The Best Investment In The World: You!

best-financial investment-homemade-finance

Of course, as an investor, you are always on the lookout for new opportunities to invest the hard-saved as much as possible in the best investment. What many overlook: you or your workforce is your most valuable asset and it pays to continue investing and developing it.


  • Your lifetime income: 1 – 2.3 million euros
  • A study pays off with 35%
  • How to make yourself the best investment ever
  • 5 concrete examples of how to increase your value
  • Summary and conclusion
  • You think this post is good? Then support Homemade Finance!

Your lifetime income: 1 – 2.3 million euros

In the course of your life you will make a lot of money. Humans tend to underestimate what regular amounts account for over a very long period of time. That also applies to our income. Even with an average salary, a lot of money goes through our hands over the course of life.

The Institute for Employment Research (IAB) has determined how high life incomes averaged over education:

It is clear that the higher the education, the higher the average income. What you intuitively knew from the outset is confirmed here by bare numbers: education is worthwhile.

A study pays off with 35%

Let’s do a short rough calculation to get a feel for how much:

We assume that the student life costs 1000 € per month . After Adam Riese makes 12,000 € per year and with a standard study period of 5 years so 60,000 € . That’s your investment, so to speak. Furthermore, I assume that you have completed the Abitur and are currently faced with the choice to look for a job or to complete a degree. According to the above statistics, studying at a university will cost you around € 740,000 more .

I discount interest now (as I said, rough estimate) and these € 740,000 will be gradually paid out over the next 35-40 years of your working life. That means on average you get 21,243 € more each year (35 years of work) than if you did not study.

It follows:

21,243 / 60,000 = 0.35 or 35% return

Of course, in this example, I’ve made it a little easier and made many simplifying assumptions and also a lot of the thumb on the bill. And of course, not every study pays off equally. We’re counting on averages here.

But I want to show you with this example, education is always profitable. And so good, there is still plenty of room for heuristics and rules of thumb when estimating.

Interim conclusion: If education is so incredibly profitable, then it makes sense to invest in it. And this is exactly where we will start.

How to make yourself the best investment ever

Maybe you have already studied or you are just out of your age, what can you do then?

books photo

No problem, there are many ways to increase your value. First, however, as with any investment, you must understand how to differentiate a good investment opportunity from a bad one. Because you want as much bang as possible for the buck.

For this you have to approach the business entrepreneurial.

First and foremost, you should take the point of view of your customer . This is simply your employer, to whom you sell your workforce. Because nothing else is the employee’s life. I do not mean that negatively, that’s just how it is. You are not sitting in your chair to be off the street, but because somebody is paying for you.

And as with any business owner, it’s important to know what your customers want. In the ideal case, you already know what your customer is looking for your current and all other potential employers and have an idea to that effect. And if not, you’re practically at the source! Find out what your customer wants. Sometimes this is easier than expected and just asking to get you there already.

Next you should look at competitors , ie your equal or similar qualified colleagues. Are there people with your abilities like sand and sea or are you indispensable because you can do something nobody else can?

The principle here is simply supply and demand: if you are interchangeable, then naturally you will not be able to call high prices.

Third, think about how you can add value to your employer. Because this way you make sure that your educational measures are also of interest to your customers and only then is he willing to pay you for them.

5 concrete examples of how to increase your value

1. Learn another language!

Relatively expensive but with the right language at the right place you can become indispensable. Just imagine you are able to bargain with a foreign-language client of the company or just you have a clue what that means in these papers.

If you can communicate with people, then you are the mediator between the worlds. The chances that this will pay off sooner or later are very good.

By the way, did you know that with only 20% of the vocabulary of a language you can master 80% of the situations? This is the so-called Pareto rule . Use it!

Start with a beginner’s course and work your way up to level A2. This is relatively fast and can also be purely in your application (emphasis is on advertising). If you stay tuned you will reach the level B1 after some time from which you can master familiar situations in everyday life.

If the courses cost you 2000 € and you only earn 25 € more a month, this equates to:

(12 * 25) / 2000 = 0.15 or 15%

A nice return, right?

2. Make further education!

Return Technique probably the best investment ever. Why is that? Quite simply: A training is usually very interesting for your customer / employer, because this is usually very related to its needs. And he’s more likely to pay more for that.

Furthermore, you stand out from your competitors, because each additional qualification makes you a bit special. And something that does not exist on every corner gets higher prices. As simple as that.

For example, if you spend 2000 € on a marketable (see point 4) training and you can negotiate 50 € more salary because of this, this results in a return of:

(12 * 50) / 2000 = 0.3 or 30%

Better than daily money or?

We can go a step further and maybe convince our employer to pay us for the qualification. Then no matter how much more you earn afterwards, your return is infinite!

3. Stay fit and be balanced!

This investment does not pay directly in monetary terms, but indirectly. I think we agree that we see a physically fit constitution as a prerequisite for contentment and balance.

relax photo

My opinion: The more balanced you are, the more efficient you are. And whoever is more efficient will achieve a better price in the long run. That is, if you spend some money on sports or leisure (of course, on a reasonable scale), it can also be a kind of investment. Daring thesis but not completely dismissed.

Treat yourself now and then to something, if it really helps you to go fitter or more relaxed through life.

4. Learn to actively market yourself or your workforce!

An important point that is often underestimated. There is no point in offering the greatest product in the world if nobody knows about it and you do not try to get the best possible price for it. That’s why you also have to communicate regularly which new added value by which new qualification you create for your customer.

If you have trouble speaking, think about investing in a rhetoric course or presentation class. It will pay off in any case, be it in salary negotiations, meetings or otherwise.

5. Collect experiences!

What your customers will always reward is experience. Even if it is not a money investment in the classical sense, sometimes you just make an investment without knowing it.

Everyone has ever dared to do something in the form of time and / or money and was wiser in hindsight, regardless of whether it worked or did not work out.

For example, when creating Homemade Finance, I learned a lot about setting up a website, which will benefit me in other projects and ideas.

Invest or risk something from time to time to gain experience. I’m sure it paid off sooner or later.

Perhaps experience is the most profitable investment ever, but it’s hardest to figure in numbers.

Summary and conclusion

In this post I have shown you 5 concrete examples of how you can increase the value of your workforce. Of course, this does not only apply to employees, but also to self-employed, freelancers or farmers.

With education returns are possible, which I certainly do not find in the long term on the stock market. For me it is only logical to diversify and see my education not only as a personal enrichment but also as a lucrative investment.

The greatest lever is as I have now repeatedly emphasized the education dar. Here, each euro pays you (something considered) there reinsteckst again.

If you’re wondering if the expense of education is worth it, just ask yourself if it’s of interest to your client / employer what you do and if you can get more money for it. In most cases, just a few more euros are enough to make the money invested, for example, in a language course or further education, the best investment in the world.

And what would be the alternative? To leave it on the money account ? Certainly not with quasi-negative interest rates .

So start investing today in the best investment in the world: yourself!


Create 10,000 Euros: The Ultimate Blueprint For Getting Started


A question that regularly ends up in my mailbox is:

I want to invest 10,000 euros. How can I go about it and what do I have to pay attention to?

For many, this amount seems to be something like the starting signal for an investment above the call money.

Often, people have saved him and now would like to take the first step to the stock market, but are not sure how they could proceed.

If you have found yourself in these lines, then this post is just right for you!

So I’ve come up with step-by-step instructions on how best to do this in my opinion and how I did it.

But beware: Since I do not just want to give you a nude list and then get up from the laptop, I have to go back and forth a little bit to explain some aspects or my point of view.

The result is that this post has over 2,500 words and it takes just under 15 minutes to read it.

If you are fresh on the stock market, these 15 minutes are certainly EXTREMELY well spent time, I guarantee you.

Not only for your question how you can invest your 10,000 euros, but basically for the rest of your life on the stock market.

So let’s go ahead.


  • Congratulations!
  • 1. Start
  • 2. The iron nest egg: How many reserves should one make?
  • 3. Define a purpose
  • 4. Set the time frame
  • 5. Determine our risk appetite
  • 6. Choose our investment vehicle
  • 7. Find the right ETF
  • Summary and checklist
  • Conclusion
  • You think this post is good? Then support Homemade Finance!


You may find it odd to start a post, but I’d like to congratulate you on this.

Yes, that’s right.

You want to invest 10,000 euros and have apparently made the firm decision to take your financial future in self-determined from now on. With this you have made the first and probably most important step:

1. Start

An overwhelmingly large proportion of citizens never become really active when it comes to their own money. Many remain alienated for a lifetime and leave it in terms of investment in what the state pretends to them, so pension, Riester and a little welfare state.

It remains with many then too. This is a shame, because off the beaten track there are many more attractive ways to financially emancipate themselves.

However, this requires dealing with some financial knowledge and since many have no desire for it anymore. This is not only a pity, it is simply sad.

Because it does not take much know-how, but only the right thing to take care of your own money and not just let others decide what you deserve. That’s why Homemade Finance.

There is still a reason to wait for many:

No time, too risky, the stock market is too high, too boring, just Christmas, blablabla. This list can be continued endlessly.

But in my opinion, people are fooling themselves. My belief is:

The secret of winning is beginning.

Because fact is also:

There is never a perfect time to get started!

What may sound negative at first is very positive at second glance. Because if there is never the perfect time to get started, then you can not do much wrong. Point for us then.

2. The iron nest egg: How many reserves should one make?

One aspect that is often forgotten when starting on the stock market is that it creates a cash cushion.

What do I mean by that?

Before we just break loose, put on our 10,000 euros, only to realize after a year then that we would actually need the money to get a new washing machine or the like, we should first talk about the iron nest egg.

Life is full of imponderables. Who knows what your life will look like in the future and what challenges will still be on you.

If you are, you need to be able to overcome these financial bottlenecks without having to prematurely wind up your portfolio. Because that usually happens just when the stock market is just once again on the ground.

Short example: The next financial crisis is here and you have unfortunately lost your job. Until you find a new one, it can easily take a few months to land. If, in this situation, you do not have any reserves that you can access, but only your deposit, then you will need to (partially) resolve this out of necessity.

But guess what? It’s financial crisis. What do you think about the courses? Right, absolutely shitty. But since you have no choice, you have to bite into the bullet and make a heavy loss with your portfolio.

In summary, you are now unemployed, have made losses on the stock market and all because you did not have nest egg. Something like that.

  • It is ESSENTIAL that you build an iron nest egg. This allows you to bridge emerging liquidity shortages suddenly and you do not have to sell your portfolio early, which would be the only way to lose money on the stock market.


Here I tell more about the iron nest egg . In short: You should keep between 6-12 of your monthly expenses quickly available on the daily allowance. With it you can also bridge bad times (unemployment, illness, …) and sort them out before you attack again.

Here the principle again graphically represented: 

I know, you came here to learn how to invest 10,000 euros and now I tell you, you should park it again on the caked day money.

But I wanted to go to the stock market and start. Scam!

Room, made. Here is a suggestion:

If you still have not thought of a cushion for you, but you still want to immediately on the stock market, then put regardless of your investment horizon € 7,500 on a money market account, or leave them there.

With the other € 2,500 you go public and make the first step towards financial self-determination. Then promise me and you, but in the next few months regularly pour money into the container with the iron nest egg and that until you could bridge at least 12 months.


3. Define a purpose

It is important that you stop for a moment and assign a purpose to your $ 10,000 you want to invest. Here are some suggestions:


10 ideas why you want to invest 10,000 euros


1. As a foundation for your financial freedom

2. Build a second income from capital

3. Equity (replacement) for a house

4. Hedging the children

5. Go again on Farewell World Tour at 80

6. Be less dependent on the state pension

7. Early retirement

8. Have more time to acquire knowledge

9. Invest in your future

10. For a flight into space


The possibilities are as endless and individual as you are.

Even if you have just landed here with the intention to invest your money just kind of neat, then I ask you anyway something to think about.

The reason is simply that going public is psychologically much easier if you have a specific goal in mind. Human nature is inadequate, so we should always trick ourselves a little if it threatens to get in our way.

So we set a non-abstract goal, with which we can continue to motivate ourselves in the next financial crisis . Everything is allowed, as long as it is not just the investment itself.

Investing should never be an end in itself.

4. Set the time frame

Now that you’ve determined the purpose of your investment, the next step is to determine your investment horizon. Depending on how old you are and what your purpose is, you will have more or less time to invest your € 10,000.

This is so important because we decide what time we spend on what time we spend.

Of course, it always depends on your personal situation, but in the following table I show you an overview of how I see it:


Please note that I am not an investment adviser and this overview, like everything else on Homemade Finance, is simply my personal opinion and my view of things.

Of course, this also means that others may have a different opinion on the division or periods of time than I do. That’s ok, if you want to discuss it. The comments are open to you.

So, from the table we see:

The more time we have to achieve the purpose, the more risky, but also more profitable we can invest our 10,000 euros. Of course always set the case that you have already managed an iron nest egg aside.

5. Our risk appetite firmly sure n

Another aspect that influences the distribution of our small assets is personal risk tolerance.

This is a difficult point, as you can only really see them when you actually stand in the stock market. There are investors who do not even bicker when the markets and their depot rush 50% south.

Others, however, is already at 5% look down the sweat on the forehead. The problem is that you can not simulate this feeling when there is no real money at stake.

Of course, we can not invest 10,000 euros or go public if you need the money a) soon again and b) you have a problem with risk.

To a) we have already taken care of up there, b) helps unfortunately just jump into the cold water. Of course, the stock market also lubricates. So what? Fluctuation is good, fluctuation is risk and diversified risk is fair return. And that’s what it’s all about in the end, right?

Then let’s change our relationship with risk from now on, right here and now. It is not our enemy, it does not want us any harm. Risk does not feel joy when we are in the minus. It’s just there. It’s just there and part of life.

So let’s find out about it and learn to ignore our emotions when our deposit slip shows red numbers. Expected value and time work for us. We should never forget that in heavy trading hours.

In spite of your euphoria, start your stock market career with a smaller amount than you can trust yourself. Imagine the following question: What could I do without the next 20 years if things went stupid?

So, if we want to invest $ 10,000 then it can be a good rule of thumb to get to know our risk appetite a bit better. The final truth about ourselves, however, we will learn only when the stock market burns again and then actually our own potatoes are in the fire.

6. Choose our investment vehicle

This may sound like a stab, but in the end it means nothing other than:

What do we invest in and how do we invest in it?

Regarding the iron nest egg this is relatively easy, a savings account is part of the standard offer of each bank and the offers are not very different from each other. It also makes no sense to operate for 10,000 euros day money hopping .

The Finanzwesir has durchgexcelt this very beautiful: the effort does not pay off. Just look for a relatively tidy account and stick with it.

If we want to invest 10,000 euros, then the interest on the daily money anyway play a minor role. With overnight money it is only about inflation compensation and quick availability. Return is earned on stocks and bonds, not interest on the account.

For this reason, in my opinion, fixed term money, in my opinion, also does not matter, because it usually creates little more than the inflation compensation, but at the same time is illiquid. Almost the worst of both worlds.

Ok, so we already know how to park our iron nest egg. Stocks and bonds are a bit more complicated, but do not worry, it’s not that wild.

Anyone who knows me a bit better knows that I think a lot about ETF, Exchange Traded Funds. These can easily be used to build very broad and well-diversified positions.

Diversifies because ETFs are index-based and, if properly selected with only one fund, you can get the same number of hundreds to thousands of companies in your portfolio.

Many thousands of securities that you can put into your portfolio so efficiently. That’s what I call diversified. And on the stock market, diversification is our religion, because it guarantees us one of the few scientifically proven benefits we can take with us.

On average, diversified portfolios have a better risk-return ratio than portfolios consisting of just a few individual positions.

In addition, ETFs are extremely cost effective. The SPDR S & P 500 is currently available from 0.0945% pa, yes read correctly. Compare that with actively managed funds that your bank adviser wants to turn to.

I assume that the increasing popularity of ETF over the next few years will make the TERs (Total Expense Ratios – the total cost of the fund) tumble even further.

There are ETFs for both stocks and bonds. Therefore, I never buy stocks or bonds individually, but always “in bulk” in the form of an ETF. So I cover in my table from above an area very efficiently and diversified.

If you want to know more about ETF, I recommend my post ” What is an ETF and what happens in case of bankruptcy? “. Beginners and old hands will find something there as well.

So if we want to invest 10,000 euros, then I propose the following vehicles:

Iron nest egg: daily allowance

Shares: ETF

Bonds: ETF

Simple as that. Believe me, it’s a scientific fact that with this seemingly simple trio you’ll get the best result in the long term. More complicated does not automatically mean better on the financial markets.

7. Find the right ETF

Now we come slowly to a more tricky part. In order to invest your 10,000 euros, it is not enough to just decide on a vehicle, but we also have to think about which model and what equipment we want to board the stock market.

And the offer is simply overwhelming, especially with the selection of indices that I would recommend to you.

So, right now, or right after you finish reading, your task with the following small list of indices is to look over to JustETF and to research a bit what ETF is about.

  • STOXX Europe 600
  • S & P 500
  • MSCI World
  • MSCI Emerging Markets
  • Bloomberg Barclays Euro Aggregate Bond
  • Bloomberg Barclays Euro Corporate Bond
  • Bloomberg Barclays Euro Government Bond 1-3
  • Bloomberg Barclay’s Global Aggregate Corporate (EUR Hedged)


This is a selection of, in my opinion, appropriate indexes for ETF. But that does not mean that there would be no more than these. It is, as I said, a selection.

As another rule of thumb, as you can see a good index: It contains more than 500 companies, preferably 1000 and more. Best of all from different regions, sectors and in all possible variations.

I deliberately do not name a concrete ETF by name, because your own research will automatically familiarize you with the topic and help you to gain security.

Hey, no one has argued that investing 10,000 euros does not mean a bit of work either.

Summary and checklist

Checklist: Create 10.000 Euro

    • To begin!
    • Place iron nest egg on overnight money
    • Determine the purpose of the investment
    • Determine investment horizon
    • Assess your own risk appetite
    • Specify investment vehicle or ETF
    • Stay calm even in crises
    • Keep going


Investing 10,000 euros is not rocket science. There are a few simple basics of the stock market to learn and to ask yourself a few deliberate questions.

It is also important to become aware of one’s own emotions, such as greed and fear. Because on the stock market, risk is not your biggest enemy, but you.

The nice thing about being able to invest the knowledge for 10,000 euros is the same as if you want to create 1 million euros. It’s almost perfectly scalable, as it’s called.

This means for you, that you have learned by the way and automatically the basic tools for your further life as a self-determined investor and that in just 15 minutes.

At the beginning of my life as an investor I also faced the same questions and challenges as you. Then I started according to the scheme described above and gained my experience and would like to pass this on to you so that you have it easier than I did then.



The Expectation – Your Holy Grail For Success

expected value-homemade-finance

Anyone who knows me knows that I only dogmatically follow very few rules.

To pay attention to the expected value is definitely necessary.

Because why should I play when the numbers speak against me?

I would like to sharpen the reader’s eye for this really simple ratio, because I believe in success and also for financial freedom , an eye for it is indispensable.


  • How can you calculate the expected value? A simple explanation
  • There is also a non-monetary expectation
  • We do not have to know everything very well
  • A disadvantage of the expected value
  • Why am I still dogmatic about the expected value?
  • Conclusion
  • You think this post is good? Then support Homemade Finance!

How can you calculate the expected value? A simple explanation

For those of you who do not know exactly what an expectation value is and how to calculate it, here’s a simple example:

euro coin photo

Imagine we both throw a coin.

With 50% probability head comes and with 50% probability number appears.

But we do not just throw it, we bet for cold hard money. We agree that if you win I pay you 10 €. But if I win, I get 10 € from you.

We know that in 50% of the cases you win and in 50% of the cases I win. Therefore, we can calculate the average profit per game :

0,50 * (+ 10 €) + 0,50 * (- 10 €) = 0 €

That is, if we repeat our game, the coin toss, very often, neither you nor I will go home in the long run with profit but also not with loss.

The expected value is therefore € 0 for both of us.

Of course it can happen in between times that one of us wins a couple of times in a row. It may even be that one wins more often than the other.

But the more often we throw our coin, the sooner we will approach the expected value on average. This follows from the law of large numbers and can be graphically represented as follows:

expected value-law-of-large-numbers


Of course, the curve can have virtually any shape, but they all have one thing in common: sooner or later, they will strive against their expected value:

expected value-2


Here comes the first two of the four most important insights in the whole article:

  1. That the above curves are against their expectation value is like a law of nature. Nobody can shake it.
  2. Every game is mathematically worth the same. The 1st just as much as the 10,000.

Now let’s change the rules a bit:

Every time you win, I pay you 10 € but every time I win I only get 9 € from you.

Your expected value: 0.50 * (+ 10 €) + 0.50 * (- 9 €) = 0.50 €

My expected value: 0.50 * (+ 9 €) + 0.50 * (- 10 €) = -0.50 €

That means, on average, you win 50 cents every game. Great for you, bad for me. Because I lose on average every time 50 cents.

From your point of view, this can be interpreted graphically like this:

expected value positive

That means you have a systematic advantage here.

You may also be in the loss zone, but in the long run it is inevitable that you will make a profit. It may as well be that I have more money in between than before in this game. But in the long run the numbers work against me.

It is, as I said, like a law of nature.

This is followed by the second two most important findings in this article:

3. If we have a negative expectation, then we should avoid it at all costs.

4. If we have a positive expectation, then we should take it under all circumstances.

There is also a non-monetary expectation

An expected value does not always have to be related to money. There is also an emotional expectancy.

For example, before the first kiss of a newly in love couple. One of the two makes a start and risks something. What if it is too early? What if you are rejected? That would be emotionally a disappointment.

But what if it is the right time? It could be phenomenal. The beginning of something very big!

After more or less reasoning, he dares and lo and behold, it was fully worth it.

Happy end.

Here nothing else happened, as the unconscious attempt to form an expectation value. You look at the possibilities and try to figure out how likely they are.

If the result fits halfway, then we just do it.

The nice thing about emotional expectancy is that when we’re solidified in ourselves, it’s almost always positive.

Imagine, the above first kiss would not have been so good. Would the loss really have been that dramatic?

Sure, at first it’s probably uncomfortable, embarrassing and you think the shame will stay forever. But honestly, the earth keeps spinning, that’s life, and two days later that’s ticked off.

The loss is limited, so we should be more emotionally confident without much thought.

We do not have to know everything very well

Now, of course, one can argue that one does not always know the amount of profit or loss from the outset. Much more likely (attention Wortwitz) it is even that one does not know the probabilities of the individual events exactly.

I ask you:

Do we have to do that anyway?

In my opinion no. Often in life, we encounter situations in which it is crystal clear whether we face a positive or negative expectation.

Prime example study or further education:

We can not gauge exactly how much more salary we will receive from our investment in ourselves and not what the likelihood is.

But we suspect that it is well worth it, because the average salary has been proven to be higher in many studies. This can not be translated into anything other than a positive expectation.

This approach may not be completely clean from a scientific point of view, but it is incredibly efficient.

There are many such situations in life and I even claim that each one translates into a monetary or emotional expectation. Really everyone.

Tip: A help for expectations in everyday life is to ask “What can I lose?”. If the answer is nothing or almost nothing, then the expected value is very likely to be positive. Then just do it and do not hesitate.

A disadvantage of the expected value

Now I’ve been raving about the concept in very high tones all the time. Time so, even a point of criticism a little closer.

Take a look at the two following decision trees. Let’s pretend that it’s two stocks. Both are worth 100 € today and in one year there are two ways they can have developed.

Again, for the sake of simplicity, both options are equally probable, 50/50.

Share A:

Expected value: 0.50 * (110-100) + 0.50 * (110-100) = 10 €

Share B:

Expected value: 0.50 * (150-100) + 0.50 * (70-100) = 10 €

Both stocks have the same expected value and are equivalent in their view.

Nevertheless, every reasonable person would choose the first game. Because what the expected value ignores is the variance or volatility of the possibilities.

With stock A we certainly get the expected value, with stock B it may be that we get a lot more but also that we make a loss.

The expected value does not matter. He just tells you, “That’s okay, just do it. And immediately. “

Why am I still dogmatic about the expected value?

Even if one can practice criticism from an academic point of view, from a practical point of view, the expected value is nevertheless unbeatable.

He is simple, he can often be touched at least over the thumb and he is simply incredibly efficient.

Look at it like this:

The answer of meaningfulness of things of life and money concentrates in a single number.


If you succeed in ranking as many games with positive expectation in your life as one after the other, then success is, in any case, a mathematical certainty.


With the concept of Expectation, we have an incredibly powerful tool to rank and evaluate our decisions. Be it financially or emotionally.

It allows us to gauge what we do and, more importantly, what we should do better.

Because no one escapes this law and I do not know how you see it, but I do not want to mess with the power of numbers.

What do you think about the expected value? Do you like the philosophy behind it? Let me know now!



Copy-Trading: When Lemmings Storm the Trading Floor

Today it’s about a topic that is often sold as something like Stock Market 2.0:


Gladly shown in the haze of catchwords such as swarm intelligence, machine learning or robotics.

Cool and really trendy, right?

Quasi the further development of investing for private investors.

If you’ve been following me here on Homemade Finance a bit longer and you already know my philosophy, then you probably already suspect what I think about it:

Not much.

As I come to this conclusion, I want to explain to you here now, because I really want to prevent you burn unnecessary money with this nonsense.


  • Brief introduction to copy trading
  • Problem # 1: Survivorship bias
  • Issue # 2: Copy traders are trading actively and underperforming
  • Problem # 3: Hindsight Bias
  • Who profits from the copy-trading trend?
  • How to cheat scammers with copy-trading investors
  • Copy trading and martingales
  • Conclusion: copy trading is expensive, underperformed and is a playground for scammers
  • You think this post is good? Then support Homemade Finance!

Brief introduction to copy trading

The logic behind copy-trading sounds really easy:

You compare a bunch of traders and their strategy, picking out the ones you think are the most successful and following them.


The consequences usually happen automatically. Say, through a copy trading platform, the actions of the traders you follow are translated 1: 1 into your personal account.

I’ve picked out one of the most popular traders in the German-speaking world.

Quite deliberately, I do not mention the name of the platform or the traders that you can follow there.

Because advertising for something that I think is not good enough for you, I certainly do not do here on Homemade Finance. Point.

So, here’s the list of the top 10 traders on the platform:


You might think that you are simply picking out a few successful strategists, following them, and making your own such formidable returns without much effort.

Simple logic or not?

Of course wrong.

Three problems in advance:

Problem # 1: Survivorship bias

There are certain cognitive deficiencies in our brain, and copy trading behaves in this context just as much as comparing actively managed funds.

Looking back, using a list of traders or funds to compare or evaluate is pretty pointless.


Well, let’s take another look at the top 10 list from just now.

If we calculate the average performance, then we would have made an average of 48.85% pa when investing in all 10 traders, which sounds great. Simply split your own capital into ten equal parts and distribute them evenly.

That should still guarantee reasonable average returns of a similar amount in the future, or not?

Well, not necessarily.

For one, it is crystal clear that nobody knows whether the top people in today’s copy trading will still lead the ranking tomorrow.

Boring, but true:

Past results are no guarantee for the future.

If I follow Trader 1 today and entrust my money to him, that does not mean his strategy will work so well in the next 12 months.

That goes without saying.

The problem is that this applies to the whole squad. All 10 traders can in principle be financially dead in the next 12 months.

But what does a newcomer to copy-trading see when he looks at the Top 10 list for the first time in a year?

10 new, successful and successful traders whose strategy happened to work especially well this year.

But not the Investor Armageddon of the past 12 months, the 10 Trader corpses and your lost money.

Just a freshly polished list of people who had a good run last year.

That means the average return you can count on is not 48.85% pa but less. Because there are often a few “rivets” that you can not see in the list today, but for someone who has already entered in the past, pull the cut down.

In other words, comparing traders to a list puts you at risk of systematically overestimating the average score.

By comparison, the average returns on the stock exchanges, over long periods of time and after deducting inflation and tax, are around 5% per annum .

So you can figure out how much rivet must be there to (risk-adjusted) our 48.85% so far down to pull.

Issue # 2: Copy traders are trading actively and underperforming

As for all market participants, the old adage also applies in copy trading:

Back and forth, pockets empty.

To the performance of copy-traders, there are, to my knowledge, not really detailed, scientific investigations. However, so far secured Findings for the stock market in general of course also apply here.

And there it looks for any active form of action in the long run just bad. In other words, yield less than the market as a whole because transaction costs create a noticeable headwind.

There is nothing to shake it because the laws of the stock market apply to all equally. Whether lonely fund manager high up in the glass tower or sociable lemming down here on the street.

Both will get their expected value in the long term and this is risk-adjusted the already mentioned above about 5% after taxes and inflation per year.

That alone is in my view actually a manslaughter argument against copy-trading, but we still continue.

Problem # 3: Hindsight Bias

Looking back, it is always easy to say:

Oh, I would have.

If the whole world had known 80 years ago what would become of little Warren Buffett somewhere out of nowhere in the US, everyone would have invested in the young man.

But guess what: That just this little boy would enter the long term above-ground returns (about 25% pa), no one could guess.

In retrospect, it would have been wise to invest a few dollars, but this information was not predictive.

On the internet, people regularly read about people who are annoyed at various occasions about not investing in anything, be it Warren Buffett, Apple or Bitcoin .

This mistake is called hindsight bias .

What does this have to do with copy trading?

Well, comparing the different top traders presented on the platforms does exactly the same thing:

One is forced to think “Oh, I should have”.

Of course this is intentional, because the operators know exactly how people are ticking.

As soon as we are confronted with a retrospectively, theoretically very positive situation, we automatically want to react quickly so that we can at least benefit from it in practice.

Such a behavior was certainly beneficial in the hunt in the Stone Age, but such behavior generates losses in the financial markets.

It lets people do irrational things and that’s what the operators want. It suits them well when we chase after the constantly changing top traders.

Should the stupid investor run bankrupt while trying to catch the currently best trader.

The main thing is, he pays his fees and transaction costs.

Who profits from the copy-trading trend?

There are a lot of proverbs that say that if you want to find out the cause of something, then you just have to follow the trail of money.

Let’s do it now:

Basically copy-trading needs a platform where traders and followers can interact.

This is usually provided by a broker or an intermediary.

I will not name any names here, but if I scour the Internet like that, then I find there mostly old Pappenheimer:

Forex brokers and binary options platforms!

A few exceptions, which for example work with certificates, confirm the rule here.

As you may know, I have eaten these betting shops, as their lifework is merely to lure inexperienced retail investors into investments that are on the one hand much too expensive and on the other hand provide no added value for society.

As a long-term investment, this inevitably ends in failure and will make 99.99% of all people who dare to end up worse off than before.

Incidentally, this is not just my personal opinion, but proven by scientific studies.

These brokers (who have almost nothing to do with a reputable broker you buy your ETF for) have only one goal:

Make you move your capital back and forth as much as possible. After all, every move makes good money.

Copy trading is primarily a marketing tool to give you even more “interesting” opportunities to gamble with your money.

It is therefore almost always such rather dubious brokers, who advertise the supposedly limitless financial possibilities (= bag of ash) of copy trading.

On the other hand, there are the traders who provide their strategies on the respective platforms for followers. The platforms, in turn, engage these active traders (not the passive followers, of course) in the commissions and fees they collect to motivate people to fill the platforms with some sort of follower strategy.

It is important to note that both brokers and the forerunner traders earn from the followers and thus have a common interest:

Your money.

And as always, when there is a lot of money in the game, there are always a few cheaters.

How to cheat scammers with copy-trading investors

I will now show you a trick that will allow you to cash in on low-minded followers on copy-trading platforms.

The catch here: It is absolutely immoral and of course punishable.

Therefore, I urge you to stop doing that!

I’ll explain the possibilities to you only because I find it disgusting if any criminal candlesticks exploit other people like that.

And since the underlying “trick” in this context is still unknown to most people, I consider it my duty to explain it to you here openly.

Following background:

There are a variety of strategies in the financial markets and looking back (again keyword Hindsight bias) will always find one that has hit the market seriously.

In return, there are of course strategies that have underperformed.

If you were to follow all the strategies of this world at the same time, then you would receive on average exactly the performance of the market (before transaction costs, mind you!).


Of course, since many market participants, and especially copy traders, are behaving erratically, for the reasons explained above, the best-performing traders will naturally top the list, and the one who happens to be more recent will be followed successful strategy.

As a result, rain for the lucky guy plenty of commissions and profit sharing.

Nice for him.

Next year maybe another trader with a different strategy is at the top of the list and then gets the blessing.

And so the year turns from year to year. The trader, whose strategy was by chance the superior, gets the most money from the followers.

Interestingly, you can systematically recreate this “success” so that every year you are one of the successful traders in the list:

You simply offer followers every strategy that exists!

On most copy-trading platforms, if at all, one sees only yes-no, whether the one who fights the strategy has invested his own money.

This now allows you to risk completely without your own money or drive a very large number of strategies with very little money, of course, under different user names.

Now if you drive as many strategies AND the exact counter strategies (buying in one strategy and selling in the counter strategy and vice versa), then the chances are that one of the very successful ones.

And completely without risk, because the profits and losses of the two related strategies cancel each other out completely.

It’s all about offering the bar in the bar graph above, which was the largest last year.

This strategy is then followed by the followers and in the automatic replica flushes the image of the commissions as a very real money in the account.

If the strategy is a failure, then our fake ear suffers practically no or only very small losses.

Because offering a strategy costs little or no use and any trading losses are offset by the trading profits of the counterstrategy.

The problem here is that in this situation, losses are limited for the cheater, but potential gains are very large.

This entices you to simply “offer” many strategies with as little effort and automation as possible, and those that do great things will overcompensate for the low losses in other strategies.

A more concrete example:

Trader 1 from our portal list from above has generated a return of 27.41% over the past year through its strategy.

If he has now also the exact counter strategy, ie for each purchase a sale and vice versa, offered under another name, then he has here -27.41% made and to his actual strategies the bottom line deserves nothing, but also lost nothing.

The profit of one strategy is the loss of the other.

So why the whole thing?

Very easily:

He did not gain or lose anything by trading himself, but in the meantime earns real commissions and profit sharing from the followers of the exceptionally successful strategy, whereas the exceptionally bad one in Nirvana’s ranking has vanished and no one cares any more.

That would easily be enough to theoretically finance some other probationary strategies and, among other things, offer user names, even if transaction costs are at stake.

Although I can not prove it, I argue that a significant part of copy trading goes back to this form of fraud.

The attentive Homemade Finance reader will probably realize that the principle that underlies the whole scam is very similar to the perfect crime: the stock market letter .

Copy trading and martingales

If I still have not persuaded you to keep your hands off copy trading, then I’d like to give you at least one last piece of advice on your way here.

If a trader with a performance that looks like an almost straight line with sawtooths crosses your path, then steer clear of the Holy Water like the devil!

What happens here is that after a loss someone increases or doubles their bet. At first glance, this may seem like a genius, because it avoids losses in the short term, but in the long run will definitely ruin mathematically.

Why and why do I explain you in detail in my article on marginal or progression systems .

One of my most important contributions here on Homemade Finance, if you ask me.

Conclusion: copy trading is expensive, underperformed and is a playground for scammers

Copy trading is nothing but a marketing gimmick to the broker.

That may sound like a bit harsh, but it’s fact.

In the worst case copy trading is a quick way to burn money and, at best, just a fancy new package for something well-tried that already exists:

The investment in securities.

And what is ideally to be done, we should all now hopefully be clear:

  • long-term
  • Cheap
  • diversified
  • passive

If you want to pay extra for an interesting packaging, please. But that is directly at the expense of your return.

And of course you should always try to avoid that.

Why pay for certificate fees, profit sharing, or similar for average and long-term market performance when you can get more return for less fees?

In fact, I do not advise you to deviate from your plan (saving a long-term ETF portfolio).

Not a millimeter.

Just stay on course and go your own way instead of chasing the other lemmings into the abyss.



The Path to Financial Freedom Rewards you Today

off-the-financial-freedom-made home-finance

The benefits of financial freedom are very clear:

  • It gives you the opportunity to do what you want . You will agree with me, for your personal happiness that is indispensable.
  • It gives you security , because with solid finances in the back you can handle the crises of life easier. Money does not make you happy, but life is easier.
  • It makes you flexible , you can free up your time and organize your jobs as it suits you. Especially if you have family that is an invaluable advantage.

However, financial freedom is nothing you can achieve overnight. You can definitely work it out with patience and discipline.

This sounds like this kind of freedom is something that you work on for 15-20 years, and in the meantime, you do without the finer things in life. But that is not the case and why this is not so I want to explain to you here.


  • Financial freedom is a long-term project
  • Be sure to set subgoals
  • How would you change your behavior if you got € 400 more a month?
  • Conclusion
  • You think this post is good? Then support Homemade Finance!

Financial freedom is a long-term project

As I said, the road to financial freedom is long and you will need a few years to reach your goal. Depending on how ambitious you pursue this goal, this can take as long as 1-2 decades.

The following graphic shows you a small example. We assume a monthly savings rate of € 500 and a term of 20 years. Furthermore, let us assume a net yield of 5% .

That means after 20 years you have earned a fortune of around € 208,000 . All right, what does that mean?

If we assume that you want to pass on the accumulated capital to your children and only live on the continued accrued interest, that means € 10,400 interest each year. That’s € 866 per month for the rest of your life. If need be, for all eternity.

That’s a great extra income. Of course, depending on how old you will be then you can continue to work and continue to increase your income, or if you retire in 20 years, you can upgrade your pension.

By the way, if you are wondering now how high your monthly savings rate must be to come after 20 years and at 5% to 1 million , here is the answer:

This corresponds to around € 2400 per month. This may be sobering at first glance, but if you are still young and have 30 years and may even get 6% return , then the monthly amount will already be reduced to € 994. Still not very short but not impossible. The compound interest sends greetings.

But you definitely do not have to become a millionaire to be financially free, and maybe it’s not such a healthy goal to stiffen up a number. Remember, money does not make you happy, it just makes life easier. Depending on your standard of living, significantly lower sums of money are enough to be money-technically independent.

That may sound very negative now, as if you were doing without something for 20 years, only to be able to enjoy something later in the uncertain future. Even if this is the basic principle of any investment (you are giving up money today to get more money in the future), this does not quite apply to the quest for financial independence.

After only a few years , your depot already supports you with passive income . Even if you do not spend this for the sake of dear interest, but reinvest immediately. But it’s a pleasant thought to know that a certain cash flow keeps your back free.

Be sure to set subgoals

I like to set goals and compare the increases in the depot with everyday things I need. For example, after one year my depot pays me a bulk purchase a month, after 2 years my entire expenses for food, 7 food and half rent, 10 years food, rent and some spare time. And so on.

Financial freedom

A big goal is much easier to achieve by breaking it up into many small subgoals . Reinhold Messner does not even stand in front of the K2 and says to himself, ok I have to go up there now. He looks closely at his route and divides it into individual stages. Today to camp 1, tomorrow to camp 2, the day after tomorrow bivouac under the saddle and then up to the summit.

If he only thought of the altimeters altogether the whole time, that would be an enormous mental burden. But today until camp 1? That’s possible, I can do it. And after a few days he is at the top and has achieved something that seems impossible.

You need stamina, patience and partial goals to motivate and keep you happy. Then virtually nothing can go wrong on your path to financial freedom.

How would you change your behavior if you got € 400 more a month?

In this question, I do not mean your employer, but regardless of your income from capital. And compare it to the situation where your total income depends on your employer.

I believe that the more independent you are from your employer, the freer you will express your opinion. You will also go through life more relaxed and more likely to criticize or represent your positions with more emphasis.

And, as a self-fulfilling prophecy, you’re more likely to become more successful in your job. Constrained and tense, good things rarely happen. In the end, that also benefits your employer, because who wants a gang of yes-Sagern around. Sooner or later, this will get you on your feet and that is certainly not in the interest of the employer.

These “soft” aspects on the road to financial freedom are often overlooked in my opinion. Would you be less tense if you had 30%, 40% or more of your salary, regardless of your job? I am convinced you would be it.

By the way, this is another form of diversification , because what are you doing on your way to financial independence? You invest money and receive income from capital assets. Instead of doing everything on your own, you do not have one but two types of income . You are simply broader.


Financial freedom is not a binary, black and white process . It is something very graduelle. There is no exact deadline from which you can call yourself financially free. You will gradually . An invaluable advantage, because it allows you partial goals set which in turn motivated by keeping you on your way.

Going for financial independence is worthwhile today , not just sometime in the distant future. The steady growth of your depot will make you feel much safer or freer a lot.

If you have enough liquidity on your account then nothing can go wrong on your way.



5 Solutions Against Negative Interest on the Account

Each saver face the hackles on such headlines:

ECB cuts interest rates to zero.

ECB levies penalty for bank deposits.

It’s really hard to look positively forward when big central banks start experimenting with the financial system.

Most of all, we fear all negative interest rates on our credit, that is, you would have to pay interest to the bank in order to park your money with her. You have to let that melt on your tongue. Since you wear his hard savings on the bench to make it work a bit and then you will not only not rewarded but even disadvantaged.

Although the banks are certainly not the winners in the current low interest rate environment, I am well aware of that.

Negative interest rates already exist, so the Skatbank and Commerzbank levy a kind of undefined fee for (very) large deposits. But basically, it’s nothing more than punitive interest.

How likely it is that even private, normally large daily money and current accounts will be affected by it once is in the stars. However, I do not think it is very realistic, because as a saver, we do not have to stand idly by and see how the bank is bugging us away from the savings.

Here are 5 approaches to fight back against it.


  • 5 options for negative interest rates
  • Are penalty rates realistic?
  • Who benefits from negative interest?
  • Real you pay a penalty often now
  • Conclusion: Calm blood
  • You think this post is good? Then support Homemade Finance!

5 options for negative interest rates

1. Switch to foreign / non-European banks

Pro: You can continue to participate in the money transfer (transfers etc.)

Contra: possibly no deposit guarantee if outside the euro area then currency risk

The most convenient solution would be to simply use a bank that does not require negative interest rates. Maybe you have to look a bit outside the box, with the danger in the back, that the local deposit insurance is not the best. Currency risks (eg Norwegian Krone to Euro) are also an issue for foreign currency accounts. A big advantage of this method is that you can still conveniently participate in the monetary system.


2. Bunk your cash

Pros: you stay liquid

Cons: Theft risk, could be banned

What you have got that one. The mattress full of money (or at least the pillow) can not take the state so easily. That may be but he could simply ban cash. And if not the state takes it away, then maybe a thief. The advantage of this method is that you remain liquid, you do not have to invest in investments that are subject to price risk or are illiquid.


3. Use gold as a store of value

Pro: never becomes completely worthless

Cons: quite illiquid, impractical as a means of payment, possession could be banned, fluctuations in value

Gold will fluctuate in value over time, but I would guess that gold will at least never be completely worthless. One could therefore use gold as a store of value and tie up excess liquidity in it. However, it has the disadvantage that it can not be made so quickly to money and the bid-ask spread (the range between selling and buying price) are not to be underestimated, at least for physical gold. There have also been times when the private gold ownership was banned and who knows what else there is waiting for us.


4. Buy government bonds

Pro: you stay relatively liquid (if you need money you sell bonds), property is never forbidden

Cons: Price risk (government bonds also fluctuate in value), even states are not without risk

Another alternative would be the purchase of government bonds. This could be done so that you clear your account to a large extent and put your bonds in the deposit with your broker. Every time you need extra liquidity, you sell bonds and transfer the money back to your checking account. Government bonds are almost always liquid and can be sold quickly. However, they also fluctuate in value, so you may have to sell in an awkward moment.


5. Invest in a property

Pro: inflation-protected, by borrowing, inflation can work for you

Cons: requires large funds, very illiquid

This option is only suitable if you have a lot of excess liquidity. Then maybe make the investment in a property sense. Another advantage is the “paging”. By that I mean, since you take out a loan, you now benefit from low interest rates and inflation works in your favor. But you should weigh very carefully if that makes sense to you. You should also be clear how much free money you will probably need in the future, because a property can not just sell it once and turn it into money.

Are penalty rates realistic?

How likely negative interest rates are, it can be argued well. Some say that the progressive abolition of cash is solely for the purpose of forcing people to expropriate this form of expropriation. I do not think so, there are many reasons why cash is less and less used, but I can not see any conspiracy in it.

I also do not believe that on a broad front, negative returns on assets will prevail, because if the existing money system punishes the participants on a large scale which use it, then yes, the citizens simply switch to another system without such negative interest. At some point it is just too stupid people and then they look for alternatives.

This can be, for example, an exchange economy or a kind of parallel currency.

Who benefits from negative interest?

As a preliminary I have already mentioned that banks certainly are not among the winners of this interest rate environment. Even if they should raise interest rates from savers, they would prefer to pay us interest. That’s how it worked, the good old 3-6-3 world. Borrow money for 3%, lend 6%, live well from the range and return to the golf course by 3.

Nor do the large (life) insurers benefit. Their business is to collect money from savers and investors on the right-hand side and to invest in securities on the left-hand side. Like also sometimes government bonds.

And here we come a good deal closer to the truth. Because negative returns are good for everyone’s debt. And we know, if someone in this world has debts, then states!

Interest rates on government bonds are currently extremely low, sometimes even negative . So states can lend money very cheaply and keep the shop running.

Here you can see the interest expenditure of the federal government in the individual years. We’re not talking about eradication here! These are only interest that the state spends, of which the mountain of debt has not diminished.

That looks pretty good, the interest burden has steadily declined. Good state or not?

Thus the indebtedness of the Federal Republic (on which of course the interest is paid) developed:

Ok, maybe not so good, the debt has increased well in the time. This means that the current low interest burden comes to the state. Although he has significantly more debt than 10 years ago, he has to pay significantly less interest than 10 years ago.

But what happens when interest rates rise again and new debts can no longer be received as cheaply? The average will rise again and only as a food for thought: 3% of 2,000,000,000,000 (2 trillion) would be 60,000,000,000 (60 billion).

Only for interest.

I think we agree if the states in the current environment are probably the winners. Of course, the ECB and politics are independent of each other (of course), but I would imagine that our politicians are quite grateful to the central bankers.

Real you pay a penalty often now

What many savers are not really aware of:

From time to time, you pay in real terms today, after deducting taxes and inflation. Say the credited interest in your account is not enough to pay for the loss of purchasing power and taxes. Only when the interest goes beyond just these, then you actually generate a real return.

But there have often been occasions where the real saver has paid. A paradoxical situation, because something is being paid to your account, so it looks like more, but in fact you can buy less than before. One is almost happy that the savings are now worth less and does not even notice it.

Incidentally, this also applies to “the good old days” when there was still 5% interest on the current account. Put simply, what good is 5% interest if only inflation is 6%?

The subject of punitive interest is therefore not completely new, which was born only in the current environment.

Conclusion: Calm blood

As you can see there are different approaches to avoid negative interest rates. Sometimes they even throw off some returns, but you have to also some price risk, so that the value can sometimes fluctuate, or take illiquidity into account.

In the case of negative interest rates, I would suggest a diversified approach consisting of several of the above solutions. This should be well equipped against penalty interest.

However, it is not without its challenges, because you have to keep an eye on your liquidity even more intensively than you should anyway.

In addition, one must also pay attention to be able to participate with the respective solution to the payment in any way practicable.

Even if one does not generate a return with a reasonably practicable alternative, the majority of savers will nevertheless resort to it in case of negative interest rates.

Because no return is still better than a negative return.