Money Management

They’re a yellow flag at the very least. 

Kevin O’Leary, investor and Shark Tank star, has made millions off his investments. On his podcast and social media accounts, he spreads investment advice. He took to Twitter to share with investors his thoughts on potentially high-risk investments.

This type of investment makes Mr. Wonderful cautious

Kevin O’Leary says, “You can have proof of concept, but as an investor, any product where there’s a significant amount of time required to educate consumers makes me cautious.”

Generally, financial gurus like O’Leary say this because education is expensive. It’s a tax on company profits. Companies must spend limited marketing dollars to convince customers to buy their products.

What’s more, a product that requires a significant amount of time to educate consumers is a yellow flag. It means the market may not be ready for the product. History contains many examples of products that flopped because companies launched them too early.

Consider Google Glass, the breakthrough product no one ever bought. Despite the support of Alphabet, one of the wealthiest companies on the planet, it failed to sell. Casual consumers preferred the convenience of a smartphone over the expensive and battery-heavy Glass.

Should you avoid investing in companies that must educate consumers?

Not necessarily. Some companies do so successfully. Take Tesla, for example. Six years ago, hardly anyone drove its cars, and many people doubted the benefits of electric cars. Since then, the share price has more than quintupled, and Tesla continues to gain share of the vehicle market.

Apple is another company that created a product no one knew they wanted, only for that product to become wildly popular. They released the iPod in 2001. It took six years and the release of the iPhone for Apple to kickstart the smartphone revolution.

One thing to keep in mind is that investments in innovative companies can take a while to season. Investors may wait years before seeing returns on these kinds of investments. When investing in innovative companies, prepare to hold them for the long term.

Where can I invest in innovative companies?

The public market is full of innovative companies. The best brokerages offer investors the power to purchase ownership of public companies for low fees and other perks. Do your due diligence before investing in companies that must educate customers; many fail, and products flop.

Kevin O’Leary also plugs a private investment vehicle StartEngine. Investors can invest in private companies through the third-party platform. However, this is risky. Investments can be highly illiquid, and there’s no guarantee private companies will ever go public.

Consider sticking to innovative companies in the public market. Invest in an ETF to diversify high-risk investments. By investing a small percentage of your portfolio in more than 25 companies and holding for five or more years, you maximize your chances of earning returns on your investments.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Cole Tretheway has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Apple, and Tesla. The Motley Fool recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.

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Animal shelters are like Petri dishes. 

In fall 2021, I decided I was ready to add a kitten to my household. I had moved into a larger rental apartment a few months prior, and was hoping that my next move would be to a home I bought. I had also changed careers and was working remotely, meaning that I would be able to supervise a kitten as he got used to his new family (I already had two adult cats who had been with me for several years). I took to Petfinder to search local shelters and rescue groups for the right candidate.

I found a listing for a 5-month-old tuxedo kitten being held at a rural animal shelter about 50 miles away from where I live, and after filling out a detailed adoption application, arranged to meet the kitten. Long story short, I adopted him and went to pick him up the following weekend, giving me time to prepare for his arrival by buying the necessary supplies. I wish I had thought of getting a pet insurance policy, however. Here’s why.

Things went sideways fast

I brought the little guy home, having named him Seymour, and for the first few days of his life with me, everything was great. Seymour got very comfortable in his new home fast, and jumped right into engaging with my two adult cats (who didn’t quite know what to make of this bold newcomer). Then, he started showing signs of being sick, including lethargy and sneezing (thankfully, my older two cats didn’t get sick, and I quarantined Seymour until he was well). I was so worried, I called veterinary offices frantically, and since I was unable to get him in to see a local vet in a timely manner, I took him to an emergency vet in a nearby city.

Seymour was diagnosed with feline URI (upper respiratory infection), which is a common affliction among cats. Cornell Feline Health Center notes that it’s especially prevalent in high-density cat populations, such as animal shelters. Seymour was held in a cage in a fairly small room at the shelter, sharing space and breathing room with multiple other cats who had come from a variety of situations. It was basically a giant Petri dish for germs. And the stress of leaving the shelter with a strange human and having to make sense of his new life was enough to make Seymour susceptible to illness.

If you adopt a pet from a shelter, keep in mind that he or she will be under a lot of stress in the course of coming to your home, and may have been exposed to a variety of illnesses along the way.

Seymour is fine — but I paid a lot for his treatment

This story has a happy ending for Seymour, if not for my bank account. I’m grateful to the staff at the emergency vet clinic, as they were wonderful to my cat (to whom I was already incredibly attached and deeply worried about). My bill for this misadventure came to $450 for the emergency vet visit and medication he was given there, plus another $150 to a veterinary pharmacy for additional medication he had to take during his recovery. Ouch.

If I had thought to put a pet insurance policy in place before bringing Seymour home officially, I would have been reimbursed for at least some of the money I spent to get him healthy again. I definitely learned my lesson from this situation, and while Seymour is fine (and almost two years old now), I will seek out a pet insurance policy as soon as I decide to add a new furry family member to my household to avoid this again in the future.

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Here’s a taste of what could be in store for the real estate market. 

If you’ve been struggling to buy a home so far this year, well, there’s probably a reason for it. We started off 2023 with higher mortgage rates and elevated home prices.

Now, it’s true that housing market conditions can change from one month to the next. But at this point, we’re unlikely to see major shifts during the month of March. Here’s what to expect.

1. Mortgage rates will remain high

Mortgage rates dipped a bit in early 2023 compared to where they sat in the fall of 2022. It’s hard to say what direction mortgage rates will trend in during March. We might see them rise a bit compared to where they’re at today, or they could dip — perhaps even just below the 6% mark.

But all told, we should still expect mortgage rates to be elevated, historically speaking. And while there are steps you can take to eke out savings on a mortgage, like boosting your credit score and shopping around with different lenders, you might end up paying more to borrow for a home than you’d like to.

2. Housing inventory won’t really pick up

The National Association of Realtors (NAR) reports that housing inventory was up about 15% in January compared to a year prior. In spite of that, there were only 980,000 units for sale in January, which represents a mere 2.9-month supply of homes. It usually takes a four- to six-month supply to adequately meet buyer demand.

Since winter isn’t a particularly popular time to put a home up for sale, and the weather can be pretty harsh in March in much of the country, we may not see much of an uptick in property listings. That means buyers might struggle to find suitable homes.

If you’re a seller, however, low inventory is a good thing. It means you may not have a lot of competition, and that could make it much easier to sell your home quickly, and for a price you’re happy with.

3. Homes will remain expensive

Any time there’s not enough supply of a given commodity to meet buyer demand, its price tends to rise. And that’s why housing prices are likely to remain elevated in March.

In January, the median existing home sale price was $359,000, as per the NAR. Now, that’s only a 1.3% increase from a year prior. But let’s also remember that home prices were already up quite a bit in early 2022. So all told, buyers shouldn’t really expect any bargains in March.

Sellers, however, are in a good position to capitalize on low inventory. And if you’ve been thinking of listing your home, you may want to do so before a potential spring rush.

Unfortunately, March could end up being a challenging month for prospective home buyers. Sellers, on the other hand, are still in a great position to capitalize on current real estate market conditions. We don’t know how long those will last, though, so anyone serious about selling a home may want to get moving sooner rather than later.

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It’s a move that might pay off. 

If you owe money on a personal loan, you’re in good company. As of the fourth quarter of 2022, U.S. personal loan balances reached $220 billion, according to TransUnion. That’s up from $167 billion a year prior.

Note that owing money on a personal loan isn’t necessarily a terrible thing. Often, these loans come with competitive interest rates attached to them that make them reasonably affordable. And because these loans come with fixed interest rates, your monthly payments are nice and predictable.

But if you’re planning to buy a home, you may want to consider paying off your personal loan balance before applying for a mortgage loan. Here’s why.

1. It might help you qualify for a home loan

Mortgage lenders look at different factors when deciding whether to approve an application or not. One factor is your credit score. The higher it is, the more likely you are to get approved for a mortgage, and at a more favorable interest rate.

Another big factor that goes into mortgage approval is your debt-to-income ratio. This ratio measures the total amount of your monthly debt relative to the amount of money you earn.

The lower your debt-to-income ratio, the more likely you are to get approved for a mortgage. So if you can pay off your personal loan ahead of your mortgage application, you’ll have a lower debt-to-income ratio to present.

2. You’ll have one fewer debt to deal with

Factoring a mortgage into your budget isn’t an easy thing to do. And it’s not just your mortgage payments you have to worry about when you buy a home. There’s a host of added expenses you’ll be on the hook for, from property taxes to homeowners insurance to maintenance to repairs.

If you pay off your personal loan before signing a mortgage, you’ll free up that much more room in your budget. And that could make it a lot easier for you to adjust to your new set of housing expenses.

Just as importantly, if you’re able to rid those personal loan payments from your list of monthly obligations, you’ll lower the risk of falling behind on any of your bills. Remember, the cost of owning a home has the potential to be higher than you expect, so the more wiggle room you’re able to give yourself, the better.

Should you pay off your personal loan before getting a mortgage?

Carrying personal loan debt is something you may end up doing for many years. But if you’re making plans to apply for a mortgage, paying off your personal loan beforehand could be advantageous.

That said, the money to pay off a personal loan will have to come from somewhere. You might have it sitting in your savings account. But when you buy a home, you need plenty of money on hand for unplanned bills and emergencies, like having to suddenly replace your water heater or roof. So you actually shouldn’t pay off your personal loan early if it means leaving yourself with little to no cash reserves for unplanned bills related to your new home purchase.

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You can safely assume the bad guys are hard at work. 

Trillions of dollars in COVID-19 relief funds have breathed new life into an old scam: Check fraud. Using statistics from the Financial Crimes Enforcement Network, CNBC notes that banks reported nearly 250,000 cases of check fraud in 2021. By last year, that number had skyrocketed to nearly 460,000 cases. That’s an increase of 84%.

21st century criminal enterprise

Check fraud is nothing new, but social media has made it much easier for the bad guys to organize and execute their theft. While organized crime has used sites like Facebook to plan schemes in the past, mainstream social media apps are not the “go-to” spot for criminals looking to score.

Today, the bad guys are turning to Telegram, a multi-platform messaging app founded by Russian entrepreneur Pavel Durov. While Telegram first debuted in 2013, the company now claims to have about 550 million monthly users.

The appeal for some users is Telegram’s unrestricted nature. For example, there are at least 30 channels dedicated to sharing the latest techniques to commit bank fraud.

The app makes it easy for users to send encrypted messages to individuals as well as groups. It’s big with criminals because it allows them to do business anonymously. It’s next to impossible for police to trace a message back to the user.

Check washing

Check fraud frequently involves “check washing.” According to the United States Postal Inspection Service (USPIS), check washing involves changing the name of the payee and often the dollar amount on a check. Once those changes are made, the criminal deposits the check into their own account or into the account of someone they know.

Criminal organizations have a multitude of ways to wash checks, from chemically removing the actual recipient’s name, to using copiers or scanners to print fake copies of checks. USPIS says that it recovers more than $1 billion in counterfeit checks and money orders every year.

And that’s where apps like Telegram come in. Criminals go to Telegram looking for “walkers.” These are the people who get paid to make trips into banks to cash bogus checks. The bad guys often recruit the elderly and homeless to work as walkers because those are the groups most in need of money and most willing to work for whatever the criminals offer them.

An elaborate scam

Walkers are taught to provide a combination of real and fake personal identification to open bank accounts. The information that’s real is just enough to convince a bank that they’re legitimate. The fake information is designed to prevent law enforcement from tracking them down.

By the time a walker enters a bank to cash a bogus check, they’re familiar faces and less likely to raise suspicion. If they’re good at what they do, so-called brokers sell their services to other criminals who also need walkers to do their dirty work.

The scheme sometimes involves having a contact inside a bank, an employee who checks customer account balances to make sure that fraudulent checks don’t bounce.

How to protect yourself

No one believes they will become a victim of check fraud, which only makes the criminals’ job easier. Here are some of the ways you can make it tougher for thieves to get your money:

If you’re ever contacted by someone claiming to be from your bank, provide them with no information.Do not leave your receipt at an ATM. It contains just enough account information to give a smart criminal ideas. For example, most ATM receipts include the last four digits of your account number, your checking account balance, and where you made your last withdrawal.Use direct deposit to get paid by your employer.If a check is lost or stolen, report it to the bank immediately.Store checks, deposit slips, bank statements, and canceled checks in a secure, locked location.When you have new checks made, never include your Social Security number, telephone number or driver’s license number. In the wrong hands, this information can be used to open a new checking account, credit card, or loan in your name.Properly dispose of canceled checks until you need them for tax purposes. In that case, lock them away.Regularly monitor your bank account, looking for any irregularities.Do not mail bills from your mailbox at night. This is one of the ways criminals are able to get their hands on checks. Your best bet is to mail bills directly from a post office or to use your bank’s online bill pay service.Make it tougher for a criminal to change information on a check by using dark ink.Don’t leave any blank spaces when you write a check. For example, if you make a check out to Mary Smith, fill in the rest of the space with a dark line.Never make a check payable to cash. If it’s stolen, anyone can cash it.Don’t endorse a check until you’re ready to cash or deposit it.If anyone pays you with a cashier’s check, have that person accompany you to the bank. Do not accept a check as payment unless it can be verified, even if they’ve provided you with identification.

Given the amount of money lost to check fraud it’s year, it’s no surprise that crooks are upping their game. Use their enthusiasm for theft as the motivation you need to protect your bank account.

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Stick to simple policies. 

To care for a loved one. That’s far and away the number one reason to purchase life insurance. Premature death is more than painful — it’s expensive for those left behind. Life insurance provides funds for loved ones after the policyholder passes away.

But life insurance can be confusing, what with all the bells and whistles and policy add-ons. Despite what you might’ve heard, it’s not right for everyone. A policy has limits. There are better alternatives for folks who want to save for retirement or to fund a child’s education.

Term vs. whole life

There are two types of life insurance: term life and whole life. Most folks will be satisfied with a simple, affordable term life policy that expires after a set period.

Whole life policies offer additional features. They accumulate cash value that can be used to catch up on missed premium payments, or drawn upon as an emergency fund, among other things. They’re big and sprawling, and they can last a lifetime.

Regardless of which policy you want, there are three reasons you should absolutely not buy life insurance this year.

1. To replace stock investments

Stocks offer better returns than whole life insurance policies on average. The average annual rate of return on a whole life policy is around 1.5%. Investing in the stock market has historically delivered a 10% average yearly return, over five times the return of a pricey life insurance policy.

An insurance policy is not an adequate replacement for investing in the stock market. The best stock brokers offer low fees. Great IRA accounts offer tax-advantages to retirees. Even a safe high-yield savings account offers better returns than your typical whole life insurance policy.

2. To fund a child’s education

If you’re thinking of purchasing an expensive whole life insurance policy so you can borrow against it to fund your kid’s education, think again. Money you borrow accrues interest. Generally speaking, better alternatives exist.

Consider opening a tax-advantaged 529 plan instead. Or invest the money in a flexible high-yield savings account. Chances are, you’ll earn better returns on your investment.

3. If you have little to gain from a life insurance policy

Some folks are in the envious position of having little to gain from purchasing a life insurance policy. Consider whether the following hold true:

Your family can easily afford funeral costsYou have sizable assetsYou have no debt or dependents or financial obligations (like co-signed loans)

If so, chances are you have little to gain from purchasing a life insurance policy. And if you’d like to purchase one for peace of mind, consider a simple, affordable term life policy that expires when your dependent is no longer reliant on your income.

Life insurance has one job

According to finance guru Dave Ramsey, life insurance has one job: to replace lost income. Dependents rely on caretakers to pay for food and housing. For most caretakers, that means purchasing a term life policy from one of the best cheap life insurance companies out there.

When in doubt, ask yourself whether you are purchasing life insurance to replace lost income. If not, chances are there are better places to put your money, including the stock market, a savings account, or a tax-advantaged 529 plan.

Our picks for best life insurance companies

Life insurance is essential if you have people depending on you. We’ve combed through the options and developed a best-in-class list for life insurance coverage. This guide will help you find the best life insurance companies and the right type of policy for your needs. Read our free review today.

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Discover Financial Services is an advertising partner of The Ascent, a Motley Fool company. Cole Tretheway has no position in any of the stocks mentioned. The Motley Fool recommends Discover Financial Services. The Motley Fool has a disclosure policy.

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