MoneyFu Finance, Loans and Investments

I just read in a book by Andrew Feinberg, “How to be a Smarter Investor” that humans are always looking for patterns. This tendency is a downfall when trying to predict the market. We have selective memories and a sense of “I know what I am doing” when attributing skill to winning gambling games.

We humans have a skewed view of the market such as when to invest or imagining the simplicity of paying a loan off. We also like immediate results and so a loan may look better at the start than during the payment periods. We move to quickly when taking on a risk.

So in general we need to track forecasts to remind ourselves of the past, and don’t try to force a wrong into a right. In essence, people are not the rational, sensible investors they assume they are. Investigations of how people make financial decisions conclude that the majority of investors make foolish decisions more often than not. But, paradoxically, the single smartest thing any investor could do is to recognize the limitations of his ability and the extent of his irrationality.

Be careful in long-term decisions by using short-term information. Remember the consequences of risk. Distrust data and chill out. When taking out a loan remember that your investment is the cash you put into getting out of debt. It simply can come down to needs and wants. Or even “they have it so I should too.“ What do you need?

Today it seems most Americans need to get out of debt. I know I do. I have tried to consolidate my debt to make it easier to pay off. The trick now is not to think I can leverage money to get more of what I want. The reality is that most things are setup to make money from you, especially credit cards.