Picture this: you’ve arrived at the airport, excited about your upcoming trip, only to hear those dreaded words at the gate, “We regret to inform you that this flight has been overbooked.” Frustrating, isn’t it? But have you ever wondered why airlines resort to overbooking flights? Let’s find out.
Today, we’re delving into a question that has puzzled many passengers: Why do airlines overbook flights?
What is overbooking?
But first things first, what exactly is overbooking? Put simply, it’s when an airline sells more tickets for a flight than the available seats on the aircraft. Seems counterintuitive, right? Well, airlines engage in this practice based on historical data and statistical analysis.
Reason 1: No-show Passengers: Airlines overbook flights because they expect a certain number of passengers to not show up. This happens more often than you might think. Passengers may miss their flights due to various reasons, such as traffic delays, personal emergencies, or even connecting flight issues.
So, why do airlines take the risk of overbooking flights?
Overbooking allows airlines to maximize their revenue and efficiently utilize their available resources. It’s a balancing act, predicting the number of no-show passengers to ensure a full flight without causing excessive inconvenience to passengers.
Overbooking helps airlines maintain high load factors, which means filling as many seats as possible on each flight. This leads to optimal fuel usage, better cost management, and a higher chance of profitability. Moreover, a full flight reduces the need for rescheduling or canceling flights, which can disrupt passengers’ travel plans.
Reason 3: Compensation Options
When an airline realizes that a flight is overbooked and there are not enough volunteers to give up their seats, they might have to involuntarily deny boarding to some passengers. In such cases, the passengers are entitled to compensation, which can vary depending on local regulations. This compensation usually includes options like rebooking on a later flight, accommodations, meal vouchers, and sometimes monetary compensation.
Now It’s clear that airlines have their reasons for overbooking, but it’s important to address passengers’ concerns as well. Let’s talk about that.
So how do airlines handle the frustration and inconvenience caused by overbooking?
Airlines understand that overbooking can be frustrating for passengers, and they strive to minimize the impact. They typically use sophisticated algorithms and predictive models to estimate the number of no-shows accurately. If a flight is overbooked, airlines prioritize finding volunteers willing to give up their seats in exchange for compensation before resorting to involuntary denial of boarding.
Conclusion
Thus, airlines overbook flights to optimize their operations, maximize revenue, and account for the possibility of no-show passengers.
Are you tired of trading your time for money? Then it’s time to explore the world of passive income! It can be a great addition to your active earned income.
But first, let’s understand what it takes to generate passive income and what passive income really means.
Passive income is the money you earn with little ongoing effort or active involvement. It’s like having your money work for you while you sleep or enjoy your life. In other words, it is income that continues to be earned even when a person is not actively working or trading their time for money.
Today, I’ll cover my list of passive income sources that can earn you money while you sleep. From rental properties to affiliate marketing, we’ll take a deep dive into these opportunities and give you the tools to start generating passive income for yourself.
But before we look into these different options, I want to tell you that what may work for one person may not work for another depending on their skills, interests, and financial situation.
The ideas I am going to share have varying degrees of passivity. Some may require more upfront money than your time commitment, while others may require more of your time than money. However, all of these options will provide you with passive income in the coming years after the initial few months of time, effort, and investment. So let’s dive in.
1. Dividend-paying stocks:
Dividend-paying stocks are a type of investment that pay you a portion of the company’s earnings as dividends on a regular basis. For example, if you own 100 shares of a company that pays a $1 per share dividend each year, you’ll earn $100 per year in passive income.
Graph Growth Development Improvement Profit Success Concept
Of course, investing in the stock market always carries some risk, so it’s important to do your research and diversify your portfolio. One way to do that is to invest in index funds or ETFs: Index funds are investments that track a market index, such as the S&P 500.
Investing in an index fund can earn passive income from the dividends paid by the companies in the index. How much money you make from dividends, obviously depends on the amount you invest and which type of index funds you chose.
Many index funds and ETFs track dividend indexes, which are comprised of stocks that pay dividends. For example, the iShares Select Dividend ETF (DVY) tracks the Dow Jones U.S. Select Dividend Index, which is made up of 100 high dividend-paying stocks.
On their website, it says “The iShares Select Dividend ETF seeks to track the investment results of an index composed of relatively high dividend paying U.S. equities.”
By investing in an index fund or ETF, you can get exposure to a diversified portfolio of dividend-paying stocks with lower risk than investing in individual stocks. Additionally, many index funds and ETFs offer relatively low expenses, making them a cost-effective way to invest in dividend-paying stocks.
I have written several posts explaining what index funds are, so you can check those out here.
2. Rental Properties:
Rental properties are another popular form of passive income. By owning a rental property, you’ll earn rental income each month from tenants. You can also build equity in the property over time, which can increase its value and your passive income.
While rental properties can be a great source of passive income, there are also some disadvantages to consider like high upfront costs. Investing in a rental property often requires a large amount of upfront capital, which can be a significant barrier to entry for some investors.
Also, Rental properties require ongoing maintenance and management, which can be time-consuming and expensive. This includes routine repairs, handling tenant complaints, and managing rental payments.
In addition, there is always a risk of tenant problems, such as non-payment of rent, property damage, or legal disputes. These issues can be stressful and time-consuming to resolve.
Also If a rental property is not occupied, the owner may not generate any rental income. Turnover is also a common issue, as tenants may choose to move out at the end of their lease.
So, It’s important to carefully consider these potential disadvantages before investing in rental properties as a form of passive income. However, with proper management and a long-term investment mindset, rental properties can still be a lucrative source of passive income for many investors.
3. High-Yield Savings accounts:
3rd option is saving your money in a High yield savings account than saving your money in a traditional savings account. High-yield savings accounts are designed to help customers earn more interest on their savings while still having the flexibility to withdraw their money when they need it. So if it is paying 4% and you have $10,000 saved in it, you will get $400 as interest income at the end of one year vs getting $25 in a traditional saving account that pays 0.25 percent.
One of the primary advantages of high-yield savings accounts is that they typically have lower costs because they are online banks and not brick-and-mortar banks so they can pass those cost savings to their customers through higher annual percentage yield or APY this means that customers can earn more interest on their deposits over time which can help their money grow fast.
Marcus by Goldman Sachs, Capital One, Sofi, Lending Club, and Ally Bank are a few banks that offer high-yield savings accounts. You can check their website, but the interest rate they currently offer ranges from 3.75% to around 5% as of May 18, 2023.
Just keep in mind that Some, high-yield savings accounts may have certain requirements or restrictions, such as minimum balance requirements or limits on the number of withdrawals allowed each month, so you can check those out at their website.
Also, remember the interest rates on these accounts can fluctuate over time, so it’s important to monitor them regularly. But usually, they are a better option than traditional savings accounts as they also have atm services.
4. Create an online course:
This can be a great way to earn passive income from your expertise. Once you create the course, you can sell it on platforms like Skillshare, Udemy, or Teachable and earn passive income from each sale.
The initial work of creating the course and setting up the platform will require significant time and effort, but once the course is created and available online, it can generate income with minimal ongoing maintenance. So that’s when you will start earning passively.
Of course, the success of the course will depend on various factors such as the demand for the topic, the quality of the course material, the marketing strategies you use, and the competition in the market for that subject. However, if the course is well-made and marketed effectively, it can attract a large audience and generate a consistent stream of income.
Overall, creating an online course can be a viable passive income option for those willing to put in the initial effort and have expertise in a particular area.
5. Create a blog:
By creating a blog and attracting a large audience, you can earn passive income from advertising, affiliate marketing, or sponsored posts.
This can be a good passive income option for those with a passion for writing and a willingness to put in consistent effort over time. Starting a blog requires setting up a website, creating quality content, and marketing the blog to attract readers.
Once the blog gains a following, it can generate income through various channels such as affiliate marketing, sponsored posts, and advertising revenue. However, it may take a while for the blog to gain traction and generate substantial income, so you have to be patient about that. I do have a blog called your everyday economics. I enjoy writing and sharing my knowledge with others, so this was something I started doing exactly and year ago.
Again, like online courses, the success of the blog depends on various factors such as the quality and relevance of the content, the audience size and engagement, and the marketing strategies you use. Also, it’s essential to keep the blog updated with fresh and relevant content to maintain the readers’ interest.
So you can give it a try if you enjoy writing, and like keeping yourself updated about the topic, and most importantly you are willing to spend a couple of hours on the blog each week to keep it running. You will start earning on previous posts that you have written, and it can be a great source of income. In fact, Several bloggers have quit their full time and made blogging their full-time profession once they saw good results.
6. Renting out your unused space (such as a spare room or parking space):
This is another option for passive income but can only work for some individuals who have the space to rent. But if you have that extra space you are not using, it won’t harm to advertise it for renting purposes.
7. Investing in rental storage units:
This can be another good way to earn passive income. Once the units are built, you’ll earn rental income each month without having to actively manage them.
This option can be a viable passive income option, especially if the investor can acquire the units at a reasonable cost and in a prime location. Rental storage units can generate steady rental income with relatively low maintenance costs compared to other types of rental properties.
However, there are a few drawbacks to investing in rental storage units. The demand for rental storage units can fluctuate depending on the economy and season, which can impact the occupancy rate and rental income. Also, investing in rental storage units requires significant upfront capital, including the cost of acquiring the property, property taxes, insurance, and maintenance costs.
Investing in rental storage units can be a viable passive income option if done correctly, but it requires significant upfront capital and ongoing effort to maintain profitability.
8. Sell digital products:
Selling digital products can be another good option to get passive income: If you have skills in design, photography, or writing, you can create digital products like e-books, templates, or stock photos to sell online.
There are several online marketplaces where you can sell your e-books, templates, and stock photos. I will share Some of the most popular options, one of which I have used myself.
When choosing a platform to sell your digital products, you should consider factors like fees, payment options, and audience reach. You may want to try out a few different platforms to see which one works best for you and your products.
Amazon Kindle Direct Publishing – This is a platform that allows you to self-publish and sell your e-books on Amazon.
Etsy – This is an online marketplace for handmade and vintage items, including digital products like templates. I myself have an Etsy shop for handmade high-end fashion clothing. I will put its link in the description below. I have seen many shops selling digital products like templates, themed birthday party supplies, and party games that you can download and print.
Creative Market – This is a platform that sells a variety of digital products, including templates and stock photos.
Shutterstock, Stock, and Adobe Stock – These are platforms where you can sell your stock photos and earn royalties each time someone downloads your image.
Sellfy – This platform allows you to sell digital products directly to your audience, including features like payment processing and marketing tools.
When choosing a platform to sell your digital products, you should consider factors like fees, payment options, and audience reach. You may want to try a few different platforms to see which works best for you and your products.
9. Royalties:
If you’ve written a book, recorded music, or created other types of intellectual property, you can earn passive income through royalties. These are payments you receive based on the sales or usage of your work.
10. Make a Youtube channel
I would rate starting a YouTube channel for passive income as a good option, but it requires a lot of effort and time to be successful. The competition on the platform is high, and it can take time to build an audience and generate consistent income.
However, if you have a passion for creating content, and are willing to put in the work, it can be a rewarding way to earn passive income. The channel should fulfill one of two criteria, it should be either entertaining or educational.
YouTube’s Partner Program allows creators to earn revenue through advertising and other monetization strategies like affiliate marketing and sponsored videos where the creator is promoting a specific product.
As for me, right now my channel is not monetized, and I can’t reap any rewards of passive income yet, but hopefully, in the future, I will. I know many other successful YouTubers do it as a full-time job earning hundreds of thousands of dollars.
Conclusion:
So these are all the options, hope you find something you like and can make it work. Just remember that while passive income may not require constant active effort, it often requires initial setup, sometimes money investment, ongoing management, and occasional maintenance to keep it sustainable and growing.
A credit score is a three-digit number that represents your creditworthiness, that is, how likely you are to repay a debt. Credit scores range from 300 to 850, with higher scores indicating better creditworthiness. A credit score is calculated based on various factors, such as your payment history, credit utilization, length of credit history, types of credit used, and new credit accounts.
How are credit scores calculated?
Let’s take a closer look at how credit scores are calculated. Payment history is the most important factor, accounting for 35% of your credit score. It refers to how you’ve paid your debts in the past and whether you’ve made payments on time. Late payments, defaults, or collections can significantly lower your credit score.
The second factor is credit utilization, which makes up 30% of your credit score. It’s the amount of credit you’re using compared to your credit limit. Keeping your credit utilization below 30% is considered good, and exceeding it can negatively impact your credit score.
The length of your credit history makes up 15% of your credit score. The longer your credit history, the better, as it indicates a more stable financial track record.
The types of credit you use also matter, accounting for 10% of your credit score. Having a mix of different types of credit, such as credit cards, car loans, and mortgages, is considered good, as it shows you can handle different types of debt.
Finally, the last factor is new credit accounts, which make up 10% of your credit score. Opening too many new credit accounts in a short period can negatively impact your credit score.
Why are credit scores important?
Now that we know how credit scores are calculated, why are they important? Your credit score can affect your ability to get approved for credit cards, loans, or mortgages. A higher credit score can lead to lower interest rates, saving you money in the long run. Additionally, employers and landlords may also check your credit score to evaluate your financial responsibility and trustworthiness.
Now, let’s look at some examples of credit scores and how they’re typically categorized:
A credit score of 750 or above is generally considered very good or excellent. This indicates a strong credit history and may qualify you for the best interest rates and terms on loans and credit products.
A credit score between 700 and 749 is typically considered good. This shows that you have a solid credit history, but there may be some room for improvement in certain areas.
A credit score between 650 and 699 is generally considered fair or average. This means you may have some negative items on your credit report or a shorter credit history, but you may still be able to qualify for credit products.
A credit score between 600 and 649 is typically considered poor. This indicates a higher risk to lenders and may result in higher interest rates or less favorable terms on loans and credit products.
A credit score below 600 is generally considered very poor. This indicates a significant risk to lenders and may make it difficult to qualify for credit products or result in very high-interest rates.
It’s important to keep in mind that credit score ranges and categories can vary depending on the scoring model used and the lender’s specific criteria. However, in general, a higher credit score is typically viewed more positively than a lower score.
CONCLUSION
In conclusion, understanding credit scores is crucial for your financial health. It’s a three-digit number that represents your creditworthiness, calculated based on various factors such as payment history, credit utilization, length of credit history, types of credit used, and new credit accounts. A higher credit score can lead to better financial opportunities, while a lower score can limit your options. So, be sure to monitor your credit score regularly, pay your debts on time, and keep your credit utilization in check.
Deciding whether to buy or rent a home is a big decision that can significantly impact your finances. In this post, I will discuss the pros and cons of both options and provide you with some tips on how to make the best decision for your finances.
Pros and Cons of Buying a Home:
Let’s start by discussing the pros and cons of buying a home.
Pros:
Potential for long-term financial gain through property appreciation
Freedom to make changes to the property and customize it to your liking
Building Equity in your home
Stable housing costs (fixed mortgage payment)
Cons:
High upfront costs (down payment, closing costs, etc.)
Responsibility for maintenance and repairs
Potential for the property value to decrease
Limited mobility (selling a home can be a lengthy and expensive process)
Pros and Cons of Renting a Home
Now let’s move on to the pros and cons of renting a home.
Pros:
More flexibility and mobility
No responsibility for maintenance and repairs
Lower upfront costs (typically just the first and last month’s rent)
No need to worry about property value fluctuations
Cons:
No equity building
Rent payments can increase over time
No control over property changes or customizations
Potentially less stable housing (landlord could sell or choose not to renew the lease)
How to Make the Best Decision
So, how do you decide whether to buy or rent a home? Here are a few tips to help you make the best decision for your finances.
Determine your budget and what you can afford
Consider your long-term goals and plans for the future
Think about your lifestyle and how it may change over time
Research the housing market in your area
Weigh the pros and cons of each option carefully
Conclusion:
In conclusion, whether to buy or rent a home is a complex decision that requires careful consideration. While both options have pros and cons, it ultimately comes down to what is best for your unique financial situation and lifestyle. By considering your budget, long-term goals, and the local housing market, you can make an informed decision that will benefit you in the long run.
Thank you for reading this post on the economics of buying versus renting a home, and I hope you found this information helpful.
A stock market is a place where people buy and sell shares of publicly traded companies. These shares represent ownership in the company and can increase or decrease in value based on various factors such as the company’s performance, economic conditions, and investor sentiment.
When a company goes public, it issues shares of stock that investors can purchase. People can then buy and sell these shares on the stock market. The stock market provides a platform for investors to trade these shares with each other.
How does the price of a company’s stock move?
Supply and demand determine the price of a stock. If more people want to buy a stock than sell it, the price will go up. If more people want to sell a stock than buy it, the price will go down.
The bull represents a growing market while the bear represents a falling market. The name comes from the way these animals attack.
There are two main types of stock markets: primary and secondary. The primary market is where new stocks company issue and sell to the public for the first time. The secondary market is where investors trade previously issued stocks.
Overall, the stock market plays an important role in the economy by allowing companies to raise capital and investors to participate in the success of these companies.
How’s the stock market related to the economy?
The performance of the stock market can be an indicator of the health of the economy, as it reflects the collective sentiment and expectations of investors about the future prospects of companies and the economy as a whole.
When the stock market is doing well and prices are rising, it often indicates that investors have confidence in the economy and expect companies to perform well in the future. This can lead to increased investment, job growth, and economic expansion.
But, when the stock market is performing poorly and prices are falling, it may indicate that investors are pessimistic about the economy and the future prospects of companies. This can lead to decreased investment, job losses, and economic contraction.
In addition, changes in the economy, such as interest rates, inflation, and government policies, can also impact the stock market. For example, if the Federal Reserve raises interest rates to combat inflation, it may lead to higher borrowing costs for companies and decrease their profits, causing their stock prices to fall.
Therefore, the stock market is an important component of the overall economy. It can be affected by, and also impact various economic factors.
I will cover more on the main types of stock exchanges in the US and globally in my next post. Thanks for reading!
If you want to watch my videos on the same topics, you can check out my Youtube channel here. https://www.youtube.com/channel/UC1wFKF1FTBI90qdn4HH2QhQ
So, there’s been some big news in the banking world. First, Silicon Valley Bank, which had a lot of high-profile tech investors as clients, collapsed on Friday. Federal regulators have taken over the bank since then. It’s actually the largest U.S. bank to fail since the 2008 financial crisis. Then, on Sunday, regulators started worrying about New York’s Signature Bank. This bank had a lot of money tied up in the unpredictable cryptocurrency market.
Both Silicon Valley Bank and Signature Bank are under the Federal Deposit Insurance Corporation (FDIC) control. This happened after Silicon Valley Bank experienced a run on the bank last week, with people withdrawing billions of dollars in deposits.
men with finance business report and money vector illustration
The different business model of this bank
Do you know how Silicon Valley Bank wasn’t really a name you’d hear outside of Silicon Valley and the tech industry? Well, that’s because their clients were mainly venture capital firms, startups, and wealthy tech employees. They were in the game for around forty years and even managed to compete with big financial institutions. But in the end, SVB collapsed in just a few days.
Apparently, around 90% of SVB’s accounts had over $250,000 in deposits, which is higher than most banks. This means most of their deposits weren’t backed by government insurance, according to a report. Also, experts pointed out that SVB’s business model was more like a local bank from the 1800s or 1900s, focusing on deposits and local customers, while bigger banks had more diverse funding sources and customers.
In 2020, SVB’s deposits surged, but unfortunately, they invested those extra billions in long-term Treasury bonds just as the Federal Reserve raised interest rates. This led to a decline in the value of government bonds, and more depositors withdrew their money. Last week, SVB announced a loss of $1.8 billion from selling some of its bond holdings, leading to a run on the bank. Federal regulators ended up taking control of the bank last Friday.
In today’s post, I will talk about what you should consider if you haven’t started investing in stocks yet or if you are a beginner investor.
Why do people fear investing in stocks?
Before we do that, let’s look at the reasons why people may be afraid to invest in stocks. Here are some of the most common reasons:
Lack of knowledge: Many people are afraid to invest in stocks because they don’t understand how the stock market works or how to analyze stocks. They may feel overwhelmed by the amount of information available and worry about making a mistake.
Fear of losing money: Investing in stocks always carries some degree of risk, and many people are afraid of losing money. They may worry about a stock market crash or about investing in the wrong company.
Past negative experiences: Some people may have had negative experiences with investing in the past, such as losing money or being scammed by a fraudulent investment scheme. These experiences can make them hesitant to invest in stocks again.
Perceived lack of control: Investing in stocks can feel like a gamble to some people, and they may worry about not having control over their investments. They may feel more comfortable with traditional savings accounts, where they feel they have more control over their money.
Peer pressure: Some people may feel pressure to invest in stocks because of their friends or family members, but they may not feel confident in their ability to make good investment decisions.
So what is the solution?
Infact, investing in stocks for long-term growth can be a great way to build wealth over time if done correctly. By following some simple tips, you will mitigate the risk associated with investing and will grow your wealth over time. Here are some tips on how to invest in stocks (and other assets) for long-term growth:
Set your investment goals: Before you start investing in stocks, it’s important to define your investment goals. Do you want to save for retirement, a down payment on a home, or another long-term goal? Understanding your goals can help you create a long-term investment plan.
Determine your risk tolerance: Investing in stocks comes with risk, and it’s important to understand your risk tolerance before you start investing. Conservative investors may want to focus on blue-chip stocks with a history of stable returns, while more aggressive investors may be comfortable with higher-risk, high-growth stocks.
Research companies and industries: When investing in individual stocks, it’s important to research individual companies and industries to make informed investment decisions. Look for companies with strong financials, competitive advantages, and growth potential, and consider investing in industries that are poised for growth in the long term. This does require quite a bit of research by looking at companies’ financials. For conservative investors, it is best to start with a broad-based index fund or an ETF. By setting up monthly or weekly contributions, you can ignore market fluctuations. Predicting the future of a specific company is uncertain. Thus this risk is much higher compared to investing in a fund, which is a pool of many companies from different sectors.
Build a diversified portfolio: Diversification is key to managing risk and maximizing returns when investing in stocks. Invest in a variety of companies and industries to spread your risk (through index funds or ETFs). Vanguard, Charles Schwab, and Fidelity are all good brokerage companies offering index funds. It’s important to research and compare the fees, historical performance, and other factors of different index funds and providers before making any investment decisions. Also, consider adding other asset classes, such as bonds and real estate, to your portfolio.
Invest regularly and stay disciplined: Investing in stocks for long-term growth requires discipline and consistency. Set up automatic contributions to your investment account and stick to your long-term investment plan, even in times of market volatility. As I mentioned in my previous posts, investing in funds is a great way to do that. Also, by following a strategy called dollar cost averaging you can remove emotions from your investment decisions.
Monitor and adjust your portfolio: Finally, it’s important to regularly monitor and adjust your portfolio as needed. Rebalance your portfolio periodically to maintain your desired asset allocation, and consider adjusting your investments as your financial goals or risk tolerance change over time.
Conclusion
Overall, investing in stocks can be a great way to build wealth over time. However, it is important to do your research and understand the risks involved. If you are feeling hesitant about investing in stocks, consider consulting with a financial advisor or taking a course on investing to gain more knowledge and confidence.
Whether investment should be done for the long term (retirement) or short term (if you are looking to pay for downpayment of a house), we should consider these key points:
Short-term gains can be risky: While making quick profits through short-term investments is possible, it often involves taking on more risk. Fluctuations in the stock market can cause investments to lose value quickly, making short-term gains unsustainable.
Long-term investments offer more stability: By investing for the long term, you are able to ride out market fluctuations and take advantage of compounding interest over time. This can provide more stability in your portfolio and increase your chances of achieving your financial goals.
Patience is key: Investing for the long term requires patience and discipline. It is important to avoid making impulsive decisions based on short-term market movements and instead focus on the long-term potential of your investments.
Diversification is important: To mitigate risk, it is critical to diversify your portfolio by investing in a mix of different asset classes and sectors based on returns and risks. This can help to offset any losses in one area with gains in another.
Consider your goals and risk tolerance: Your investment strategy should be aligned with your personal financial objectives and risk tolerance. While long-term investments may be suitable for some, others may prefer a more active approach to investing. Some safe ways to make a reasonable return in the current market situation are investing in CDs and high-yield savings accounts. These are currently giving around 4%-5% interest rate annually. The US treasury bills and notes are also offering similar rates. It is essential to consider what works best for you and your financial situation and how soon you need the money.
In summary, while short-term investments can offer quick gains, long-term investments provide more stability and the potential for compounding interest over time. By focusing on a long-term investment strategy and diversifying your portfolio, you can mitigate risk and increase your chances of achieving your financial goals.
Start with a low-cost index fund: One of the easiest and most effective ways to invest for beginners is to start with a low-cost index fund, which tracks a specific market index, such as the S&P 500. These funds offer broad diversification and typically have lower fees than actively managed funds.
Invest regularly and consistently: Investing is a long-term game, so it’s important to invest regularly and consistently over time. Consider setting up automatic contributions to your investment account weekly or monthly to ensure you’re investing regularly. Also, it is best to start early to get the maximum benefits.
Diversify your portfolio: Diversification is critical to managing risk and maximizing returns. Invest in a mix of asset classes, such as stocks, bonds, and real estate, and within each asset class. You can easily invest in various companies through index funds and properties through REITs to spread your risk.
Keep your emotions in check: Investing can be emotional, especially when markets are volatile. However, it’s important to keep your emotions in check and avoid making impulsive investment decisions based on fear or greed. Stick to your investment plan and focus on the long term. Dollar-cost-averaging is a great stregy to use as it takes the emotions out of your investments.
Monitor and adjust your portfolio: Finally, it’s important to regularly monitor and adjust your portfolio as needed. Rebalance your portfolio periodically to maintain your desired asset allocation, and consider adjusting your investments as your financial goals or risk tolerance change over time.
Remember, investing is a long-term game, and success comes from consistency, patience, and discipline. By following these simple strategies, beginners can set themselves up for long-term investing success.
The bureau of labor statistics (BLS) just released the inflation number for January 2023 for the United States.
There is a 0.5% increase from the December number, and inflation sits at still a whooping high of 6.4% over the last 12 months from January 2022.
As you can see in the BLS chart above, the year-to-year inflation is 6.4% for all the items, 10.1% for food, 8.7% for energy, and 5.6% for all the things except food and energy. Also, in their press release, they mentioned the index for shelter was the largest contributor to the monthly inflation number.
By shelter, they mean rents and owner equivalent rent cost of housing.
If you look at this detailed table from them, it shows the breakdown in prices for all the individual items.
Source: BLS
Under the energy category, fuel oil is still up by 27.7% for the 12 months. Natural gas is also up by 26.7% in the 12 months.
There is a 14% rise in Dairy and related products in the food category.
You can see that the highest inflation happened in cereal and bakery products. This was mainly because of the rise in egg prices because we felt that in the grocery stores.
What caused egg prices to rise so much?
Economists think the bird flu was the main reason behind increased egg prices because about 40 million egg-laying hens died in 2022 because of this disease.
At the same time and the demand for eggs continues to rise because it provides a cheaper source of protein to many Americans. Thus both these supply and demand factors contributed to a significant rise in egg prices.
Was this inflation expected?
This came as a little bit of a disappointment because people were expecting the overall inflation not to rise if not fall from the December level, even though fuel prices seem to be falling.
Inflation is still high on many essential things, and it continues to be the biggest hit to poor Americans. It acts like an indirect tax on them.
Unfortunately, most of this inflation we are experiencing is caused by supply-side factors, which are difficult to fix in the short run.
Policy implication
The government can only focus on controlling the demand aspect of inflation in the short run. As a result, the Fed will continue to tighten the monetary policy and raise interest rates until inflation reaches around 2%
The federal reserve has been trying to control inflation using interest rate hikes to slow the demand in the economy.
To learn more about inflation, how it is calculated, and the factors that cause it, please see my post here.
