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.
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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>
A new study finds that factors influencing where you're born continue to affect your earnings throughout life.
- Children born, raised, and working in big cities tend to be more successful.
- A mountain of British demographic data reveals the correlation.
- Are more successful families created by cities, or are they more likely to move there?
The study’s data<img type="lazy-image" data-runner-src="https://assets.rebelmouse.io/eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJpbWFnZSI6Imh0dHBzOi8vYXNzZXRzLnJibC5tcy8yMDU1NTg1NS9vcmlnaW4uanBnIiwiZXhwaXJlc19hdCI6MTY1NDg2NDc3MX0.y4C2poh2-udJUM1yyv_8lR6f0yP-YJitnXksm39MCpw/img.jpg?width=1245&coordinates=0%2C0%2C0%2C0&height=700" id="de80a" class="rm-shortcode" data-rm-shortcode-id="fe3bc4caac49620f5057509291dafbcc" data-rm-shortcode-name="rebelmouse-image" />
Image source: Sean Pavone/Shutterstock<p>The authors of the study, <a href="https://voxeu.org/users/clementbosquet0" target="_blank" rel="noopener noreferrer">Clément Bosquet</a> of the University of Cergy-Pontoise in France and <a href="http://www.lse.ac.uk/geography-and-environment/people/academic-staff/henry-overman" target="_blank" rel="noopener noreferrer">Henry G. Overman</a> of the London School of Economics, derived their conclusions from an analysis of highly-detailed demographic data collected for the U.K.'s <a href="https://www.sciencedirect.com/topics/economics-econometrics-and-finance/panel-study" target="_blank">British Household Panel Survey</a>. The information it contains was sourced in 18 waves from 1991 to 2009 from interviews with everyone 16 and older residing at a specific address. Individuals who moved from these residences to other locations were also tracked. On average, participants were interviewed 7.4 times over the course of the project, and Bosquet and Overman discarded individuals not interviewed at least twice.</p><p>After factoring out data that the researchers felt would skew clear results — including periods of unemployment, study, and retirement, for example — they were left a baseline data set of 55,382 observations for 75,00 individuals. (This data set was expanded as necessary for deriving insights into certain specific demographic characteristics.)</p>
Why this happens<img type="lazy-image" data-runner-src="https://assets.rebelmouse.io/eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJpbWFnZSI6Imh0dHBzOi8vYXNzZXRzLnJibC5tcy8yMDU1NTg3Ni9vcmlnaW4uanBnIiwiZXhwaXJlc19hdCI6MTY1NDUxNjc5Mn0.p7AYyBHC_Mgjem0efrnx3D1fW3YtrQaO-s7AJG9B_-0/img.jpg?width=1245&coordinates=0%2C144%2C0%2C1&height=700" id="25ca0" class="rm-shortcode" data-rm-shortcode-id="86131846e01d9e19289b093ca60afd9f" data-rm-shortcode-name="rebelmouse-image" />
Image source: Flystock/Shutterstock<p>Previous <a href="https://www.citylab.com/equity/2018/10/what-neighborhood-in-your-city-is-an-opportunity-bargain/571381/" target="_blank">research</a> has documented the reasons that residents of affluent areas in big cities wind up with higher incomes — the downside being the unfortunate fact that those who live in areas of urban poverty find it harder to climb the socioeconomic ladder.</p><p>It's believed that the advantages of living in a big city come from the greater number of benefits available, among them abundant amenities and opportunities for employment, wider educational choices, and robust social networks.</p><p>Large urban centers also perpetuate the <a href="https://bigthink.com/robby-berman/stunning-new-paper-explains-how-inequality-keeps-growing" target="_self">growing gap</a> between the well-off and everyone else in terms of potential success, especially as the U.S. population is increasingly moving into such expensive places to live. They attract more well-off residents in the first place, and it's their children who are the focus of this study. About 80 percent of children born to professionals, finds the study, are born in large urban areas. Even more significant is that urban kids are more likely to get a good education, a characteristic they share with their well-educated parents, a majority of whom favor city life.</p><p>The study asserts that nearly half of us — a whopping 43.7 percent never move out of the areas in which we're born, and indeed, the effect of birth location is strongest for these children. They benefit from urban advantages throughout their childhoods, teen years, and adulthood, and in general enjoy the increased odds for success that all big-city dwellers enjoy. People who move to big cities as adults also do better than those remaining in birthplaces having fewer economic advantages.</p>
A guaranteed basic income is an old solution to a new problem of labor automation.
- Economist Robert Theobald coined the team 'basic living guarantee' in the 1960s.
- He believed that we were going to suffer problems because of an overabundance of resources.
- Philosopher Alan Watts spoke about the possibility of an economic utopia through a universal basic income.
Early proponents of a guaranteed income<p>Economist and futurist Robert Theobald first rang the alarm bells on this economic threat, which at the time didn't have a name to it. Theobald believed that the threat to the American and subsequently world economy wasn't one of scarcity but abundance. His views were in direct contrast to the traditional strain of economics worrying more about scarcity. Theobald looked at the technology of the time and realized that the promise of future development would lead to even greater automated abundance in the future. </p><p>In his essay, <em>Free Men and Free Markets, </em>Theobald argued that technological progress would free surplus labor and capital in such a way that it would eventually prove detrimental to the society if this excess human capital wasn't fully utilized. He predicted that the mass of wealth would be transferred largely to the rich, which would fuel dissent and resentment among the lower classes. <em></em>To avoid the looming disaster, he called for a "basic living guarantee<em>". </em><em></em>Theobald states:</p><p style="margin-left: 20px;">"Unemployment rates must…be expected to rise. This unemployment will be concentrated among the unskilled, the older worker and the youngster entering the labor force. Minority groups will also be hard hit. No conceivable rate of economic growth will avoid this result."</p><p>Philosopher Alan Watts, who at the time called Theobald "an avant-garde economist,"<em> </em>took the idea one step further and tried to imagine what sort of psychological and sociological issues a basic income would rile up. Not only did he imagine what the after effects of this radical change would bring, but what kind of psychic change would be needed to also bring about a new<a href="https://bigthink.com/personal-growth/philosopher-alan-watts-on-the-difference-between-money-and-wealth" target="_self"> way we think about money.</a></p>
Automation and basic income<p>Alan Watts believed that we still place an unjustified fixation on the notion of a job or employment, which he said predates back to our pre-technological days. </p><p style="margin-left: 20px;">"Isn't it obvious that the whole purpose of machines is to get rid of work? When you get rid of the work required for producing basic necessities, you have leisure – time for fun or new and creative explorations and adventures."</p><p>The problem is we don't see that as the case. If you follow the outcome of automation to its logical end, you'll realize that the whole purpose is to eventually eliminate any human interference in rote menial tasks. But if the casualties of this instead creates a new invalid serfdom class, our entire capitalistic structure will become severely strained. </p><p style="margin-left: 20px;">"... we increasingly abolish human slavery; but in penalizing the displaced slaves, in depriving them of purchasing power, the manufacturers in turn deprive themselves of outlets and markets for their products," writes <em></em>Watts in <em>Does It Matter?: Essays on Man's Relation to Materiality</em>.</p><p>Those that lose their jobs will live in a more diminished and impoverished state. All the while, there is a surplus of cheap consumer goods being created by the automated factories. On the subject of who should pay for the basic income, Watts said that the machine should – something <a href="https://bigthink.com/paul-ratner/bill-gates-proposes-that-if-a-robot-takes-a-human-job-it-should-pay-taxes" target="_self">echoed by Bill Gates in recent years</a>, who suggested a robot tax.</p>
Theoretical outcomes for a universal basic income<p>Watts was a bit premature on his basic income prediction, but the picture he paints is still one that proponents of UBI look to as the future. Watts said:</p><p style="margin-left: 20px;">"I predict by AD 2000, or sooner, no one will pay taxes, no one will carry cash, utilities will be free, and everyone will carry a general credit card."</p><p style="margin-left: 20px;">"This card will be valid up to each individual's share in a guaranteed basic income or national dividend, issued free, beyond which he may still earn anything more that he desires by an art or craft, profession or trade that has not been displaced by automation."</p><p>Inflation arguments abound when talking about basic income. Watts understood at the time that the way people thought about money would prove most of these arguments true. </p><p style="margin-left: 20px;">"The difficulty is that, with our present superstitions about money, the issue of a guaranteed basic income of, say $10,000 per annum per person would result in wild inflation. Prices would go sky-high to "catch" the vast amounts of new money in circulation…"</p><p>Watts found inflation arguments to be null if people would simply realize the symbolic nature of currency instead of confusing it with true wealth. </p><p style="margin-left: 20px;">"The hapless dollar-hypnotized sellers do not realize that whenever they raise prices, the money so gained has less and less purchasing power, which is the reason that as material wealth grows and grows, the value of the monetary unit goes down and down."</p><p>While this idea has gained both supporters and detractors in the years since, the main point still stands: Automated abundance is at risk of disrupting the status quo of the past few hundred years. </p><p>Later on in his life, Theobald looked back on the foresight he had and its unnerving validity. </p><p style="margin-left: 20px;">"What's startling to me is that when I started talking about ideas like these 30 years ago, they were so new and strange that people looked at me as if I had two heads. In retrospect, I think I was looked on as something of a cultural clown – a "crazy" who was fun to listen to. The reaction I get now worries me a lot more, because what most people say is, "Bob, today you're right, but we're not going to do anything about it."'</p>
Facebook's co-founder wants middle-class workers to get a $6,000 raise<div class="rm-shortcode" data-media_id="KWC1Nxkq" data-player_id="FvQKszTI" data-rm-shortcode-id="1bb90bb93906579bcaf2c3da57b4225f"> <div id="botr_KWC1Nxkq_FvQKszTI_div" class="jwplayer-media" data-jwplayer-video-src="https://content.jwplatform.com/players/KWC1Nxkq-FvQKszTI.js"> <img src="https://cdn.jwplayer.com/thumbs/KWC1Nxkq-1920.jpg" class="jwplayer-media-preview" /> </div> <script src="https://content.jwplatform.com/players/KWC1Nxkq-FvQKszTI.js"></script> </div>
Economist Jeffrey Sachs discusses how the megarich can help millions of children by donating 1 percent of their wealth.
- In 2006 there were about 700 billionaires with a total net worth of about $3 trillion. Today there are 2,208 billionaires with a total net worth of $9.1 trillion. A tiny fraction of that wealth could keep millions of kids alive and in school.
- Jeffrey Sachs, who argues that the world economy isn't "exactly fair," proposes the ultra rich give 1 percent of their collective wealth — about $100 billion — to help meet everyone's basic needs. "What I know — as an economist that has worked all over the world, including in the poorest places in the world— [is that] little bits can save lives and make futures for the children of this world..."
- If plutocrats don't give voluntarily, Sachs recommends putting an SDG levy, a Sustainable Development Goals levy, on 1 percent of their collective wealth. "We're going to get this job done. We're going to get every child healthcare. We're going to get every child into school."
George Bernard Shaw quipped that a rich man ‘does not really care whether his money does good or not, provided he finds his conscience eased and his social status improved by giving it away’. Was he right?
In Socialism for Millionaires (1896), the Irish playwright George Bernard Shaw quipped that a rich man ‘does not really care whether his money does good or not, provided he finds his conscience eased and his social status improved by giving it away’. Was he right to be so cynical?