One of the universal rules of money management. In easy terms.
It goes hand in hand with principles of diversified stock portfolio…
In business we call it dead inventory. Destructive power of depreciation.
These remarks are mainly for guys starting with a limited amount of funds. Let me start from the theory. According to one popular kind of macro-economic
definition in textbooks, capital formation refers to "the transfer of savings from households and governments to the business sector, resulting in increased output and economic expansion". The idea here is that individuals and governments
save money, and then invest that money in the private sector, which produces
more wealth with it. The concept of "household saving" must itself also be looked
at critically, since a lot of this "saving" in reality consists precisely of investing in housing, which, given low interest rates and rising real estate prices, yields a better return than if you kept your money in the bank (or, in some cases, if you invested
in shares). In other words, a mortgage from a bank can effectively function as a "savings scheme" although officially it is not regarded as "savings".
So, with a little bit of theory behind, let me simplify, scale it down and give you some useful examples of applying it to real life. Principles of small group investing
are known to man for thousands of years. Power is in numbers, and where are numbers, there are statistics.
What the ancients knew about risk management In ancient times, trade business with most lucrative profits was around bringing goods from Asia and
Africa and trading them in the Middle East and Europe. At those times traders
just as today had been working on bases of supply and demand.
These remarks are mainly for guys starting with a limited amount of funds...
Negative interest is a trap that keeps many  in financial trouble. But in the right…