Most people are very interested in investment and financial management. After all, who doesn't love money? However, many friends confuse financial management, investment, and trading. Most people want to manage their finances, but in fact they are investing, and most of those who invest are also trading. There are essential differences between these three, and it is easy to get confused if you don't understand them clearly.

Financial management, its core is allocation. Reasonable arrangement of your financial resources, meeting life's needs, solving life's worries, and making life better, this process is called financial management. For example, if you want to travel, the budget is 10,000 yuan, and there is just this 10,000 yuan in the financial arrangement; for example, if you are worried about getting sick and need to spend 300,000 yuan, there are corresponding social security and commercial insurance in the financial arrangement, etc. Let every penny serve your life, this is financial management. Many people have money, but they have become slaves to money. The huge wealth they have not only cannot make them happier, but brings them more pain and anxiety. For such people, money is worse than nothing. If you can't control wealth, wealth will backfire.

Investment, its core is undervaluation and growth. The essence of investment is to find investment targets that are undervalued or have growth potential. Be friends with time. Undervalued assets will return to their original valuations sooner or later, and growth assets will always shine. The purpose of investment is to achieve asset growth. It is not difficult to find good investment targets. The difficult part is to hold them patiently, to be able to hold on, and to sell them when they are overvalued.

Trading: Its core is gambling, taking advantage of asset fluctuations to take money out of other people's pockets, which is actually the most difficult. In the secondary market, only about 10% of people make money, and only about 1% make a lot of money.

Since most people are actually trading, I will share my own views. Trading is essentially only related to the supply and demand of chips. Remember this sentence! Many people have been switching between investment and trading. They are obviously trading, but they have to exhaust their energy to study its intrinsic value; they are obviously investing, but they study its chip supply and demand every day, torturing themselves.

If you are selling watermelons, you only need to worry about whether you can sell them for 1.5 yuan after buying them for 1 yuan, and how much you can sell; if you are selling pork, you only need to worry about whether you can sell them for 20 yuan after buying them for 15 yuan, and how much you can sell. If you can't sell them, you will lose money.

Since we are doing business (trading), why do we need to study the intrinsic value of "watermelon" and "pork"? What we need to study is whether we can sell them at a positive price difference. Don't worry, people will eat both "watermelon" and "pork". "Intrinsic things" have nothing to do with you. The intrinsic value of liquor is not as good as chips, but it makes more money than chips. People drink liquor and people use chips. Don't use your values ​​to measure whether the investment target has "intrinsic value".

The essence of trading is gambling, and gambling depends on the supply and demand of chips. The same is true in the capital market, where junk stocks are bought by some and blue chip stocks are sold by others.

Back to the crypto market, it can be said that more than 95% of cryptocurrencies will die in the future. They have no value. Do you agree with this? But why haven't they fallen? Some even have a market value of hundreds of billions?

Don't think about its intrinsic value, they have no intrinsic value! There is no decline, only because their supply and demand of chips are balanced. Let's take an example to understand it better: after the leading algorithmic stablecoin LUNA triggered a death spiral, it fell by tens of thousands of times in just a few days. Many people who bought the bottom lost all their money, right? Why did it fall so much?

It is rare for many air coins launched on mainstream platforms to fall by 90% in a few days. At that time, the consensus of Luna was so high, and the decline was tens of thousands of times. What happened? Because its minting mechanism allows it to issue chips indefinitely, and the chips issued can be infinitely smashed! After Luna2.0 was restarted, it was replaced by Lunc. It has completely become air at this time, but it can still have a market value of more than 20 billion at most. Even now, it still has a market value of several billion, because its chips are fixed, there are always retail investors willing to buy to achieve a balance between supply and demand of chips.

As I said before: the essence of trading is the supply and demand of chips.

Many people study "intrinsic value" to find production costs or growth. This is only suitable for professionals to invest, not for most people to trade.

Production cost is useful, but not absolute. In a bear market, people like to look at the production cost of Bitcoin, because they have this anchor in their minds. When the price falls to near the production cost, it will not fall anymore, because the motivation to sell chips below the production cost is weakened. In a bull market, people prefer to fantasize about the growth of this "digital gold".

The same is true for stocks. Many investors like to look at the price-to-book ratio and price-to-earnings ratio. The price-to-book ratio more represents the company's intrinsic value, but the price-to-earnings ratio looks more at the company's ability to make money.

For the back-end users, the price-earnings ratio is more important. If a company's net assets fall, it at least means that its growth potential is not good and its future prospects are bleak. The same is true for the crypto market. After the LTC halving, almost no one in the market is interested in it. Its increased production costs can no longer drive it forward. Bitcoin will be the same in the future. Growth is the core element of investment.