Adam and Eve once were living happily in the Eden Garden. They had no worries about food until they were sent out from Eden by God. By then, human need to work so that they have food to eat. It is the same now as in the past that we all need to work for food, clothes and many other necessities. People who want to be rich actually want to achieve the financial freedom which Adam and Eve once enjoyed.

One of the important differences between rich and poor people is their mind. A poor person can also be rich if he can manage his mind and self consciousness. If you do not concern how to be rich, you will never achieve such goal of rich. It is not just a personal idea, many psychologists agree that a strong sense can help people more devoted, serious and dedicated to what they have to do. And the result is always positive.

Have you ever heard of the book “Rich Dad poor Dad”? The rich sense concept has also been mentioned in the book. The Author thinks that both the rich and poor dad are clever and smart. What makes them different in financial position is actually their difference in value of financial intelligence. The poor dad does not concern about money, but the rich dad is the other way round that he thinks money is power. Therefore, to build your sense is more even more crucial to learn how to invest.

If you have already built up that sense, you may not immediately get rich. What you really need can be investments. Though there can be many other ways that can help you get rich, most of the economists agree that investments probably are the fastest way. It seems good that you can invest in every kind of investments so easily today. But the problem is, there are risks that you have to face.

To make money and become rich by investments, the first thing you need to do is to learn discipline. You should learn to discipline and control yourself in controlling yourself to stop when your target is reached. Such discipline is extremely important as it ensure you are doing investments instead of playing your luck. If not, you are going to lose money as many other people do.

Another important to note is to start with small business. Many people have the idea that they want to become rich by a big business. Therefore, they wait for the time, and the finance possibility to start a big business. The truth is most of the big businesses are from small businesses. Start with a small business and learn the skills and experiences which are the key to success for the big business.

Getting rich is simple but it may not be as difficult as you think once you have started. Pay more attention to everything around you and you may make a way out!

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When it comes to investment, hedging is not a strange word. Though many of you have already heard of the name hedging, not many of you may be able to explain what hedging is. Without the ability to explain the term, I guess you have not yet participated in the hedging world, which actually can be useful to protect yourself. Let us now understand it.

Why there are so many people and well established enterprises use hedging? You need opportunities from investments. But no free lunch, there are risks linked to such investments. To reduce the risks on such investments, many of them choose hedging as one of the methods. There are many different types of hedging products available to cover different types of investments. You can find foreign currency ones, interest rate ones, future ones, options ones and stock price ones.

You have to remember the golden rule that hedging is not a way to help you earn more money. It is a tool to help you reduce the risk. By that, you will invest in two different products that are negatively correlated. The risk is reduced by the offset between the gain and the loss from each of the investment. Or, when investment A is in a gain position, investment is on the contrary a loss position. The gain offsets the loss.

When the risk is higher, the earning or opportunity is likely to be higher, too. But, by hedging, the risk is reduced, therefore, the highest possible earning is also reduced. That means, when you are gaining on investment A, the gain is reduced by the loss in investment B. On the other hand, if you are making loss on investment A, the loss is reduced by gain in investment B.

Let me give you an example on interest rate swap. If you have a loan from the bank of $100,000 and the bank is charging you a floating interest rate (or market rate). You biggest concern must the increase in interest rate (“interest rate risk”), which than you have to pay more interest. To reduce the interest rate risk, you can enter into an interest rate swap with the bank.

When it comes to such hedging instrument, you have a choice to decide if you want to fully hedge or partly hedge. You can enter into a $30,000 hedge or a full hedge of $60,000. Why you want to do so? It is because there is tradeoff between you risks and opportunities. For simple explanation, I assume you have entered into a $60,000 hedge that you receive interest income.

When the market rate goes up, you have to pay more for the loan, but on the other hand, you receive more from the interest rate swap. On the other hand, if the interest rate goes down, you pay less, but you receive less as your interest income. To note that, hedging may not help you eliminate the risk but only reduce, therefore, you cannot expect that the interest pay out should be exactly the same as interest income.

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