5 steps to start investing
Getting started is not particularly difficult if you have a clear path in mind, otherwise you flounder left and right without doing anything, throwing your money away.
Investing needs to have specific goal in mind, whether it is to improve your economic situation or have funds to buy a house or to finance our business. We want to grow our capital so that we can then use it for ourselves.
Step n 1
Check your expenses and understand how you spend.
That is, where does the money go?
Understanding how you spend is the key to cutting unnecessary expenses and saving to start investing.
Let's see it this way, the money you will save will be the gasoline for your investments.
And your investments are like a car, without petrol you just stop and look around.
Now, after understanding how you spend, you have to choose how to allocate your budget.
Many suggest the 50 30 20 rule, which is 50% necessary expenses, 30 discretionary expenses and 20% savings.
You need to be disciplined but this also depends on what fixed expenses you have, such as a home or car loan.
Try to apply yourself on your personal sphere and your situation.
Step n2
Pay off debts.
Having a debt such as a mortgage or car payment is not a big problem, because they are debt that we can consider useful.
At the end of the mortgage you will have a house, we can call it a real estate value.
On the contrary, having a mortgage for an iphone or a television is not very smart.
Surely you can avoid spending that money on consumer electronics or other things that can be considered useless.
In fact, every debt has a cost, and you are paying for your iPhone more than what it costs in the store.
The costs of the debts you have on whatever you have bought must be checked, and if possible pay off these debts ASAP.
Remember we need gasoline for our car.
Step n3
Create an emergency fund.
It seems counterintuitive, cutting debt to have more money to spend on financial assets and then creating a fund with money that we shouldn't touch except in an emergency. Instead it makes sense, specifically for your psyche and for your safety.
In fact, you must be prepared to have fluctuations in your financial portfolio, with whatever asset you have formed it.
An emergency fund lets you know that in the event of any problem in your life, you can have a safety net to draw on.
Think about if you lose your job and don't find one for a few months. How could you live and pay the bills?
3 to 6 months of funds to live without work can be a good start for creating an emergency fund.
You can also make it grow over time, shifting some of your earnings.
The emergency fund will also allow you to have extra security when you go to invest.
Your psyche must be ready to handle the stress of financial positions.
Step n4
Understand if you can invest on your own or if you need help
In this case, you have to be honest with yourself.
Do you know what to do? Can you handle it psychologically?
Investing is not easy and burning an account is very easy.
Your psyche is risk averse and you need to learn to manage it.
Your risk tolerance may be higher or lower, but the pain for losses is real.
You have to understand how to manage anxiety and this leads you to wonder if you can do it alone or if you need a consultant.
If you believe you can do it yourself, then a long, very long course of study awaits you.
But it will enrich you and allow you to understand a lot of things about our world and our society.
Step n 5
Start today, with discipline.
The earlier you start, the better, because with the passing of age the attention decreases and because the longer you stay on the market, the greater your chances of earning.
Discipline requires you not to do things rashly, to remain balanced as investments and never, ever make the famous ALL INNN on the set-up that everyone is pushing during a Hype- Assett period.
Because you will know that it is the stupidest thing to do, especially when everyone is on FOMO.
Hype is the enemy.
Why Investing is important.
Why people invest in the financial markets?
The reason is only one.
To have more money.
In fact, investing is neither more nor less like a job, using our money to have an economic return.
Not to be confused with the term speculation, which refers to a short term view, investment refers to the long term and has a different forms of investment instruments.
These tools are created to ensure that companies raise money for their activities, money that is raised by selling debt such as bonds or a small part of the company, such as shares.
Returns are never guaranteed given the risk inherent in investing.
There are no zero risk investments, don't believe anyone who tells you such a thing.
In fact, you can lose everything, because you have to remember that the higher the risk, the greater the return.
Various techniques are used to lower risk, such as diversification which applies to unrelated investments.
Investing serves to achieve personal and family financial goals such as the possibility of having more money for goods and services, to be able to afford a dream home or vacation, or to have economic certainty when you retire.
Starting early means having a longer period of time to be able to accumulate, also thanks to compound interest.
Double Spending
Today we are going to learn what double spending is.
Double spending is the manipulation of the blockchain of any cryptocurrency in order to spend the same amount of coin several times, sending this coins to different addresses.
Let's take an example on the bitcoin blockchain.
If we have only one bitcoin on our wallet, and we send it to Marco, this will be awaiting confirmation in the network mempool.
Immediately after closing the transaction to Marco and before waiting for the confirmations, we will send the same amount to Giorgio, and this transaction will also end up in the unconfirmed transaction pool.
When these transactions are checked by the miners, the second transaction will be rejected as invalid and impossible to carry out.
In case of simultaneous sending of several transactions, we will have to wait for the 6 confirmations to understand which of the two transactions will be rejected and which will not
From one wallet to another - The transaction of a Bitcoin
In this article we will see what happens from when we send a bitcoin to when it is received from another address.
There are 3 main parts within a transaction, and these are:
Signing
Broadcasting
Confirming
Let's start from the first one, the signing.
Now, by pressing the send button we are telling the wallet to send the selected bitcoin sum to the address indicated in the space provided.
The wallet then creates a transaction, which is actually a message containing the data of who sends, who receives and how much is sent.
Once this is done, a unique digital signatures is created by mathematically mixing my private key, that is the private key of the sender.
The private key as we know, is a long series of letters and numbers that acts as a password for your bitcoins.
Whoever knows the private key has control of these bitcoins, so you must protect it in every way.
The digital signatures is proof that I have this private key along with my public key.
Remember that each transaction creates a different digital signatures.
After signing the transaction, the system creates a file containing the digital signatures and the transaction message.
This concludes the first step on signing.
In the second step, the broadcasting, the wallet sends the file to the computers that mine the blockchain or have a copy of it.
These computers are known as NODES and each node that receives the file checks it to understand that it is legitimate and correct.
In particular, check that who is sending some coin needs have the funds in his wallet and then confirm the validity of the digital signatures.
Once confirmed as valid, this file is sent to other nodes which repeat the verification process.
When a node receives the file, it keeps it in an area called Mempool or memory pool.
This is a space dedicated to valid but not yet confirmed transactions.
Now let's move on to the status of our transaction, Block explorer is software or a tool on a website to check the status of transactions and navigate the blockchain.
We can check the holdings of all bitcoin addresses, check all transactions and have statistics and information on the network in real time.
If we check our transaction right now, we will see it marked as unconfirmed. this means that our transaction is not yet part of the blockchain.
It is defined as zero confirmation transaction.
In this state the transaction could still be canceled or postponed and we have no guarantees that it will be included in the blockchain.
If you sell products and services, never accept an unconfirmed transaction as proof of payment.
If you remember, when we talked about mining, we said that miners group transactions to create a block of the blockchain and of course miners will take the transactions that will be more profitable, there is a limit to the number of transactions.
So the miners compete with each other to create the blockchain block and this competition is based on mathematical calculations.
The greater the computational power the greater the chances of victory.
When a miner wins the competition, all transactions that are in that block are considered confirmed.
Miners write the history of bitcoin transactions and a block is created every 10 minutes.
When we go back to check our transaction, if it is written inside a block, it will be marked as with 1 confirmation.
Confirmations will grow as block creation increases.
The transaction will be fully confirmed with 6 confirmations and without any possibility of cancellation.
The transaction will now be received and it will unmodifiable.
How to get started with bitcoins!
what are the steps to get to know Bitcoin?
Step n1 Education
You have to understand the basics of bitcoin and what revolves around it, studying our guide and seeing our videos is a good starting point.
You have to understand why people appreciate this new technology, what gives it value and why, what is behind it and what are the ideas that led to its creation.
Step n1 is useful but not fundamental, in the sense that you can buy bitcoins even without knowing anything about it.
The second step is to gain experience with a purchase.
Create a wallet, sign up for an exchange and start moving your bitcoins.
Get experience through small transactions and expect to spend 100 euros that you can consider lost.
Then try to turn some of these bitcoins into ethereum and experience that too.
The third step will be to stay updated on the technology and the market.
And always follow us.
Bitcoin Digital Signatures
Today we explain the meaning of the term Digital Signature towards the bitcoin blockchain.
First, to send any amount of bitcoins to my wallet I have to prove that I am the owner of the private key.
Digital signatures will give you this proof of possession, obviously without making my private key public.
When I submit a transaction, it is mathematically mixed with my private key to create the digital signatures.
When the miners will go to validate my transaction, the digital signatures together with my public key will allow the miners to validate the transaction, guaranteeing possession of my bitcoins and avoiding double spending.
Digital signatures are different every time you sign a transaction, so they will be different for every send to any address.
51% Attack !
Today we understand the meaning of the term 51% attack.
Bitcoin miners in fact use their powerful computers to keep the bitcoin network alive by managing and processing all transactionslike checking that the users dont create any double spending trouble on the network.
This very important work, which guarantees the functioning and trust in bitcoin, is done by controlling the blockchain in its entirety.
To give an example, in the case of a transaction on the bitcoin blockchain from user A to B, the miners will check that the transaction is valid, that there are on the address of user A those bitcoins that he wants to move towards the address of user B.
If most miners certify the transaction as correct, then it will be confirmed and entered on the blockchain.
Now, if you had more than 50% of the computing power of the blockchain, it could theoretically be manipulated, carrying out double spending and other types of fraud such as preventing any transactions from specific addresses or eliminating other miners from the network.
The problem is real especially if the computational power of the blockchain is concentrated in the hands of a few connected and colluding hands. In this, the decentralization of mining should avoid this problem. If we think in the event that most of the computational power is in the hands of two or three large companies, the problem of dealing with a cartel is real.
Learn more about safety here.
5 golden rules to buy bitcoins between users!
the issue of the sale and purchase of bitcoin between individuals.
It may happen that you decide to sell or buy bitcoin from a private individual for various reasons, the important thing is to always be careful that on the other hand there isnt a scammer or an attacker on the seller.
Let's start from the point of view of those who want to buy.
The steps to take are:
1 checks the credibility of the seller:
There are groups and sites where individuals decide to sell their bitcoins.
On these sites there are always reviews and past experiences.
You have to check the credibility of these people and how they approach each other in the various chats.
Trust your instincts and Always start with small amount of money to buy.
Also try to use google by searching through the various pages. Maybe you will waste time or maybe you will save your money and life.
2 documents everything to avoid fraud:
Chat with this person, ask questions and have them explain precisely how the exchange will take place.
Don't leave anything out. Prefer emails or written chats, avoid phone calls or record them.
Remember that you need material to help you prove fraud.
3 wait for the first confirmation before paying
Remember that Bitcoin needs 6 confirmations to go from one address to another, and it generally takes 10 minutes for the transaction to be written in the first available block.
Obviously assuming that the transaction fee does not make him pass to the next one and so on ...
4 uses an escrow:
What is an escrow?
From wikipedia: A guarantee deposit is a legal agreement in which a real or virtual asset is deposited by one party in the account of a neutral third party, until the other party fulfills the contractual clauses. Upon fulfillment of the clauses, the agent will deliver the deposited asset to the other party.
A 3rd party will protect your money from possible fraud.
5 Where to trade:
You can choose to do the exchange in a public place, in a bar or without meeting the person on the other side.
It's all up to you, but don't put yourself in danger.
Avoid hidden places and stay around people.
Advice For those who want to sell:
The advice above can also be applied to the seller's part.
Be careful with buyers. It could be an attempted assault and it wouldn't be the first time a salesperson has been beaten up and robbed.
Be careful
Is Bitcoin Anonymous??
Today we are going to talk about bitcoin and his anonymity, the thing that everyone talks about but no one knows about.
Let's start from a fundamental point, bitcoin is completely traceable and transparent thanks to the blockchain network but bitcoin is not completely anonymous .
Bitcoin is pseudonymous.
In fact, the address of your wallet is your identity on the blockchain but if this address is connected in some way to your document, your identity is revealed.
Think for example of when you did a KYC on some exchange, and from this exchange you sent funds to your long-term wallet.
Here at this moment your pseudonymy has been lost and anyone will know how many bitcoins or other coins you have on that address.
If you want to remain totally anonymous you will have to take the necessary measures
The uncertainty of the investment
Today we are going to talk about the aspects behind investments and their psychology.
We are facing the uncertainty about investing in the financial world.
The human being is in the perennial search for security thanks to a natural genetic repulse to risk to make us survive.
Risk aversion in an environment where we can be killed by beasts or adverse climatic conditions is what allowed us to survive thousands of years ago.
Many people have an innate adversion to losses.
Try to think of losing 20 euros. In this case the pain will be greater than the pleasure of having earned the same 20 euros.
This means that these people are totally opposed to certain practices that allow them to increase their portfolio .
In fact, to have an interesting economic return you have to take risks, since risk is the fuel of the potential profit.
It is also true that some zero-risk investments still exist such as bank accounts but which yield practically are below zero.
And these are not at zero risk since there is the risk of bank failure.
Therefore, it is necessary to manage the investment risk.
In the financial world, risk means exposure to the possible loss of money, or the possibility that your investments will drop in value compared to the purchase cost.
The amount of risk we are willing to expose ourselves depends on various factors like volatility.
Volatility indicates an indecision on the price on the part of sellers and buyers, certainly equates to a greater risk that can be justified by the greater possible gain.
Precisely to maximize our earnings and to analyze the risk to which we are exposed, an analysis of possible events that could affect our investments must be made, a sort of exercise to manage some risks to which we may be exposed.
Among the risks that we can easily recognize are:
a rise or fall in interest rates by the central bank, affecting corporate loans;
a credit risk, with debtors unable to pay their obligations;
a sudden inflationary push in a specific country or worldwide;
A possible country risk, as happened with Greece or Argentina;
These last two risks can be placed in a large group that we can call
market risk or systematic risk.
This is a type of risk that can affect all companies operating in a specific country or market.
We are talking about a recession, which destroys all the spending power of the population or an environmental problem that jeopardizes a specific industry, such as a disease that attacks plants destroying them all over the world.
Going more into the details of a specific market we can then talk about the specific risk of a company, like Enron in the United States.
This type of risk refers to a specific company in a national or international market and can be caused by huge scandals, or by the appearance of new international competitors on the internal market or by a new legislative change that worsens our market situation.
Remember that every investment is under this kind of risk and that systematic risk is difficult to predict in the future while specific risk can be eliminated through diversification.
But then there are assets that are not subject to risk, those safe havens where everyone can take refuge.
Yes, they exist and generally the greatest exponent is gold.
However, it should be remembered that gold also has price fluctuations and that in the event of a crisis it could have a certain decline. But here we need to understand how much the drop is, for example if gold falls by 10% in a market that dives into minus 60 or 70% ...
Let's move on to another point of view, moving from investment to investor.
The psychology and preparation of those who put money into any investments are much more important than people think. It is necessary to understand the different risk tolerance of the different people who approach the market.
This tolerance is mainly given by two factors which are the predisposition to risk influenced by one's personality and personal financial culture, to which must be added the ability to manage emotions and the fear of losing one's money.
Managing anxiety and maintaining clarity to better manage the situation are two very important characteristics.
Think what could happen if we panicked at every slightest downtrend or wanted to take home every little profit.
Other factors that can make this situation worse, is your relative financial situation and in which time frame you are investing for your life. Maybe that descent won't change your life, but if you've used all your money on a single asset, it starts to be different.
Financial availability and your working salary are two factors that can make you feel better, combined with a long-term vision.
If we think of a personal safety net like a bank account with a good amount of money and a job with a good salary, a loss of 20% is something that we can expect. A short-term view means that risks and loss tolerance are approached differently.
The risks are generally in a short period of time, and the markets generally recover from the crisis by making new highs in a period of time that is not so long.
One last note aside, the age of the investor is also important. An elderly person is unlikely to get involved with particularly dangerous assets.
Do not focus only on volatility risk, but on real risks, on those things that are too good to be true and try to always have a long-term view.
Risk is necessary, it can be controlled but it cannot be avoided.
Learn more about safety here.