MM error – for discussion at the forum
The error lies in looking at the deposit as a separate entity. Excuse me, but you read the book? Attentively ?? or stand before the eyes of millions of unknown and reigns on Wall Street …
In all (I underline – all), books dedicated to MM, investing and money management in black and white, red thread spelled out simple truths:
- We considered all personal capital as a whole
- capital invested in proportion to the markets / assets with different risk, return and liquidity
- Purpose of investments – is the preservation and enhancement of the total capital
- all this economy is controlled by personal budget and its rules
- and finally domestic rule – the income is that you can freely spend, rather than numbers with a broker
as soon as the MM (or current account figures) are in conflict with this there is a chance to fly from the market in general.
In principle, the normal approach may be considered:
- the initial investment (initial depot) – less than 1% of personal assets (less risky investments)
- allowable replenishment (and respectively the total risk for the transactions drawdown.) – not more than 5% of net income, that is, the sum of which is not hit hard on the personal pocket.
- removed (displayed in a less risky and more liquid form) ALL cream.
- deposit only increases as the total personal capital.
Of course following these rules will not work "deposit crackdown", or "Ferrari in a year" 🙂
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