Financial Freedom

More and more young people are planning with the hope of achieving Financial Freedom.

With pensions falling and the retirement age increasing year by year, the possibility of achieving Financial Freedom begins to gain favor among young people.

Beyond utopias, the so-called FIRE movement (Financial Independence Retire Early) seeks to establish a strategy to achieve Financial Freedom as soon as possible. Despite the fact that the objective is not easy, there is no guarantee of reaching it and it is reached based on years of strict savings and wise investments, more and more young people are signing up to this philosophy.

The movement began in the United States, has also taken hold in Canada and the United Kingdom and is now landing in other countries with prospects of staying.

Work is a very important and positive part of our lives, but the fact of being forced to work for 40 years so that we can collect a basic pension at 67 or 70 does not seem like a good plan. And this is where Financial Freedom comes into play: that is, the freedom to decide what to do with your time without having to depend on the State. It is a very ambitious objective, which requires a lot of perseverance and determination. Even those who believe they can achieve it, may not achieve it due to life circumstances.

To walk the path with the greatest chance of success, the key is to save and invest, and start as soon as possible. Financial freedom consists of reaching a certain patrimony with which to ensure a sufficient income to cover the expenses generated by our lifestyle.

There are three steps that every individual can do to try to achieve the objective: invest, start doing it as soon as possible and choose the assets with the highest profitability.


Capitalization of the middle classes

Capitalization of the middle classes from 1850 to 2005

In this period, in the core countries where stock markets developed (USA, England, the Netherlands, Switzerland, France, Germany and Sweden), the middle classes were able to channel their savings to large companies. And so, at the same time that the big companies grew and expanded throughout the world, the families of the middle classes of these countries capitalized.

Meanwhile, in the peripheral countries there was great difficulty in placing family strategic reserves: the accumulation of treasury was not viable due to the continuous devaluations of the currency, the stock markets of these countries had very few reliable values, housing for rent it was subject to political regulations and the only acceptable investment was one’s own home. The result of this situation is the poor financial culture that exists in these countries.

Capitalization since 2005

From 2005 onwards, many of the peripheral countries come to be in a central geographic area where they can have their reserves in the international markets, on equal terms with the families of the most developed countries. You just have to have the preparation, the knowledge and the determination, the same as in previous periods you had the knowledge of the crops and the raising of cattle in the agricultural smallholdings.

The liberalization of the economy, the free movement of people, greater legal security, information, financial operations over the Internet and the freedom to operate in any market, open up a range of capitalization possibilities that until now did not exist in the peripheral countries.

Financial Wealth in Europe

From 2008 to 2019, Financial Wealth in the Netherlands went from 80,000 to 160,000 euros per capita (+100%), and in Spain it went from 40,000 to 50,000 euros (+25%).

What is hidden behind this striking difference is simply the structure of the wealth portfolios:

The Dutch have a higher proportion of products in their portfolios that have benefited from the rise in equities over the past decade, which has been instrumental in achieving high returns. This is because Dutch households have mandatory pension plans that account for 61% of their financial assets and these have a high proportion of shares.

Spaniards have financial wealth in their portfolios with around 40% in assets and deposits. Shares and shares in investment funds account for around 35% and 10% is in pension funds, 10% in insurance and the rest in bonds. This composition of the portfolios explains the low profitability obtained due to the low proportion of assets in variable income.

The importance of Knowledge

Detailed wealth data is extremely rare, but Norway’s highly reliable 12-year (2004-2015) tax records have opened a new window into wealth accumulation for individuals and their descendants.

“This database shows that a person in profile 75 of the wealth distribution who invested $1 in 2004 would have $1.50 by the end of 2015, a 50% return. A person in the top profile would have produced $2.40 for the same dollar invested, a return of 140%”

In addition, “another significant finding is that high returns prevent people at the top of wealth from leaving that position.” It is the people who are already in the high zone (at profile 90 or above) who have the best chance of staying on top thanks to the higher return on their investments.

Published data reveals that the returns earned on assets are higher as more wealth is accumulated. People with high wealth invest a greater part of their savings in risky assets (stocks, investment funds…), while people with low wealth (with a tighter monthly budget) tend to have a greater aversion to risk and opt for more conservative assets such as deposits.

The Family Knowledge

Family Knowledge and Group Knowledge are priorities for survival. Throughout history we have many examples of groups, ethnic groups and countries that survived because of Knowledge.

In the Modern Age and in Europe there were regions that at a certain moment were developed by the Knowledge of a technology, and decades later they were ruined because other regions were ahead of them in Knowledge.

The Development of Knowledge Groups with the determination of continuous training and the Transmission of said Knowledge, are priorities for the Capitalization of families and groups in the long term.

Financial Investment

The purchase and sale of Financial Assets, Fixed Income and Variable Income, is carried out in the Financial Markets, that is, in the Stock Market.

According to a general current of opinion, investing in the Stock Market is a game. We are not going to contradict this opinion, but we do think that what a game is must be qualified, because in all human activities there is a greater or lesser component of play. Let’s see:

  • Games of chance: when we talk about an activity being a game, we understand that it means that it is a game of chance, and this means that a competitive advantage cannot be achieved through knowledge. For example, the lottery.

  • Skill games: when with knowledge, study and work you can get a competitive advantage to achieve professional, business or human relations success. For example: when a young person undertakes professional studies, they first have to invest money and a lot of time, and in the end it is necessary to play the game of luck to find their way into the job market. There are also large companies that play successfully in the market and others in the same market and the same sector they go bankrupt.

As we see in the previous section, Financial Wealth in Europe, the knowledge and work of traders make Dutch pension funds the best in the world, and Dutch workers accumulate more and more wealth.

Gaining a statistical advantage as a trader in the financial markets is not a game of chance, it is a long and laborious path of study and work to gain a competitive advantage, just like in any other profession.

To think that the work of the Dutch traders is a game of chance, it seems a great simplicity.

Freedom Project 1910.

Liberty Freedom was initiated by the entrepreneurial great-grandparents and continued by the grandparents.

The knowledge of the production and the knowledge of the risks are basic for the development of any profession, the same as in the agricultural smallholdings there is the knowledge of the crops and the breeding of cattle, in 1910 the great-grandparents without inheritance began the industrial activities with the knowledge of manual production systems, until the arrival of the electricity to the factories.

With the determined determination to expand Knowledge, at this moment the Freedom Project is operating in the main financial markets as a Financial Holding Company.

Now is our time, the time to take our remaining family Values and Knowledge and continue the entrepreneurial drive of our great-grandparents, so that the next generation can go further.

Remembering Steve Jobs, “Let it be known, everyone, that negative purrs will not silence our weighing nor will they extinguish our ancestors’ drive for freedom.” ·
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