Knowing the pitfalls is the first step to making smarter money decisions.
- Taking control of your money and making better financial decisions is something that everyone can and should do.
- There is a bit of a learning curve when it comes to investing. A big part of making money is learning how to avoid common mistakes.
- Buying cheap stocks instead of smart ones, being too reactive to news headlines, and thinking short term are a few of the things that new investors often get wrong.
M1 Finance<p>A useful (and free) personal finance tool for investors at all levels is <a href="https://m1finance.8bxp97.net/76BPy" target="_blank">M1 Finance</a>. It's a commission-free investing and money management app that was recently rated #1 for Sophisticated Investors and #1 for Socially Responsible Investing by Investopedia, beating out competitors like Personal Capital, Vanguard, and Betterment. Available for Android and iOS devices, M1 Finance lets users create a portfolio of stocks or exchange-traded funds (ETFs) for free. Investors can also borrow from a flexible portfolio line of credit with a low base rate, and M1 is currently beta testing FDIC-insured checking accounts with debit cards that investors can use instead of their existing checking account. To find out more about how it works and to sign up today, <a href="https://m1finance.8bxp97.net/76BPy" target="_blank">click here</a>.</p><p>As you set out on your investing journey, here are a few common mistakes to avoid:</p>
Don’t focus on the short term.<p>Treating the stock market like placing a bet is a strategy that probably won't work out for you. Successful investor Warren Buffett warns new investors against day trading. "If you aren't willing to own a stock for 10 years, don't even think about owning it for ten minutes," <a href="https://www.berkshirehathaway.com/letters/1996.html" target="_blank">Buffett wrote</a> in a letter to shareholders back in 1996. Buying and selling stocks quickly may get you a few dollars, but making a smart investment in a good company and sticking with it over a long period of time could make you exponentially more. </p>
Don’t buy what you don’t understand.<p>Never buy a piece of a company when you don't understand how it makes money. Do your research and learn about the industry and the mechanisms that move it, otherwise the money you invest could disappear and you would have no idea why.</p>
But don’t only buy what you know.<p>According to <a href="https://www.investopedia.com/articles/stocks/07/beat_the_mistakes.asp" target="_blank">Investopedia</a>, novice investors (and those with experience) should probably stick to the principle of diversification. In poker terms, you don't want to "let it ride" on one big stock in the hopes that your money will double or triple. Create a portfolio and spread the money around. As a general rule according to the experts, never allocate more than 5-10% to any one investment.</p>
Don’t use your retirement money.<p>Risking your livelihood on investments is dangerous and ill-advised. If losing the money you are thinking of investing would ruin your life or the lives of those around you, then you absolutely should not do it.</p>
Find good investments, not cheap ones.<p>In the same vein as the first tip, it's important for new investors to learn that just because they can afford to buy a stock, that doesn't mean they should. The idea of investing early in the next Google and riding the wave to wealth is enticing, but that's not a realistic strategy. Tried and true is often better than shiny and new.</p>
And lastly, don’t overreact based on the news.<p>Hearing about a tanking stock on the news can be scary if that company is a part of your portfolio, but experts warn against letting your emotions get the best of you. Consider the history of the stock and whether or not the reason for the dip is something that could soon pass. If you panic and sell because of a headline, you could regret it next month when that dip turns into a spike.</p>
Lumina Foundation wants to help 16.4 million people get a quality credential by 2025, and they're looking for entrepreneurs with the vision to help realize that goal.
- Lumina Foundation's goal is to help people across the U.S. get a quality post-secondary education.
- To do that, it's providing grants, helping to shape policy, and it's investing in innovative entrepreneurs through the Lumina Impact Ventures program.
- Lumina is looking to partner with entrepreneurs who are dedicated to helping students gain a fulfilling post-secondary education and for whom Lumina Foundation can be a strong value-add partner.
- In 2019, Lumina Foundation and Big Think teamed up to create the Lumina Prize, a search to find the most innovative and scalable ideas in post-secondary education. You can see the winners of the Lumina Prize here – congratulations to PeerForward and Greater Commons!
Cutting edge social innovators should consider hybrid models
Over the past fifteen years, I've had the opportunity to provide strategy for well over a hundred social change start-ups seeking to make the world a better place. The most common question they ask, "Should we be a for-profit or a nonprofit."
My answer, "Why not consider both?" Let's review the advantages and disadvantages.
The nonprofit option<img type="lazy-image" data-runner-src="https://assets.rebelmouse.io/eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJpbWFnZSI6Imh0dHBzOi8vYXNzZXRzLnJibC5tcy8xOTAxOTAxNC9vcmlnaW4uanBnIiwiZXhwaXJlc19hdCI6MTYyNzM1OTk3NX0.3bV5UFjLvdaePpyVLiqFvK5bseKYnzDXyTxTJhkc-G0/img.jpg?width=980" id="7cb85" class="rm-shortcode" data-rm-shortcode-id="d05953854c97915ae8e70081acff961e" data-rm-shortcode-name="rebelmouse-image" />Human hands holding polygonal heartHuman hands holding polygonal heart. Love, peace and donation concept. Charity event. Vector illustration for non-profit organisation<p>The nonprofit option is the most popular choice with over $410 billion given to 1.5 million nonprofits last year alone. Nonprofit leaders report back to me four primary advantages to this legal structure:<br></p> <ol><li>"My donors get a tax deduction."</li><li>"Foundations prefer giving to nonprofit entities."</li> <li>"Nonprofits have a good brand in our culture."</li> <li>"We don't have to pay taxes!"</li></ol> <p>They also cite three major disadvantages:</p> <ol><li>"I feel like I'm in constant fundraising mode—I'm chasing donors not solving problems."</li> <li>"Instead of seeing our impact, donors scrutinize my salary and overhead costs."</li> <li>"No matter how much sweat equity I put into my work, I have no financial gain to show for it." </li></ol>
Impact investing for for-profit social ventures<p>The rise of impact investing into for-profit social ventures makes this is a powerful alternative to the nonprofit model. The Global Impact Investing Network reported that "225 investors, including pension funds, invested $35.5 billion across 11,136 impact investment deals in 2017. That is up 58% from $22.1 billion across 7,951 deals in 2016." That $35 billion is getting pretty close to the $66.90 billion donated by charitable foundations in 2017.</p><p>Nonprofit leaders are also looking toward for profit earned income as part of their future as well. A recent <a href="file:///C:/Users/tafelric/Dropbox/Bradach,%20William%20FosterJeffrey%20L.%20" target="_blank">Bridgespan Group</a> survey of US nonprofits' executives reported they "believe earned income would play an important role in bolstering their organizations' revenue in the future." According to <a href="https://www.echoinggreen.org/ideas/look-2017-profit-hybrid-applications" target="_blank">Echoing Green</a>, a nonprofit with a 25-year record of supporting early-stage social entrepreneurs, the proportion of their applicant pool proposing for-profit and hybrid organizations has grown to nearly 50 percent, compared to 15 percent in 2006.</p><p>For-profit social ventures name three primary advantages to choosing this model.</p><ol><li>"I no longer feel like I'm begging donors year in and year out."</li><li>"There's untapped capital out there without sufficient social ventures to invest in."</li><li>"We put in our own sweat equity and as owners, I might get a great long term financial return for my work."</li></ol><p>Social ventures also described to me three disadvantages.</p><ol><li>"I don't know how to find impact investors."</li><li>"We aren't able to get funding from foundations or other traditional donors."</li><li>"It's hard to measure and report out both impact measurement and return on investment to investors."</li></ol><p>Hybrid models that include both for-profit and nonprofit entities can maximize the advantages of each model, while minimizing the disadvantages. These hybrids come in many shapes and sizes.</p>
A Case Study: Town Stages<img type="lazy-image" data-runner-src="https://assets.rebelmouse.io/eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJpbWFnZSI6Imh0dHBzOi8vYXNzZXRzLnJibC5tcy8xOTAxODk0Ny9vcmlnaW4uanBnIiwiZXhwaXJlc19hdCI6MTY3MDU0MzAyMH0.gBZL1ZmikBvS2fuVOLLvQLhb2022OzwTsHad4CWKYyo/img.jpg?width=980" id="45144" class="rm-shortcode" data-rm-shortcode-id="9b80e6d869d2698a7130df0e86d6ffca" data-rm-shortcode-name="rebelmouse-image" />
A Town Stages production space
townstages.com<p>A good examples of a hybrid model was reported in Forbes magazine by Carey Purcell. In the article titled, "How a 'Robin Hood' Business Model Supports an Artistic Clubhouse in Tribeca," she tells the story of Town Stages LLC a "female-driven cultural institution and event venue owned by a nonprofit Sokoloff Arts." The founder Robin Sokoloff wanted to provide spaces to work and live for artists like herself to survive ever-rising NYC rent. Town Stages, with space rentals for weddings, bar mitzvahs, and business events, subsidizes Sokoloff Art fellows.<br></p><p>Artists can rent the space at the rate they can afford, and the revenue is used to subsidize other emerging artists. Not only does she provide spaces for artists, but her organization is also focused on the advancement of young women, minorities, and LGBTQ voices. Town Stages has become a home for underrepresented voices in the community and was able to expand its impact thanks to the success of her first artistic hub. Since 2012, they allowed 70,000 people to create almost 900 different works of art.</p><p>Social Venture hybrids have some profound advantages, especially when it comes to fundraising and equity. In particular, they allow the social venture to say "yes" to both impact investors and traditional foundations. They allow social entrepreneur teams to be owners and get a financial reward for the unpaid time they invest in the cause.</p>
"Guard Rails" required<p>Hybrids also have the disadvantage of requiring more well thought out accounting "guard rails" to make sure the organization operates legally — nonprofit money must always serves the public interest, not someone's private interest. Arron M. Fox CPA at the Senior Tax Manager, at Raffa, Marcum's Nonprofit and Social Sector Group describes one way to create a hybrid model called a for-profit subsidiary in his piece <a href="https://www.raffa.com/newsandresources/publications/pages/considerations-when-creating-a-for-profit-subsidiary.aspx" target="_blank">"Considerations When Creating a For-Profit Subsidiary."</a></p><p><strong>Rich Tafel is the Director of</strong> Raffa Social Capital Advisors - Marcum's Nonprofit and Social Sector Group <br> Marcum LLP. <a href="mailto:Rich.Tafel@MarcumLLP.com" target="_blank">Rich.Tafel@MarcumLLP.com</a></p>
How do you make yourself valuable in an ever-changing economy? You become well-rounded.
Bill Drayton, the founder and CEO of social entrepreneurship firm Ashoka, thinks that doing business today relies on being as prismatic and as open as possible. That's how you become, as he puts it, a "change maker." The world doesn't need more specialists, he posits, because well-rounded people open to new ideas and learning new skills can fit just about anywhere.
The best career advice that you are not getting? Financial feminist and Wall Street powerhouse Sallie Krawcheck delivers.
Sallie Krawcheck is the current CEO of Ellevest (a digital investment platform for women), is a former CFO and CEO at Citigroup and Merrill Lynch respectively, and is a self-described "financial feminist". She speaks here to women, but this advice can be applied across the board to anyone who is marginalized in the workplace or wants to jumpstart their personal wealth. For Krawcheck, the best career advice no one is talking about is actually financial advice: invest. Make your money work while you do, so that you have more financial freedom to make confident decisions in your career: ask for a promotion, quit the job that doesn't treat you well, or test your own business ideas. If you have money in the bank, you are free to play looser with your decisions. Men do it, and women should too. Remember this: "Ladies, we will not be equal with men until we are financially equal with men," Krawcheck says. Her second piece of advice is to ask for more money from your very first job, and to plant the seeds of a 12-pronged pay-rise request far in advance. Twelve prongs? Yep. It will all makes sense once you hear out her incredible guide to negotiating a salary increase and closing the gender pay gap. Sallie Krawcheck is the author of Own It: The Power of Women at Work.