Investment, finance and wealth creationing options before the Bitcoin era and transformations expected  in the Blockchain Era

My idea of Finance and Wealth before I ventured into the Cryptocurrency Space

By Greenchic | Investing and Trading | 18 Aug 2020


investment, wealth, money

 The Fiat money, the most liquid ready form of money

money

Money as we know it, is the fiat currency, the national currency of our countries that we spend. It’s liquid ready money that can be readily used to transfer value and spend to avail goods and services. So traditionally, as straight forward people when we think of getting rich, we would want more of this fiat currency.

Storing Fiat Money alone can’t make you rich

However, creating wealth is not a straight forward subject, it never has been. Ask any financial adviser, they would say - you cannot practically get rich just by earning money, to grow your wealth you need to invest in assets that would appreciate in value over time.

Money is required a lot more than what we earn to meet our expenses

expenses

The concept of creating wealth, managing finances has only grown more complex, it’s never ever been so straight forward that you go to work, earn fiat currency and chill. One has to account for incurring various substantial expenses to pay off all types of loans taken - home loan, car loan etc and they are heavy on the pockets.

 Wealth creation involves multiplying your money more than the growth of inflation

The reason for this is that money loses value over time because of the phenomena of inflation, where the value or purchasing power of money decreases. Therefore, you need more money 5 years later, than now to maintain the level of purchasing power you have now. So, logic is that you invest your money where you can get it multiplied beyond the percentage of the growth of inflation.

 Options to park your money to earn interest and returns on it

 

money, wealth, investment

The simplest and most trusted way of getting compounded returns on your investment has been fixed deposit bank accounts. Smarter people also save money to buy land, property knowing that in years to come the value of the land would appreciate. Gold was also an asset class people considered safe to invest, assured that the value of the metal would go up in time.

There are Bond markets to invest in, where you buy Government bonds, which is like Government borrowing money from you which will be returned back with some interest after a period of time.Corporate companies too issue Bonds to raise money from the public. These are simple investment options, beyond this there were risky asset classes to invest on - stock markets.

 Fixed Deposit Bank Accounts don’t yield you interest that beats growth in inflation by much

The problem with having your money grow locked in a bank’s fixed deposit account is that often the interest received for the money deposited just suffices to beat inflation, so you actually don’t grow your wealth by much. Also there are lock-in periods, so one is discouraged to withdraw money before the maturity period, if done some withdrawal charge is charged as penalty. So, other options to invest your savings is required - they could be gold, silver, real estate or investing in stock markets.

 Investing in stocks give you good returns on your investment

 

investment, wealth, money, growth

Stock markets are known to be risky assets because the principal amount you invest may get depleted, instead of appreciating in value. However, when invested in fundamentally sound companies, the investment has a probability to multiply beyond what you would earn from interest in banks for sure.

As stock market investing requires research and analysis of Company fundamentals, activity, performance and management team, many people are not equipped to invest in stocks with limitations of time and trading skills, for them they have the option to invest in Mutual Funds.

Mutual Funds are managed by fund managers who invest your principal amount in stocks belonging to a group of companies across various industries and categories, so all your money is not in just one basket, giving you the advantage of diversifying your risk.

 Basics should be covered - Insurance and Pension provision

 

savings, pension, insurance, security

Well, before all this of course, the basics of insurance - life and health has to be covered because in an eventuality of a possible contingency, expenses have to be met. In life insurance, for a monthly small premium you pay, you are assured that should your life go, your family will get the amount you are insured for. In case of health insurance, should you have a medical emergency, your hospital expenses are all going to be covered.

Companies also invest for your future requirements by putting some money in Provident Fund, this is also considered basic for giving you some basic savings for your future needs such as retirement .

Post Bitcoin Era has had crypto to be the best performing asset of the Decade!!

 

bitcoin, btc, crypto, blockchain

This was all I knew till I entered the crypto sphere about 2 years ago. I realised that the best performing asset that beat returns from all these other asset classes in the last decade was Bitcoin(:

 Idea of money is changing now - Fiat currency maybe on the road to be replaced

cryptocurrency, blockchain, tokens

Also the idea of money is changing, with the advent of stable coins, possible Central Bank Digital currencies(CBDC) and crypto currencies, the idea of centralised fiat currencies controlled by the Government is getting unpopular .

Already , the Venezulean Bolivar, the fiat currency of Venezuela has got devalued because having undergone the process of hyper inflation and there is no certainty that fiat currencies of other countries won’t devalue, so hedging against your countries’ fiat currency is required.

 Traditional role of banks can be replaced thanks to DEFI protocol

blockchain

Crypto and Blockchain changes the structure of the Financial system as we know it, we can expect a big bang transformation. There will be no necessity for a bank to keep custody of our money, or to avail loans or do remittances as this can be done holding digital currencies in our wallets, DEFI platforms etc. Interest on your tokens(crypto, stable coins that’s pegged to a dollar) can be earned in various DEFI platforms where you provide liquidity for borrowers.

 

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Greenchic
Greenchic

I love to write on things I am passionate about - environment, citizens activism, crypto and life in general. I am a cat enthusiast, nature lover. I am excited to engage at the Publish0x platform by reading and writing crypto and other content here.


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