3 base components of the market

Bad investing advice can come from many quarters, such as wealth expos or financial advisors. If anyone promises you any type of return over 12%, 99% of the time, they are probably playing you.

There are great financial advisors out there, but many people who sell investment products just want your money. However, it's not that hard to invest for yourself.

1. Never buy a financial or investing product from someone you just met.
2. Getting returns over 12% per year is ridiculously hard. If it sounds too good to be true, it is.
3. If you don't understand it, don't invest in it.
4. If one of your friends recommends an investment that's making them a lot of money, they are probably suckers too. If you see the "results not typical" on any marketing materials, move on.
5. There are no "secrets of the super-wealthy" that anyone will sell you for $500 or that you can take advantage of unless you have hundreds of thousands of dollars.

• Productive assets are investments that internally throw off surplus money from some sort of activity. 

• Each type of productive asset has its own pros and cons, unique quirks, legal traditions, tax rules, and other relevant details.
• The three most common kinds of investments from productive assets are stocks, bonds, and real estate.

• It means investing in common stock, which is another way to describe business ownership or business equity.
• When you own equity (the value of the shares issued by a company) in a business, you are entitled to a share of the profit or losses generated by that company's operating activity.
• Equities are the most rewarding asset class for investors seeking to build wealth over time without using large amounts of leverage.

• A stock market is simply a place where buyers and sellers meet to sell shares.
• A share is a divided-up unit of the value of a company.
  
• Shares exist to boost profits of firms to turn a business into a financial success.
• Enter a stock market: in return for your cash, a business offers you a share in its future – so you essentially own a tiny slice of that company and become a 'shareholder'.
• This slice of the company you own can then be traded with anyone who wants to buy it.

• The price is initially set by the firm offering shares.
• Its price on any given day can be determined by poor financial results, the economic health and so-called 'sentiment', ie, if City buyers think a firm will struggle, its price can fall. 
• Shares are listed on an 'index'.

Assuming you're in your 20s or 30s and can earn an average investment return of five percent a year, you'll need to save about 20 percent of your income so you can reach financial independence when you're older.

Financial independence means that you can maintain your chosen lifestyle entirely from the interest of your investments and dividends.

The four percent rule states that you could withdraw four percent of your principal balance every year and live on this indefinitely. That means you need to save 25 times your annual expenses to become financially independent.

The four percent rule is not perfect. There is no risk-free investment that yields that much today. Sudden inflation could also cause a problem.

• Create a full inventory of expenses in front of you: Categorize them into fixed and variable; urgent and non-urgent; necessities and luxury; avoidable and unavoidable.
• You can create a hierarchy of needs and decide which one’s to address first. It’s all about prioritizing. 
• Accept that you have limited resources and unlimited wants. But you have to manage your resources. The sooner you accept this fact, the better you can control your impulses towards avoidable expenditures.

It’s a statement wherein you can jot down your assets and liabilities.

• Pull together your bank statements and other proofs of the liabilities
• List down your assets like the bank balance, all investments, home value, and value of other assets.
• Take a sum of all the assets to arrive at the total value of your assets.
• List down your liabilities the (car loan, home loan, credit card balances etc.)
• The sum of all the liabilities will show the value of the money you owe.
• When you subtract the value of liabilities from assets, you get your Net Worth.
  

When it comes to money, people will do whatever they can to get hold of your money, regardless of how it will affect you.

Don't rush into any sort of decision making. Always consult a second source.

Assuming you have enough to cover the bills and aren't pulling an overdraft fee, start by automating your retirement savings. You know you need an emergency fund, so automate. Do the same with increasing your 401(k) contributions each year, or paying off your credit card debt.