How to decisively weigh the gains and losses

How to understand economics?

  The study of economics is divided into two categories: microeconomics and macroeconomics. Microeconomics is to conduct research from the perspective of individuals and enterprises, while macroeconomics is to explore the overall perspective of the economy.
  There is an old but apt analogy: Macroeconomics is like looking at forests, while microeconomics is like looking at individual trees. The trick to learning economics well is to have an overall understanding of both forests and trees.
  The view of macroeconomics is aggregated and top-down. It treats the entire economy as a large organism. The four goals of macroeconomic policy are: economic growth, full employment, price stability, and balance of international payments. Discuss the structure of macroeconomic policies, called the aggregate supply and aggregate demand model. Fiscal policy and monetary policy are the two main tools of macroeconomic policy.
  For example, the following questions: How is the government’s money spent? What will the future economic shape look like? Will violent exchange rate fluctuations cause great disruption to the economy?
  Microeconomics takes a single economic unit (a single producer, a single consumer, a single market economic activity) as the research object, and believes that society can allocate its scarce resources through the market. The market provides the impetus for efficient production, innovation, good use of resources, satisfying consumer needs and desires, and gradually improving living standards. Of course, the market may sometimes produce results we don’t want.
  For example, the following questions: What determines your salary? What kind of income inequality is reasonable? Are we going to be a small fish in a big pond or a big fish in a small pond?
What is the key to accumulation of wealth in a person’s life?

  Saving money or spending money is a problem.
  Every time we get income, we have to face this problem. Should we believe in timely enjoyment and spend as much income as possible, or should we save more for future needs?
  The answer to this question, the author believes, depends on the rate of return that we can get from saving.
  The higher the rate of return, it means that more things can be consumed in the future, so naturally you should save a little more money.
  Of course, people’s saving behavior also depends on factors such as habits and culture, but the rate of return is indeed a key factor that affects people’s saving.
  The arrival of the new crown epidemic has made everyone more eager to realize the importance of wealth. So in the “post-new crown era”, how to use common sense in economics to manage personal wealth?
  The key to accumulation of wealth in a person’s life lies in the power of compound interest. Don’t underestimate the annual rate of return of a few percent, the profit will bring you huge benefits.
  Einstein said that the greatest energy in the universe is compound interest, and the eighth wonder of the world is compound interest.
  In the investment field, compound interest is interest rolling, and the interest of the previous period is also calculated as the principal of the next period. Using compound interest thinking to invest, time, rate of return and stability are the three most important key points.
  1) the time
  to give you 1 million, the investment can be done every year annualized return of 20%, will be the first 20-year total number of harvested principal and interest?
  It can be seen from the above that the great power of time in compound interest investment, after just 20 years, 1 million has become tens of millions.
  According to calculations, assuming a 20% annualized income, then it will be 6 times in 10 years, 39 times in 20 years, 3657 times in 45 years, 9100 times in 50 years, and the income in the last 5 years will be close to the previous 45 times. 2 times the year.
  We often have too high expectations for a one-day yield, but have no patience to wait for 1 year, 3 years, 5 years, or even longer.
  2) Yield
  In addition to time, the biggest impact on compound interest is the r rate of return. Many people tend to ignore the small gains at the beginning and choose to give up halfway.
  for example. 10,000 yuan, calculated on the basis of an annualized 10% investment return rate, is only 1,000 investment income in one year. Especially if you put the 1,000 yuan in one year to reflect it, the daily income is 2-3 yuan, which is not very attractive to many people.
  But those who have invested know that it is actually very difficult to maintain an annualized rate of return of 10%. Even if the stock god Warren Buffett, the initial snowball is very small.

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