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How to Choose the ETFs That Fit You

By MPI5th November 2025Smart moneyaccumulating, cost, distributing, ETF, investing, physical, Replication, risk, synthetic, Tax, TER, UCITS

ETF Investing

ETF Research

How to Choose the ETFs That Fit You

Published: November 5, 2025

Starting to invest doesn’t have to be complicated—especially when execution costs aren’t fighting you. With trading fees as low as 0.14% + €3 on European markets and zero custody fees, the frictions you feel most are no longer at the broker. They are upstream—in the way you set objectives, select exposures, and control risk. This article lays out a complete, analyst-grade framework: from purpose and horizon to replication, TER vs. tracking difference, liquidity, taxes, hedging, and a disciplined implementation plan.

1) Purpose, Horizon, Constraints: the Investment Triangle

Every ETF choice sits inside a triangle of purpose (what you’re solving), horizon (how long capital stays), and constraints (risk tolerance, taxes, liquidity needs). Reverse the sequence and you get noise. Lead with the triangle and product selection gets easier.

Purpose: Are you building long-horizon wealth (retirement), a medium-horizon goal (home, education), or a buffer (emergency fund)? Each maps to a different volatility budget.
Horizon: Short horizons amplify mark-to-market risk. Long horizons make drawdowns survivable—if the allocation is appropriate.
Constraints: Tax regime, currency of liabilities, need for distributions, ethical screens, maximum drawdown comfort.

Ray Dalio frames diversification as the “Holy Grail”: reduce expected risk more than expected return. Warren Buffett counters that diversification can be protection against ignorance. Both are true—at different stages. Early on, default to breadth. With skill and proof, earn the right to concentrate.

2) When ETFs Are the Right Tool—And When They Aren’t

ETFs are access technology: low cost, transparent, tradable. They’re superb for equity beta, broad bond exposure, and systematic tilts. But they’re not always optimal.

Emergency funds & near-term cash: Prefer direct purchases of very short-dated government bills for precise maturity and rate control. Bond ETFs, by design, roll maturities and carry small duration risk.
Idiosyncratic convictions: If your edge is in a single issuer or niche, an ETF may dilute the thesis—use with care.

Outside of these cases, ETFs remain the default for most long-run portfolios.

3) The Core Allocation: Theory That Still Works

Seven decades after Markowitz and Sharpe, the core idea persists: pair growth assets with stabilizers. In ETF-land, that looks like one or two broad equity funds, one or two bond funds, and optional sleeves for real assets.

Classic 60/40 (modernized)

60% global equities (developed + optional EM), 40% investment-grade bonds (global aggregate with attention to duration).

All-Weather–style balance

~30% equities, 40–45% government bonds split across durations, 10–15% inflation-linked, 5–10% real assets (commodities/gold via UCITS/ETC).

Choose a baseline, automate contributions, and rebalance annually. Complexity is optional; discipline is not.

Local context: Short-term bursts are real—e.g., a BET/BET-TRN ETF has recently offered ~35–40% returns in a year. Wonderful, but design the policy portfolio for the next 10–20 years, not the last 10–20 months.

4) What Exactly Are You Buying? Index, Structure, Replication

4.1 Index definition

MSCI World (developed-only) is not FTSE All-World (developed + emerging). Sector tilts differ across providers. Read the methodology: country eligibility, free-float adjustments, small-cap inclusion, reconstitution rules.

4.2 UCITS and domicile

For European investors, UCITS funds domiciled in Ireland or Luxembourg are the standard. Domicile affects tax treaties and dividend withholding leakage (especially on U.S. equity exposure).

4.3 Physical vs. synthetic replication

Physical: holds the underlying securities; simple, transparent. May engage in securities lending—check the revenue split and collateral policies.
Synthetic: uses swaps to track the index; can improve tracking for hard-to-access markets but adds counterparty complexity. UCITS limits mitigate risks; still, understand the structure.

4.4 Full replication vs. sampling

Full replication owns all constituents—best for liquid, concentrated indices. Sampling owns a representative basket—common in very broad or less liquid universes; reduces costs but can increase tracking error in stressed liquidity.

4.5 Distributing vs. accumulating

Distributing share classes pay out dividends; accumulating reinvest them. Match to cash-flow needs and your tax context. Over long horizons, automatic reinvestment simplifies compounding.

5) The Cost Reality: TER vs. Tracking Difference

TER (Total Expense Ratio) is the sticker price; tracking difference (index return minus fund return) is the paid price. A 0.07% TER fund with poor sampling or wide spreads can cost more than a 0.12% TER fund with tight tracking and deep liquidity. Compare like-for-like over the same period and currency.

Large, liquid universes (e.g., S&P 500 UCITS) often show TERs near 0.03%.
Smaller or frontier markets can run to 0.50–0.70%.
Spreads, securities lending revenue, and tax leakage all feed into tracking difference.

Compounded over decades, a few basis points matter. You control this lever—use it.

6) Liquidity, Spreads, and Capacity

ETF liquidity has two layers: secondary (exchange volume, bid–ask) and primary (AP creation/redemption in the underlying). AUM and 3-month ADV are good first filters; then inspect the bid–ask spread and intraday premium/discount behavior.

Prefer funds with stable AP support and consistent spreads in volatile sessions.
Check multiple listings (Xetra, Euronext, LSE) if your broker routes across venues.
For very large orders, consider risk or NAV-based trades via your broker.

7) Currency, Hedging, and the Liability Side

Decide at the portfolio level how much FX risk you accept. Many long-term investors keep equity exposure unhedged (growth offsets FX noise) and hedge parts of the bond book to align with spending currency. Hedged share classes add a small ongoing cost; they reduce FX volatility but do not change expected returns.

8) Putting It All Together: Model Line-ups (Illustrative)

Global Core (accumulating)

70% Global Equity UCITS (World or All-World)
20% Global Aggregate Bond UCITS (EUR-hedged share class)
5% Gold ETC (UCITS-friendly)
5% Broad Commodities UCITS

Rationale: equity growth engine; bonds stabilize and match euro liabilities; small real-asset sleeve for regime hedging.

Quality Tilt (long horizon)

50% Global Equity UCITS
15% Quality factor UCITS (global)
10% Dividend growth UCITS
20% Global Aggregate Bond UCITS
5% Gold ETC

Rationale: systematic tilts toward resilient earnings and income; still anchored by a broad core.

All-Weather Bias (defensive)

30% Global Equity UCITS
25% Long-duration Gov Bond UCITS
15% Intermediate Gov Bond UCITS
15% Inflation-Linked Bond UCITS
7.5% Gold ETC · 7.5% Broad Commodities UCITS

Rationale: regime diversification: growth, disinflation, inflation, and commodity shocks.

Implementation discipline: automate monthly contributions, rebalance annually (or when weights drift by ±20% relative), document changes in an Investment Policy Statement.

9) Due Diligence Workflow (Repeatable)

Define exposure (index, region, cap range, factor).
Screen UCITS ETFs (domicile, provider, AUM, ADV, spread).
Compare costs (TER, 3–5y tracking difference, lending policy).
Assess structure (physical vs synthetic; full vs sampling; distributing vs accumulating).
Tax (withholding leakage, your personal regime, ISA/PEA/third-pillar constraints where relevant).
Operational (listings you can access, settlement, broker fees—e.g., 0.14% + €3; zero custody helps).
Write the rationale (1 paragraph). If you can’t explain it, don’t own it.

10) Advanced Topics: Factors, Bonds, and Real Assets

Equity factors

Quality (profitability, low leverage) and dividend growth pair well with a global core. Small-cap raises cyclicality; size positions modestly.

Fixed income

Duration is your macro lever. Keep the bond sleeve simple (aggregate + govies), then add inflation-linked if your liabilities are CPI-sensitive.

Gold & commodities

Use UCITS-compliant ETC/ETFs. Keep sizing measured (5–10%)—they hedge regimes, not day-to-day moves.

11) Behavior: Where Portfolios Live or Die

The best ETF line-up fails without behavioral guardrails. Write—and sign—three rules:

Loss rule: “If the equity sleeve draws down 25%, I rebalance to target, not de-risk.”
Gain rule: “If a tilt doubles, I trim back to policy weights.”
Change rule: “I change the policy portfolio only after a 30-day cooling period and a written memo.”

Larry Fink often notes: ETFs democratize access. The edge is not cleverness; it’s consistency at low cost.

12) A Short, Real-World Contrast

Two globally popular UCITS ETFs—one tracking MSCI World (developed-only), one tracking FTSE All-World (developed + emerging)—delivered different 5-year EUR outcomes (~low three digits vs. high nineties %). Neither is “better” in isolation; the index design, EM inclusion, and sector weights explain the gap. The “right” choice is the one that fits your purpose, horizon, and constraints.

Bottom Line: A Framework That Scales

Start with purpose, horizon, constraints.
Pick a core allocation and keep it boring.
Understand index, structure, replication.
Optimize real costs: TER and tracking difference.
Mind liquidity, taxes, and FX hedging.
Add tilts deliberately; size them modestly.
Automate contributions; rebalance annually; document changes.

Do these things at low cost—and let time and compounding do the heavy lifting.

Bondora Go & Grow: Investing Made Effortless for Everyone

By MPI28th October 2025Smart moneyBondora, Go & Grow, investing, passive income, welcome bonus

Bondora Go & Grow: Investing Made Effortless for Everyone

Published October 28, 2025 · My Passive Income

Bondora Go & Grow is designed to remove friction from investing. With daily growth, instant access to funds, and a simple experience built for real people (not just finance pros), it’s one of the easiest ways to start growing your money online.

Investing, Simplified

In a world where traditional investing often feels complex and intimidating, Bondora Go & Grow stands out as one of the most straightforward ways to grow your money online. Built for both beginners and seasoned investors, the platform allows users to earn up to 6%* annual return, with daily growth and instant access to funds.

No complicated settings. No hidden fees. No waiting months to withdraw your money. Go & Grow turns investing into something almost effortless: you deposit, you watch it grow, and you stay in control.

How Go & Grow Works

The idea behind Bondora’s Go & Grow is simple: you deposit money, and Bondora automatically diversifies it across thousands of loans issued to borrowers across Europe. Your earnings accumulate daily and can be withdrawn at any time, giving you both liquidity and predictability — a mix that’s rare in traditional P2P lending products.

Key benefits include:

Target return: up to 6%* p.a.
Instant withdrawals
No lock-in period
No management or withdrawal fees
Low minimum investment – start with just €1

Go & Grow was designed for people who want to build a long-term passive income stream without micromanaging investments every single day.

Who Is It For?

Bondora Go & Grow is ideal for:

People new to investing who want a safe, simple way to start
Experienced investors looking for a low-effort, low-volatility component in their portfolio
Anyone frustrated with traditional savings accounts that pay almost nothing

Whether you’re saving for travel, your first home, or long-term financial security, Go & Grow offers a practical, digital-first way to build towards those goals.

Transparency and Trust

Founded in 2008 and based in Estonia, Bondora is one of Europe’s longest-running peer-to-peer lending platforms. With more than €900 million invested and over 180,000 investors across 40+ countries, Bondora has built its reputation on transparency, simplicity, and reliability.

Every Go & Grow investor gets access to a clear dashboard showing:

Daily earnings
Total balance
Deposit and withdrawal history

This level of visibility makes it easy to understand how your portfolio is doing at any moment — without spreadsheets or manual tracking.

Why Investors Choose Go & Grow

Bondora’s mission is to make investing as effortless as possible. Unlike traditional P2P platforms, you don’t select individual loans or manage risk manually. The system does the heavy lifting for you, while you benefit from stable daily growth.

Go & Grow combines:

Automation – Bondora’s allocation engine puts money to work efficiently
Flexibility – withdraw anytime, with no penalties
Growth – daily returns that compound over time

It’s one of the closest real-world versions of “set it and forget it” investing, while still keeping your money accessible.

🎁 Investor Welcome Bonus

New investors receive a €5 welcome bonus automatically in their Go & Grow account after signing up. It’s a simple boost to help you get started.

How the bonus works:

A €5 bonus is added automatically to a new investor’s Go & Grow account after sign-up, but it cannot be withdrawn during the first 30 days.
To keep the bonus, the investor must deposit at least €50 within 30 days of registering.
After that period, if the account balance is below €55 (€50 deposit + €5 bonus), the bonus will be removed.
If the balance is €55 or more, the bonus becomes withdrawable — it’s yours.

In practice, this bonus encourages you to build a real starting position instead of just “testing with €1 and forgetting about it.” It rewards commitment and momentum.

Final Thoughts

In an age of financial noise and complexity, Bondora Go & Grow represents a refreshing return to simplicity. It’s an accessible way for anyone — from students to professionals — to start building wealth without needing to become a finance expert.

*Go & Grow is not a guaranteed investment product, and returns may vary. Capital at risk.

Whether you’re just getting started or you’re looking for a stable, easily manageable component in your portfolio, Go & Grow sits right between traditional saving and modern investing: simple, digital, and built for real life.

⚠️ Affiliate Disclosure

Some of the links on this page are affiliate links. This means that if you sign up or invest through them, I may receive a small commission — at no extra cost to you.

These commissions help support the site and allow me to continue publishing free educational content about personal finance, passive income, and investing.

Beyond Tech: The Timeless Strength of Dividend Aristocrats

By MPI22nd October 2025Smart moneyAristocrat, Dividend, Dividend ETF, ETF, GRANOLAS, vanguard

Dividend aristocrats

Beyond Tech: The Timeless Strength of Dividend Aristocrats

Over the last two decades, investor attention has largely gravitated toward technology stocks—for good reason. Innovation cycles and rapid scaling have driven remarkable returns. Yet behind the fanfare lies a durable counterweight: dividend aristocrats and other value-oriented franchises that compound quietly, pay shareholders consistently, and tend to hold their ground when froth leaves the market.

Do these stalwarts still deserve a place in modern portfolios? The evidence says yes.

Resilience When It Matters

Market history shows that quality, cash-generative businesses often cushion drawdowns. During the early-2000s bust, the Nasdaq 100 dropped nearly 85% peak-to-trough. By contrast, Procter & Gamble—a textbook dividend aristocrat—declined by roughly 55%, far less severe. In the 2007–2009 crisis, P&G fell about 41% while broad indices slid deeper. Even in 2022’s inflation-and-rates shock, its relative resilience stood out.

The pattern is familiar: companies with essential products, pricing power, and disciplined capital allocation typically experience shallower drawdowns and recover faster.

What Makes an “Aristocrat”

“Dividend Aristocrats” is more than a metaphor—it’s a designation linked to indices maintained by S&P Global, originally highlighting S&P 500 constituents with 25+ consecutive years of dividend increases. The family now spans multiple regions and methodologies (e.g., S&P Europe 350 Dividend Aristocrats, International Aristocrats, and Monarchs with 50+ years).

Common traits across these universes:

Mature, well-entrenched businesses addressing enduring needs
Strong brands and recurring cash flows
Consistent shareholder returns via dividends (and often buybacks)
Incremental growth via cost optimization and selective expansion

Dividends: A Core Driver of Long-Term Returns

Over long horizons, dividends account for a substantial share of equity total returns—especially when reinvested. Consider Vanguard FTSE All-World High Dividend Yield UCITS: since launch 13 years ago, its total return has surpassed 240%, while the cash distributions alone nearly doubled the starting capital. Reinvestment turns steady income into accelerating compounding.

Why Dividend ETFs Are Back in Focus

In the first half of 2025, global inflows into dividend-focused ETFs climbed to multi-year highs as investors sought stability, income, and diversification amid geopolitical and macro uncertainty. A selection of global UCITS funds available to European retail investors illustrates the spectrum:

Vanguard FTSE All-World High Dividend Yield UCITS — ~€5.8B AUM, ~2,200 holdings; highly diversified with modest single-name weights.
VanEck Morningstar Developed Markets Dividend Leaders UCITS & SPDR S&P Global Dividend Aristocrats UCITS — more concentrated (~100 names), focused on dividend consistency.
Fidelity Global Quality Income UCITS — a quality-tilted approach that even includes mega-cap tech where fundamentals justify it.
Global X SuperDividend UCITS — elevated yield (monthly distributions); note that price return since launch is negative, so total return depends heavily on dividends.

Note: Higher yield isn’t automatically better. Assess sustainability, payout ratios, balance-sheet strength, and sector/region concentration.

Europe’s “GRANOLAS” and the Quality Tilt

Recent market leadership in Europe has gravitated toward the so-called GRANOLAS—GSK, Roche, ASML, Nestlé, Novartis, Novo Nordisk, L’Oréal, LVMH, AstraZeneca, SAP, and Sanofi—firms characterized by global reach, robust margins, and high returns on capital. For income-oriented investors, this underscores the case for a quality bias within dividend strategies.

Portfolio Takeaways

Blend, don’t bet: Pair growth exposure with durable income franchises to balance cycles.
Focus on durability: Prefer businesses with pricing power, essential demand, and prudent capital allocation.
Mind the total return: Evaluate dividends and earnings growth; reinvest to harness compounding.
Diversify smartly: Use broad UCITS ETFs for global reach; complement with selective single-name quality where appropriate.

Tech may dominate headlines, but cash flows and discipline still compound wealth. Dividend aristocrats continue to earn their seat at the table.

Why do so many frauds appear in the crypto world?

By MPI4th November 2022Smart moneybitcoin, Crypto World, cryptocurrencies, fraud, investment

The truth is that in no field of investment are there as many wrong opinions as there are about cryptocurrencies.

And in the online environment there are not only erroneous ideas, but also numerous misinformation and outright frauds.

There are several reasons why this happens:

1. The cryptocurrency field is very, very young

Blockchain technology and the first cryptocurrency, Bitcoin, were born in 2009, so only 13 years ago.

On the scale of history, this literally means YESTERDAY!

It is no exaggeration, if you consider the fact that classic instruments such as shares or bonds have been traded for several hundred years.

Not to mention real estate or precious metals, which have been known for several thousand years…

Therefore, being a field that is JUST at the beginning, it is normal that it is very little known.

Not only is the number of specialists reduced, but also the ideas that reach ordinary people are often distorted, because they come from people who really don’t know what they are talking about.

2. The field of cryptocurrencies is very innovative

Here we are dealing with some ideas that have the ability to change completely, to revolutionize many other fields.

E.g:

the way we transfer money from one to another and the way we make payments;
the way we store the value;
the way we lend money, or make other types of contracts between us;
the decentralized way of approach, in which the center is no longer the “system” or any authority, but even the consumer, i.e. the common man.

Being such an innovative field, cryptocurrency technology will bring many changes.

That’s why the old financial institutions (including banks) are scared by these changes and are doing everything possible to “put rust on the blade” of these innovations.

Including through intentional misinformation.

3. The field of cryptocurrencies brings a lot of money

There is a real connection between the field of cryptocurrencies and the idea of making money. Sometimes a lot of money.

Because this was possible in the past, under certain conditions, and it is likely to be possible in the future (also, under certain conditions).

And every time the idea of a lot of money comes up – as it happened in the past with every “gold rush” – 2 things happen:

on the one hand, many ordinary people let their imagination run wild and end up making extremely wrong decisions, which bring them great losses;
on the other hand, there are fraudsters and thieves, who push people to make extremely wrong decisions.

Get rich in the stock market overnight. Myth or reality?

By MPI26th October 2022Smart moneyinvesting, money, myth, rich, smart, stocks

To be a successful investor it is essential to understand and overcome the biases that often lead to wrong investment decisions. A common misconception, especially among many new investors, is the belief that investing in the stock market can make them rich overnight.

The scenario seems real in that some investors end up making big gains at one point, but in this case, more often than not, the investment was made years ago.

Success is due to patience, emotional intelligence or vast experience rather than luck or a great trading opportunity that “struck” overnight. Financial literacy and staying up-to-date with the most important news and events are ingredients that also make the difference between investment success and failure.

The stock markets are constantly changing and it is not good to expect big and quick gains. This fact does not help you concretely, but, on the contrary, adds even more pressure on you.

That is why, before you actually enter the market, review the relevant information and be aware of the associated benefits and risks.

Perhaps along the way you will be pressed for time and this will make you want to “cut corners”, simplify complex decisions and thus become overconfident in your decision-making process. But keeping your expectations realistic not only gives you a balanced point of view, it also helps you be rational.

Moreover, because the decisions you make trigger certain processes, biases can actually prevent you from having an optimal approach (optimal does not mean perfect!).

At times when you seek to be perfect in this area, you begin to give too much importance to some things, leaving others on the outside.

With limited resources as an individual, it is better to seek an optimal and not a perfect allocation of them, because the inevitable errors will drain your energy and make you lose your focus.

You have to remember that in investing, you don’t aim for the impossible, you just have to eliminate the errors to become constantly better.

That is why, if you avoid major mistakes and have some understanding of the markets and the economy, the odds of becoming a successful investor are completely in your favor. But don’t think that this is the secret to becoming rich overnight.

Those who are extremely confident and also have the misfortune of having…luck in the beginning, believe themselves far above the level of those who have some experience and have also recorded losses among their gains.

But these lucky beginners will be the most shocked by the markets, and the return to the ground will be more painful for them.

By constantly learning about “investment psychology” you will know how to manage other emotional errors that can occur in any investor.

The most common prejudices and preconceptions that can lead to wrong investment decisions:

Confirmation – some investors are overconfident in their decisions, focusing on data that seems to confirm, rather than disprove, this.
Attraction to “sensational” information – as investors are bombarded with a plethora of information every day from financial commentators, newspapers and stockbrokers, it is difficult for them to filter it to focus on the relevant information.
Aversion to potential losses – some investors refuse to sell losing investments in the hope that they will get their money back. But, in addition to money, they can also lose their self-confidence.
Incentives – the power that earnings and incentives can have on human behavior often leads to exaggerated frenzy.
The tendency to oversimplify – in seeking to understand complex matters, investors tend to want simpler explanations, but some matters are inherently difficult to explain and do not lend themselves to simple approaches.
Hindsight – this state of mind prompts investors to eliminate objectivity in evaluating past investment decisions and inhibits their ability to learn from mistakes.
Confidence Transfer – Speculative bubbles are usually the result of groupthink and “herd” mentality. This concept describes a certain kind of inner comfort that an investor can feel when they think that “others are doing the same”, even if their decision is not necessarily a good one.
Neglecting probabilities – investors tend to ignore, overestimate, or underestimate the likelihood of outcomes other than those they have calculated. Most are inclined to oversimplify the process and allocate a single point estimate when making certain decisions.
Anchoring in the past – represents the tendency of investors to rely too much on a reference or information heard in the past when making a decision.

To remember :

Understanding these biases can lead to better decision-making, which is fundamental to reducing risk and improving investment returns over time.
Shortcuts especially do not work in the financial capital markets. Make sure you follow a disciplined, rational and balanced approach to investing, always keeping in mind the long-term perspective, company fundamentals and market analysis of the sector concerned.
Investors who want to take shortcuts often end up losing their invested capital and blaming the markets for their own preconceived decision.
The reason our mind tends to simplify or make decisions based on trusting certain situational patterns without applying its own filters is because it wants to reduce energy. Thus, if you are just starting out and want to become a profitable investor, you need to make sure you have the mental energy and patience to avoid these prejudice traps.
Financial literacy is what makes the difference between investment success and failure. Invest in yourself first, in your education, to make sure your money starts working for you and not the other way around!

How do we protect ourselves from inflation?

By MPI23rd May 2021Smart moneyCommodities, fixed interest, inflation, invest, real estate, shares, smart money

Inflation

The signs of inflation are becoming more pronounced and have begun to be seen in the wider world. Although the Federal Reserve and the Central Banks assure us that this rise in inflation is temporary, things are not so sure.

It would not be the first time that the authorities of any kind assure us that not much will happen and yet, after these assurances, exactly what they assured us will not happen happened.

It seems that we are in shortage of raw materials and inputs of all kinds: industrial metals, plastics, wood, foodstuffs, semiconductors and many more… and this contributes greatly to rising inflation.

Not all of these increases have been passed on 100% to final consumers, but they will be passed on in the near future. In other words, products of all kinds will continue to become more expensive in the near future.
The combination of low production during a pandemic + money injected into the system + billions of people escaping lockdown and restrictions and preparing to consume and travel, all this forms a super favorable cocktail for inflation, at least in the short and maybe medium term.

Who loses because of inflation?

Those who save – Cash or savings accounts with zero and some interest + those kept in long-term deposits will be affected. They are already devalued compared to a few months ago.
Consumers – Because most of the products and services we consume become more expensive.
The heavily indebted (who have variable interest rates) – Because variable interest rates will most likely increase.
Part of the investors in shares – Inflation creates some disturbance on the stock market, especially for those who hold growth-type shares who live on debt and do not produce enough cash flow and profit. Inflation creates the preconditions for rising interest rates, and this could lead to a decrease in the quotations of many companies, especially those that:
- are indebted
- do not produce enough profit and
- are heavily dependent on the price of raw materials and that they cannot afford to easily transmit those costs to consumers.
Fixed income bondholders – Fixed income instruments depreciate when inflation rises.

Who wins due to inflation?

Indebted States – Given that most government securities are issued at fixed interest rates, below inflation and in the long term, states have the opportunity to reduce their debt burden through inflation. Well, what does inflation mean? Devaluation of money. And who benefits from the devaluation of money? Those who borrowed money with fixed interest and, more precisely, who are the biggest borrowers who benefit from low fixed interest rates? They are the issuers of government securities, ie the States.
Manufacturers – Inflation means the appreciation (in monetary terms) of real values in the economy: goods and services that meet real needs. They are not necessarily valued, but only valued in monetary terms – more money on the market, the same amount of goods and services, resulting in more money for the same amount of goods and services. Of course, producers can lose if they do not pass on to consumers the high costs of raw materials. In the end, however, most producers will raise their prices if the market allows it.
Goods and companies producing goods (energy goods, industrial metals, agricultural raw materials)
Real estate owners – real estate is traditionally a good hedge against inflation. All raw material prices have risen – well buildings are made of raw materials and now it costs much more to build a block of flats or a house than last year. If you already own that house / apartment, then the value of your property has just increased due to the increase in raw material prices.
Shareholders in companies producing solid cash flow will most likely benefit from inflation. This would include companies that have a low degree of indebtedness and a high profit margin, this includes companies that can easily make products more expensive (they don’t have much competition): this includes banks and other solid businesses that are cash flow machines.

What can we do concretely to protect ourselves from inflation?

Pay debts with variable interest rates – If we have money lying in deposits, then it would be an obvious but important step. Even if we can’t pay our loans in full, it’s good to pay in part. With inflation, interest rates increase and consequently your bank rates will increase.
Convert variable interest loans into fixed interest loans – If we cannot pay our loans, we can try to renegotiate / refinance them to convert them into fixed interest loans. If there are quite a few options to obtain long-term fixed interest loans, we can look for solutions that cover at least one period of the loan, if not the whole period.
Beware of bonds and government securities – If we have bonds or government securities with fixed interest, along with inflation, they will decrease in value, and the interest paid by them may become real negative.
Consume less – When the prices of goods and services rise, ie we have inflation, it is a good time to optimize and streamline consumption. If in the periods of low inflation we allowed ourselves to be more “broad-handed”, in the periods of inflation we can no longer afford to buy much and for no reason, because it costs us more.
Make long-term contracts – We block any recurring cost through long-term subscriptions. Here we are talking about costs that we have anyway, not new costs.

How do we profit from inflation?

We become producers
When you have a fixed income (salary), there are little chances to counteract inflation. Any increase in revenue will come with a significant delay over inflation. If you get your income from freelancing or a business, you have the freedom to raise prices and take advantage of inflation.Inflation essentially means that there is too much money on the market compared to the amount of goods and services available. When you position yourself on the side of the producer, you are actually positioning yourself on the winning side of the barricade.
Invest in shares of companies that profit from inflation
In general, stocks are positively influenced by inflation, given that most listed companies can raise prices with the devaluation of money.However, inflation can affect the value of companies such as those with fixed incomes (subscription-based incomes such as telecom or utility companies) or those with excessive indebtedness.The companies that could benefit from inflation are either those that benefit directly from rising interest rates (banks), or those that have the flexibility to raise prices: energy, food, consumer goods, etc.
Real estate
Real estate in general tends to keep up or even exceed inflation. In addition, the owner of real estate for rent has the opportunity to protect himself from inflation by increasing the rent.
Commodities and precious metals
Gold is traditionally an asset that protects us against inflation (long-term and very long-term), tending to appreciate in times of inflation. However, we must know that in the short and medium term, gold is not required to follow inflation (but only in the long term).You can invest directly in physical gold or in financial instruments that have gold as their underlying asset.Commodities are generally appreciated during inflationary periods. They are very sensitive to inflation. You can most easily invest in commodities either by buying a commodity ETF (synthetic replication) or by buying shares of commodity producers.
Invest in stock indices
Moderate inflation will favor stocks in general. Too high inflation can affect them in the short term (the reasons are multiple – many companies cannot instantly pass on to consumers rising raw material costs + indebted companies are affected by rising interest rates + higher interest rates mean lower stock valuations).In the medium and long term, stocks are generally a very good protection against inflation, having, historically (the US market in the last 100 years), a significantly positive net inflation return of approx. 7% (7% + inflation).

Conclusion

Finally, we must remember that all the above actions and instruments can protect us from inflation theoretically, but the economy is a living organism and the appreciation or depreciation of various assets are influenced by many other factors besides inflation: economic growth, demand, psychological, demographic or social factors etc.

A prudent approach, a diversified allocation of assets and a constant focus on value creation will often position us as winners, regardless of market conditions.

An educated mind that constantly learns and constantly tests will have the ability to adapt to any market conditions and will thrive in the long run.

How to effectively protect yourself from investment risks?

By MPI7th April 2021Smart moneyinvest, investing, reward, risk, risk protection

Risk/Reward

Every time we think about the idea of making investments, the first thing that automatically comes to mind is the notion of risks.

This way of thinking is typical for the field of investments and is much less present in our normal, everyday life.

Or not…?

How present is the concept of “risk” in our lives?

Obviously, certain risks normally exist for us no matter what we do, only we don’t think about them all the time and we don’t worry too much.

Because they are quite small, and most of the time they are even EXTREMELY small.

For example, how many times do you happen to climb the stairs and fear that you might stumble and break a leg? Or how many times do you walk down the street with fear of having a serious accident?

Probably quite rare…

And yet, such accidents happen, because we hear about them many times and we even see them on TV.

However, they are very rare (thankfully!), So it would be abnormal to live our lives in constant fear of them, always thinking about these risks and everything that could happen.

In terms of investments, however, the way of thinking is exactly the REVERSE!

Every time we are interested in a certain investment, we must analyze very carefully the situations in which things could go exactly the opposite of how we hope.

What would happen in those cases, how we would react to an adverse scenario, how much we could lose – all this must be part of our plan from the beginning.

For the simple reason that sometimes these investment risks do occur, no matter how carefully and inspiringly our initial plan was made.

Therefore, the question we need to ask ourselves is not “IF” but, rather, “WHEN” the risks associated with each investment will occur.

It is very important to find out the answer to the question “HOW MUCH” can we lose if those risks occur. Because depending on this answer we know how to plan and manage our investment correctly from the beginning.

In any investment, the main concern related to risks is that, in case they occur and we have losses, they should be as limited as possible.

Because all investors, absolutely ALL, face these investment risks and therefore sometimes incur losses.

Even the famous Warren Buffett, probably the biggest investor of all time, constantly in the top of the richest people in the world, reported a significant loss a few years ago as a result of his investment in Tesco.

What is interesting is that, although in absolute terms this loss seems huge (being several hundred million dollars), in fact it represents only about 0.2% of the net value of the company run by Buffett (Berkshire Hathaway).

In fact, over the last 50 years, Berkshire Hathaway has once lost 2%, with the rest being less than 1% of its net worth. These impressive results confirm that the winning strategy is to keep the risks to a low level, and therefore the potential losses.

How can you effectively protect yourself from risk?

Self-knowledge and study are the most important elements when it comes to investing.

If you understand how you react to risks and potential losses, it will be much easier for you to build a portfolio that fits your risk profile and helps you achieve good long-term results.

Here are 4 things you should always think about BEFORE making a certain investment, so as not to expose yourself to too much risk:

1. How much can you afford to lose?

How much money do you have available for these investments? And, most importantly, how many of them could you lose without significantly affecting your portfolio (or even your standard of living)?

In addition to answering these questions, you need to think about whether you are comfortable with the fact that you will make those amounts unavailable for a certain period of time, specific to each investment.

2. What is your time frame?

The time frame for which you intend to invest is directly related to those risks that you are willing to accept.

The longer you invest for the longer term, the more chances you have of recovering from any declines, so you could take, at least theoretically, higher risks.

On the other hand, as you get closer to your goal (eg financial independence), you need to prepare your portfolio properly so that you decrease the total level of risk you take.

3. How well do you know the investment you want to make?

The main risk of an investment is the investor himself. Or, as Warren Buffett says, “Risk exists when you don’t know what you’re doing.”

So, before you embark on a particular investment, get seriously informed and try to really understand how that investment works.

What are the main risks? What might not be going well? What are the positive scenarios and what are the negative ones?

And, most importantly, what will YOU do in each of these scenarios?

Once you find the answers to these questions, it will be much easier for you to make a concrete plan, which you can implement when the situation demands it.

4. How do you deal with these risks emotionally?

Your emotional ability to cope with change, unforeseen and potentially dangerous situations is very important.

If riskier investments stress you out and affect your daily life, you should probably turn to lower risk instruments.

Even if it is said that high profits are usually brought by investments with higher risks, you should know that there are enough profitable options to invest with medium or even low risks, so that, in the long run, you do not end up ruining your life and the health.

IN CONCLUSION, you can reduce the risks of your investments by investing:

– in a diversified portfolio, with investments that you understand

– which is adapted to your risk profile

– long-term and very long-term

– investing regularly, amounts with which you are comfortable.

This way you will be able to build an investment plan to help you get good profits, in conditions of limited risks.

How to invest: 5 basic tips for beginner investors in stocks

By MPI20th March 2021Smart moneybeginner, bonds, financial education, financial goals, investing, portfolio, shares

Investments for beginners

The development of technology has increasingly paved the way for ordinary people to global financial markets. But easy access for individual investors to international markets comes with the need to be educated about them and to understand the risks they take.

1. Do your homework

Once you have decided on which platform you want to invest, you have to do your homework. Investing means more than choosing a few random shares, with the hope that everything will go well on its own. A familiar example would be that when you buy a house you do not choose one at random from advertisements, but you will go to visit it. And to determine if it has a fair price, you look at the neighborhood, the real estate market in general and then you make a decision.

Similarly, before you start investing in stocks or any other asset class, you need to research the market to understand what you are investing in. Read about each asset and invest only when you feel comfortable that you can make a well-informed decision.

Thanks to the internet, nowadays it is easy to access information about listed companies. You can see what their income and history are, you can read their news and recommendations for investors. Sector or market information or even political news is also important – for example, we can now see how airlines, even the best performing ones, are affected by Covid-19 travel restrictions or how incentive packages economically affects markets. Being up to date with things that happen in the media helps you better understand the evolutions of stocks and trends in the markets.

2. Define your financial goals

Before you invest your money, you need to have a clear idea of what you want to achieve and how you will do it. You need to understand your personal goals as an investor. Do you plan to invest in the long term (10 years for example) or in the short term? What types of investments will help you achieve your goals? What are you ready to risk?

Investors should be encouraged to define an investment strategy that suits their needs, including their risk attitude. To mitigate risk, they should diversify their portfolio, adopt a long-term attitude and invest only in financial instruments with which they are familiar and for which they understand the risks they take.

3. Invest the money you don’t need in the next five years

Risk appetite should always be linked to investment objectives. Evaluate your current financial situation to understand if you can take the risk and always invest with money you will not need in the next five years. Never invest more than you can afford to lose!
You need to have a long enough time horizon for the investments you make to avoid market fluctuations. If you have an amount at your disposal, but you know that you will need this capital in the next 12 months, then the recommendation is to invest in a less volatile asset class, such as bonds.

Over time, stock markets have provided excellent returns to long-term investors. For example, since the establishment of the S&P 500 index (stock index composed of the top 500 American companies) in 1926, it has increased by an average of 10% annually. This is a much higher return than those generated by other assets, such as government bonds. You can also start investing in shares with a relatively small amount of money using a commission-free platform, as commissions can affect your profit margins.

One of the factors that discourages people from investing online is cost. The idea is still widespread that you need a lot of money to start investing. Moreover, equity investments are often perceived as an extremely complex process, involving technical knowledge and attracting expensive commissions. This is no longer the case. A number of online investment platforms, conduct transactions with shares without commissions, as well as fractional shares – you can actually buy a part of a share, a percentage of it, expressed in dollars. This offers the opportunity to invest $ 50 in high-value stocks, such as those of Amazon (which trades at about $ 3,000 per share), Tesla (over $ 700) or Alphabet (Google) – whose shares would cost about $ 2,000 a piece.

4. Practice before you start investing

Start with small amounts of money or practice with a virtual demo account, while learning the markets and defining your strategy.
Demo accounts of several online platforms allow you to practice without risk. Every user who registers receives access to a demo account, credited with virtual money, so that they can practice their strategies, learning to work with the platform before investing with real money.

5. Diversify your portfolio

Diversification is a risk management strategy and the proverb “don’t put all your eggs in one basket” explains the concept very well. In other words, invest in different assets or market shares to limit your exposure to a certain class of assets or financial instruments.
The purpose of diversification is not to achieve very high returns, but to manage risks. Think about what it would have been like if you had invested all your savings in the shares of an airline company just before the pandemic, which made travel difficult. You don’t want to be completely dependent on the performance of a single company or a single sector, maybe even the economy of a single country or continent.

Coinbase International – Buy and sell cryptocurrency. Send money internationally for free

By MPI6th March 2021Smart moneybitcoin, BTC, Coinbase, Cryptocurrency, portfolio, USDC, vault, XRP

Coinbase started in 2012 with the radical idea that anyone, anywhere, should be able to easily and securely send and receive Bitcoin. Today, they offer a trusted and easy-to-use platform for accessing the broader cryptoeconomy.

Coinbase have approximately 43 million verified users, 7,000 institutions, and 115,000 ecosystem partners in over 100 countries that easily and securely invest, spend, save, earn, and use crypto.

You can now send money to any user with a Coinbase account around the world using XRP or USDC. By using cryptocurrencies that are optimized for cross-border transmission, you can send and receive money virtually instantly by sending those cryptocurrencies and having the recipient convert them into local currency. There’s zero fee for sending to other Coinbase users and a nominal on-chain network fee for sending outside of Coinbase.

In fact, you can send any cryptocurrency supported by Coinbase to another Coinbase user or to an account outside of Coinbase. XRP and USDC may be better suited for smaller international money transfers due to their faster processing and lower transaction fees. USDC also has the added advantage of being exchangeable for one US dollar, rather than being volatile in price like other cryptocurrencies.

What you’ll need to open a Coinbase account:

– be at least 18 years old
– a government-issued photo ID (they don’t accept passport cards)
– a computer or smartphone connected to the internet
– a phone number connected to your smartphone (they will send SMS text messages)
– the latest version of your browser, or the latest Coinbase App version. If you’re using the Coinbase app, make sure your phone’s operating system is up-to-date.
Coinbase doesn’t charge a fee to create or maintain your Coinbase account.

How to send money internationally with Coinbase?

1. Sign in to your Coinbase account, or create one.
2. Confirm your recipient can convert XRP or USDC into local currency.
3. Convert your desired funds into XRP or USDC. 6
4. Access your XRP or USDC wallet and select send.
5. Enter the amount you’d like to send and the target wallet or email address.

With Coinbase you can create your cryptocurrency portfolio

Coinbase has a variety of features that make it one of the best place to start trading:

– Manage your portfolio: Buy and sell popular digital currencies, keep track of them in the one place.
– Recurring buys: Invest in cryptocurrency slowly over time by scheduling buys daily, weekly, or monthly.
– Vault protection: For added security, store your funds in a vault with time delayed withdrawals.
– Mobile apps: Stay on top of the markets with the Coinbase app for Android or iOS.

The “secret” to reaching the first 1000, 10000 and 100000 EUR / USD

By MPI9th August 2020Smart moneycompound interest, financial freedom, invest, money, secret, smart money

Compound-interest

Most people get stuck until they reach the first 1, followed by a few zeros of earned /saved/invested money, and they stay in the “start” area for the rest of their lives, taking it over and over again from the beginning.

This is why most people do not become financially independent and do not truly achieve financial prosperity.

The first 1000 EUR invoiced from the new business;
The first 10,000 EUR invested on the stock exchange;
The first EUR 100,000 in the personal portfolio;
The first studio for rent;
First salary / bonus etc. of EUR 3000 (the example is relevant, even if it does not start with 1)

The effort to reach the first 1, followed by a few zeros, is enormous and many give up along the way. What they don’t know is that after you hit a 1 followed by a few zeros (2,3,4 etc.), the rest of the zeros are much easier to reach.

After 10 years of struggling to reach a portfolio of 100,000 EUR, most likely up to 200,000 EUR could take you much less, up to 300,000 EUR less and so on.

The same applies to investments. You can constantly invest 200 EUR per month, without seeing a big difference in the portfolio, until, at a certain moment, the compound interest intervenes and your portfolio grows rapidly.

The graphic result is more than clear:

Calculator_initial

200 EUR invested monthly for 20 years at 10% interest

The result is:

Result after 20 years

The graph “speaks” for itself:

Balance after 20 years

So don’t get lost on the road, but continue at maximum acceleration, until you reach that goal of 1 followed by a few zeros.

After that point, things will become easier, automated, routine.