Why you need to learn to trade the financial markets!
You, like most people, probably think that you don’t need to worry about learning to trade the financial markets, “I’m not active in the financial markets, it doesn’t concern me”, “It doesn’t affect me, I just go to my job every day, I don’t care about the stock market” or “I just leave it to the professionals” can be typical answers. Unfortunately, you this is completely incorrect, an you are giving away a fortune during your lifetime!
Still sceptical? Let me explain how the financial markets impact your life every single day:
If you have a job in the private sector, likelihood is that the company you work for is listed on the stock market. It will be affected by movements in its stock price as it will affect their ability or requirement to hire, fire, pay bonuses and look after their employees in various ways. This may affect you directly! You may even be entitled to a share bonus scheme which will give you shares in the company you work for as a bonus and obviously you will gain if the share price goes up.
Let’s say that you manage to retain your job through a big stock market correction, your salary and career prospects may be impacted because even if you retain your job, your company will very likely suffer a drop in profitability due to the worsened economic climate which will affect your prospects of a salary increase, bonus and benefits while retaining the same job.
The average pension is inadequateThe biggest reason for why you should be interested in how to trade the financial markets and why you should be very concerned about how they are performing though, is because even if you may not realize, your future pension is almost certainly invested in stocks and shares to a large extent so if the market goes up, so does your pension fund, and if the market goes down, your pension will diminish in value. That’s not even the worst! The fund manager that manages your pension will charge you a percentage of the value of your pension fund every year, whether they manage your fund to increase or decrease in value! Unfortunately it doesn’t get better any time soon. Most people’s pension funds will not last for the remainder of their life and they are left in a situation where they have to resort to equity release from their homes to pay for their final years of life. This is all because the interest rates are not high enough to generate sufficient returns on the pension fund and the stock market in Europe has still not managed to return to its pre-2007 financial crisis levels leaving people out of pocket for the last 14 years. In conjunction with the fees the fund managers charge most people are left in a dire situation.
How much income do you need in retirement?
According to the Pensions and Lifetime Savings Association, a single pensioner would need a pension income of £10,200 to live a “minimum level” lifestyle in retirement, which is more than the new State Pension. To live a comfortable life for a single pensioner, Profile Pensions estimate that you require £17,818 per year and this requires a pension pot of £237,000. These numbers are true if you own your home, if you are renting, these numbers will be higher.
How much is the average pension pot?
According to the financial Conduct Authority, the average pension pot at 67 years old is £61,897 which, with current annuity rates allows only an additional £3000 extra per year to add to the state pension but the worse news is that the £almost £62,000 average is being boosted by a small number of very high savings, whereas the biggest number of pension savings are only around £10,000!
How can I improve my situation?
The way fund managers make money is that they charge you a percentage of your deposits every year based on the available funds in your account. Obviously the fund managers will make more money if the funds in your account increases year on year but it is not essential for them to make money on your behalf as they will be paid either way. For us however It is the be all and end all, it is the money we need to survive in our retirement. It is concerning that there is no real impetus for the fund managers to look after our money.
If you can do it yourself you would save the fees charged by your fund manager every year typically 0.75 to 2.5%. If you are in the UK, it is important to highlight that the maximum charge limit of 0.75% which has been in force in the until recently has been removed by parliament and pension fund managers are now free to charge what they like.
You may be lucky or skilled enough to find a low fee fund manager but this only helps a small amount.
Let’s investigate how to generate more return
If you manage to find a money manager who charges a low fee, say 0.75%, you have done your homework and got yourself a great deal but regardless, you are missing out on a load of profit!
For arguments sake let’s assume a return of 15% per annum, after five years, you have lost 8% of your original investment in fees! After 10 years you have paid 30% of your original investment in fees!
If you learn to make the investments and trade yourself, you get to keep all the returns making a huge difference in your bottom line.
Return on investment calculation
Interest rate per annum
When you learn how to trade effectively however the benefits don’t stop there! You can learn to make a much greater return on your investment than 15% per annum, try 15% per month or even better. It’s not a given that you will get this level of success but if you put in the work required and invest in the right education, it is a skill you can learn that nobody can take away from you. To make it even more attractive, you can make tax free returns by applying your knowledge and skill on an ISA account. When you have learned the skill of trading there is no limit to what you can do and how much you can use it. It’s completely up to you. When you learn to trade with the institutions, you can do this as much or as little as you want. You become the master of your destiny when it comes to trading. If you want to make trading your main source of income, you can. If you just want to use your skills to improve your pension return or the college/university fund or some extra cash on the side, it’s your choice! You manage how much or how little time you spend trading and how much you make. Suddenly you are in control of your life, not just your pension and your future, but your here and now.
Now you can understand how important it is for everyone with a pension plan (401K in the US) or similar to understand how to trade the stock market yourself and not rely on fund managers.
Whatever education you invest your money in, make sure that it is financial education. If you don’t invest in education with Inspire Trades, make sure you choose another reputable financial education provider to ensure you can make your own life easier!