for example real estate or shares, often makes people overconfident. Each asset class plays by different rules. It is a matter to study carefully. Our attachment Investing in 2024 therefore devotes extensive attention to investing in bonds. These are attractive again due to the sharply increased interest rates. But we have collectively forgotten to think about bonds due to the golden times on the stock exchange and the real estate market.
Finally, there is the joker. We live in uncertain times, and unfortunately these are the best breeding grounds for jealousy or delusions. Better financial literacy not only pays off individually, it is also one of the best vaccines against populism that society has. The rules of capitalism are not scary or difficult at all.
The editors of Trends Kanaal Z wish you happy holidays. Next week we’ll wave the year off with an interview issue, so we can start 2024 full of inspiration.
2023-12-21 15:12:00
#financial #literacy #vaccines #populism
