Analysis: 3 reasons to do financial literacy

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According to the data researchIn Russia, financial literacy is average. According to this indicator, our country is in ninth place among the G20 countries, behind, for example, Turkey (although in Italy this is even worse).

Quarantine is a great time to increase your own financial literacy, because in the conditions of the economic crisis caused by the consequences of the pandemic, these skills will definitely come in handy. Today we’ll talk about why an ordinary person needs to understand working with finances, learn the basics of investing, and how to do it in general.

Reason # 1: making money on bank deposits is getting harder

One of the recent finance news is Russian banks have returned to lower rates on ruble deposits. This means that it’s becoming more difficult not only to earn money, but to keep finances in the bank.

This fact affects the influx of investors to the stock exchange – over the past year their number on the Moscow Exchange exceeded 3.5 million people. At the same time, according to statistics, a significant number of new participants in the Russian stock market are small investors with deposit amounts not exceeding 50-100 thousand rubles.

An example of these people suggests that the exchange is a very effective tool for working with finances. Of course, novice investors rarely use aggressive strategies, preferring the buy & hold approach – they collect a portfolio of assets and monitor its behavior. This is a good first step.

Reason # 2: making money on real estate is very difficult

Analysts predictthat due to a pandemic and a jump in the exchange rate, the volume of investments in Russian real estate at the end of the current year may collapse to the level of 2014. Even in Moscow, the real estate market has been in crisis in recent years, and in the current situation it is not necessary to rely on the fact that you can make money through buying and selling real estate.

In any case, the threshold for entering this market is large enough and fewer people can overcome it, which will further reduce demand.

Reason # 3: the crisis does not end quickly

Tough quarantine measures have already negatively affected the global and Russian economies. According to the official forecast The Central Bank of Russia will reduce the country’s GDP in 2020 by 4-6%. Many companies have already been seriously affected, people are losing their jobs, so recovery from quarantine removal will not be quick.

Obviously, in the current situation, the advantage will be given to people who have additional sources of income – exchange investment is one of them.

Where to begin

The benefits of improving financial literacy are understandable, but how to solve this problem without unnecessary risk of loss?

Theoretical training – This is the first step, without which you should not try to make operations on the exchange. Read books on finance and investment, analytical materials financial companies, this will help to gain basic knowledge.
Explore trading software on test access – At ITI Capital, novice investors can understand the intricacies of the work of trading software and debug their strategies using test account with virtual money.
Optimize Costs – some brokers offer novice investors tariffs without commissions for a while, there are also a number of legal ways to reduce the tax burden.

When starting directly investment activity, it is worth taking a closer look at low-risk instruments. These, for example, include federal loan bonds (OFZ), which became the first Russian asset to return to pre-crisis levels. Using OFZ in combination with an individual investment account (IIA) is an excellent defensive strategy for a novice investor.

There are a number of other low-risk tools:

structural products – These are different financial instruments collected in a single portfolio. Analysts of a brokerage company select them in a certain proportion to ensure either minimal or near-zero risk when investing on a stock exchange;
model portfolios – it is an investment instrument that consists of several securities selected on certain grounds (for example, bonds or shares of one sector of the economy);
ETF – in fact, these are exchange-traded investment funds, which are a portfolio of shares or other assets that completely repeat the composition of the target index.

It’s worthwhile to start working on the stock exchange precisely with such tools, since they can seriously reduce risks. Another option is to buy shares in companies that pay dividends.