Money Management

Doing your homework may be the most important step you take as an investor. 

The best laid plans tend to be simple, and there’s nothing complex about Warren Buffett’s five rules of investing. Apart from being a business magnate and philanthropist, Buffett is known for living a simple life and dispensing simple advice to others. Here’s Buffett’s take on the five basic rules of investing.

1. Never lose money

Given that Buffett lost billions during the financial crisis of 2008, his first rule of investing may strike you as odd. However, Buffett isn’t suggesting you can’t ever lose money; he’s underscoring the mindset an investor should have.

Takeaway: Do your homework (really do your homework) before investing. Don’t make a financial decision without knowing what you’re getting into, and never say to yourself that it’s okay to lose money. If you’re going with a new brokerage, learn everything you can about that firm. Know the pros and cons of working with them before signing up. If you’re interested in a particular asset, spend time learning about the risks and the odds of success.

Bonus rule: Never forget rule No. 1

Obviously, Buffett has experienced far more financial wins than losses, but losses teach us something. In Buffett’s case, it’s to slow down and make careful investment choices.

Buffett is also famous for his “everyday man” approach to living. After becoming one of the richest people in the world, he didn’t move into a McMansion or begin having all his meals prepared by a world-class chef. Instead, Buffett remained in the same house he’s lived in since 1958 and regularly picks up McDonald’s for breakfast. While some may call him a spendthrift, Buffett remains mindful of the best ways to put his money to work.

Takeaway: Investing is serious business. It’s tough to keep your eye on the ball while showing off to friends.

2. Never invest in businesses you cannot understand

According to Buffett, “Risk comes from not knowing what you are doing.” His advice is to only put your money into things you fully understand and can explain.

Takeaway: Doing your homework should lead to understanding a potential investment. If you study an investment but still don’t understand how it works or what it’s supposed to do, walk away.

3. Our favorite holding period is forever

Investing is a long-term endeavor. Once you’ve studied what you’re getting into and made an investment, considering it long term allows you to tune out the natural ups and downs it will experience. When you think of an investment as a long-term commitment, you’re far less likely to panic and sell at the wrong time.

Takeaway: Do your homework, trust what you’ve learned, and let your investment ride.

4. Never invest with borrowed money

Buffett calls it “insane” to risk what you have by borrowing money to make an investment. Although a stock may be taking off like a rocket today, it could crash to the ground tomorrow. If you borrowed money to get in on the hot investment, you’ll end up with worthless stock and additional debt.

Takeaway: There’s no such thing as a sure thing. All investments have built-in risks. If you can afford to invest with your own money, your best move is to wait.

5. Be fearful when others are greedy

Buffett’s full quote is, “Be fearful when others are greedy and be greedy when others are fearful.”

The right time to buy is when others are running around like characters from Chicken Little, convinced the sky is falling. That’s when bargain basement prices are to be had. And if history has shown us anything, it’s that those who invest when prices are low are positioned to make the greatest profit when prices begin to rise.

On the other hand, when others are gobbling up stock they’re sure will make them rich, it’s your turn to be cautious.

Takeaway: You may not be able to time the market, but you can make it a goal to buy low and sell high. Don’t get caught up in the hype.

Warren Buffett has made and lost billions. If anyone is in a position to share useful investing tips, it’s the Oracle of Omaha.

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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.
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Which payment method is safer for online shopping? 

Online shopping has made it easier than ever to buy anything from anywhere, at any time. However, with so many options for payment, it can be hard to decide which method is best for your personal needs. When it comes to online shopping, the two most popular methods of payment are credit cards and PayPal. So which one is better to use? To help you decide, let’s look at the features of both credit cards and PayPal.

PayPal

PayPal is an online payment system used every day by millions of people all over the world. It allows users to easily transfer money from one’s personal bank account, credit or debit cards, or PayPal balance for secure transactions between two parties. It is easy to use, with just a few simple steps required to set up an account and start sending money. You can then transfer money directly from your PayPal account to over 200 countries.

You can also use Paypal to shop online using your credit card or debit card. Paypal offers a digital credit line that is reusable and has no annual fee. You can earn credit card rewards as long as your credit card is linked to your PayPal account. PayPal has exclusive deals and coupons, so you can earn additional points on eligible purchases. Since PayPal has an app, you can also pay by QR code. PayPal has recently launched its Buy Now, Pay Later service, which allows you to break up your payments over weeks or even months.

One of the biggest benefits is that you can also use PayPal to receive money from friends, family members, or even businesses. Unlike with a credit card, you can accept payments from your roommate or friend looking to split the dinner check. Additionally, PayPal uses encryption technology to protect users’ personal information. This technology uses complex algorithms and passwords, so no bank details are shared when you make an online purchase.

One of the cons of using PayPal is that fees are charged if you send money for a business transaction. Plus, PayPal bank transfers can take several days to be completed, and the platform is often targeted by scammers. PayPal can also be aggressive about implementing account freezes. You may not have access to your funds until PayPal is able to clear up any issues with your account.

Credit cards

Credit cards are incredibly useful financial tools that make transactions more convenient by allowing people to make purchases without having to carry around cash. The most obvious benefit of using a credit card to shop online is that they’re accepted almost everywhere. Credit cards offer a certain level of security because they are regulated by government agencies like the Federal Trade Commission and the Consumer Financial Protection Bureau.

At its core, a credit card works like a loan from the issuing bank, which requires users to pay for the items they buy using their cards. Plus, if you’re shopping with a major credit card provider, you’ll usually get built-in consumer protection against fraud or damage to what you purchase. Credit cards and PayPal have similar security features. One of the biggest benefits of credit cards is that they have a wide range of rewards that you can earn. Some credit cards also offer their own deals and Buy Now, Pay Later features.

While credit cards are a convenient and safe way to shop online, some disadvantages of cards are that you can easily find yourself in over your head with credit card debt, especially if your card has a high interest rate. Some cards also have high annual fees and late fees, and if you don’t pay your card promptly, your credit score may be impacted.

Combine PayPal and credit cards for the best of both worlds

So should you use your credit card or PayPal to pay for your online purchases? Ultimately, it all comes down to personal preference and what works best for you. You can use both your credit card and PayPal to take advantage of the rewards credit cards offer and earn additional rewards and deals from PayPal.

Using both credit cards and PayPal may offer the best of both worlds, since PayPal can be a great complement to your credit cards. PayPal was originally set up as a way to send or receive money from people without going through a bank. By linking your credit card to a PayPal account, you can earn rewards as well as protect your financial information. Just be careful of being charged fees when sending money to individuals by using your credit card on PayPal.

Whether you decide to use a credit card or PayPal, it’s important to do your research before making any purchases online and ensure that you understand the terms and conditions associated with each payment method. With careful consideration and due diligence, you can find the right payment option for your needs and enjoy the convenience of shopping online with confidence. Overall, understanding how both credit cards and PayPal work is an essential part of managing your finances responsibly while taking advantage of their benefits.

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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.The Motley Fool has positions in and recommends PayPal. The Motley Fool has a disclosure policy.

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The good news is that there’s reason to believe it will. 

Inflation is one of those topics that doesn’t tend to be very popular until it becomes a problem. Think about it — how many times did you sit down with friends over coffee to talk about inflation before the latter part of 2021? Chances are, none.

But during the second half of 2021, inflation started to soar. And in 2022, consumers had to deal with raging inflation from start to finish. That forced many people to raid their savings and rack up debt on their credit cards just to stay afloat.

Now the bad news is that we’re starting off 2023 with inflation levels still being considerably higher than normal. The good news, though, is that the rate of inflation has been dropping since peaking in mid-2022. And if that trend continues, consumers could soon be in for relief.

A positive trend

In January of 2022, the Consumer Price Index (CPI), which measures changes in the cost of consumer goods, was up by 7.5% on an annual basis. In June, the CPI peaked at 9.1%.

But inflation levels have been dropping since then. In July of 2022, the CPI fell to 8.5% on an annual basis. In September, inflation only rose by 8.2% annually (“only” being a relative term). And in November, the last CPI reading we have as of this writing, inflation was up just 7.1% from November of 2021.

If the rate of inflation keeps dropping in a similar fashion, then we could reach a point when living costs start to become more manageable during the second half of 2023. Does this mean that we’ll get back to the days of 2% or 3% annual inflation this year, which is a more normal/moderate level? Not necessarily. But if inflation hits the 5% range by mid-year, consumers should be in a much better position than they were during the summer of 2022.

The Fed is doing its part

A big reason inflation levels surged in mid-2021 is that consumers found themselves flush with cash thanks to several rounds of COVID-19 stimulus payments. In fact, many consumers saw their bank account balances increase at a time when supply chains were starting to slow down due to pandemic-related hiccups. That created a disconnect between supply and demand that caused inflation to soar.

The Federal Reserve, meanwhile, has been raising interest rates in an effort to persuade consumers to cut back on spending. If they do so, it should narrow the gap between supply and demand that’s led to rampant inflation.

The downside of the Fed’s actions is that they could spur an economic recession. If consumers get fed up with or spooked by higher interest rates, they might cut their spending to an extreme degree, leading to a world of economic pain. But the Fed might get what it calls its desired soft landing — a scenario where consumers cut their spending moderately enough to cool inflation without negative economic backlash.

At this point, it’s too soon to tell whether the Fed will get that ideal balance. But we do know that the Fed is committed to slowing the pace of inflation. And so between that and recent trends, there’s reason to believe that things will get better in that regard over the course of 2023.

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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.The Motley Fool has a disclosure policy.

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