Davide Chiantore on Financial Maturity
In a world where inflation and rates are rising, the speed of depreciation is much higher than one might imagine. It is very important, therefore, to be able to give returns on capital in order to avoid having a considerable loss of value on investments on a national level.
The rise in rates by the Central Banks, moreover, facilitates the investment process. While the bond sector has been difficult to manage over the past 10 years thanks to very compressed interest rates, it is now looking more attractive once again.
Historically, the highest yielding sector remains equities, all the more so in an inflationary world. In phases where markets are very volatile, one has to be patient and try to seize the opportunities that can arise from these particular situations.
Over the years, Italians have proven to be risk-averse, not realizing that more volatile investments, such as those found on the stock market, can, in the long run, be those that best protect capital from value erosion.
It is a difficult notion to conceive this difference; and it is all the more difficult for Italians who, for the most part, are lacking in financial instruction and information. This, in the medium to long term, creates a significant negative impact on the nation’s wealth and the wealth of the entire population.
Some populations, especially the Anglo-Saxon ones, have built a large part of their wealth with the most speculative investments, such as those that give higher returns in the face of greater volatility.
One of the best ways to manage and psychologically withstand this type of investment is to be trained and prepared. It is very important to be able to cope with any negative consequences, so as to be able to recover losses that are very often temporary with regard to equity investment.
There are three reasons why Italians are historically disinclined to invest in the financial sector.
The first is poor schooling. In Italy, financial subjects are studied very little; they are often neglected both in high school and at university.
The second reason is that Italians, for historical reasons, are inclined to invest in real estate. Owning a house is a tradition, which then is usually followed with the purchase of a second or third property, for example for holidays or to rent out and make an income.
The third reason is that the most affluent people in Italy, like entrepreneurs, tend to have medium-small businesses, hence businesses with little capitalization and little inclination to do finance.
Therefore, entrepreneurs generally have little willingness to diversify and invest in finance. The classic Italian SME, very often, does not use finance to grow or makes moderate use of it.
In general, therefore, there is little cultural inclination on the part of Italians to devote attention and effort to studying and better understanding this sector. It is possible, however, to diversify to reduce risks and also try to make capital grow as much as possible over the years. This strategy is something that finance allows one to do if it is managed wisely and carefully.