Mind on My Money

How to invest wisely

by John Nofsinger

Taxes – What We Want

Meir tells fascinating tales of the trials and tribulations that people do in order to avoid or even evade paying taxes...including planning the timing of their own death! Read More

Our Debt! What has government borrowed on your behalf?

What does a trillion dollars really mean to you? How much are the debt and unfunded liabilities of all levels of government? What is your portion? Read More

If you plan to live a life of comfort in retirement, most of your retirement income will need to come from your savings. Social Security won't provide much and defined benefit retirement plans are becoming extinct. So how do we get people to contribute to their own defined contribution plan (i.e., 401k plan)? Read More

Opt-in and Opt-out Pension Design

The way in which a question is asked has a strong impact on the answer given or decision made. Consider the case of opting-in versus opting-out. To consent to be an organ donor in the U.S., you must sign a paper when getting your driver's license. This is an opt-in decision chosen by only about a quarter of the drivers. The levels are even lower for countries like Germany and the U.K. Read More

Combining Gambling and Saving

This program is designed to help lower income households save more. Low-income families in the United States play lotteries and they believe that they are more likely to become rich from lotteries than from saving. Thus, to encourage more savers and savings, consider a saving's product that has a lottery prize drawing. Read More

Designing Choices with Helping Biases

Decades of psychology research illustrates that people often don't know their own preferences for what they want. In other words, you can frame questions in different ways to elicit different responses. If people really understood what they wanted, they would not be fooled by framing effects. Read More

The Treasury Bubble

After witnessing the tech stock bubble and the real estate bubble, what is next? It is the US Treasury security market bubble. When will it burst and skyrocket interest rates? Read More

The Next Wave of Layoffs: Public Employees

The layoffs in the public sector are about to impact the unemployment figures. July is likely to be a bad month for state and local workers. Read More

Inflation or Deflation?

The news is full of economists concerned about either upcoming inflation or the current deflation. So which is right? Read More

Tax the Rich

Can the rich really pay for all this government spending. Numbers from the IRS and Congressional Budget Office explore the possibility. Read More

Wrong Medicine for this Economic Illness

It is a well researched and well known theory that economic/financial liberalization leads to economic growth. Very simply put, this liberalization reduces the size and control of government (public sector) relative to the private sector.

Reducing the public to private ratio spurs growth. Increasing this ratio retards growth. Read More

Psychology and Taxes on Capital

President Obama's proposed budget includes an increase in taxes on capital. That won't be very useful in generating tax revenue in the short-run. But it will also make fixing the broken economy even harder. Read More

What is economic stimulus?

I heard President Obama say the other day that "stimulus is spending money." The president is referring to government spending and is advocating his economic stimulus bill. Still, it begs the question, what kind of spending can stimulate the economy?

Most of the spending that government does has no meaningful lasting impact on the economy.

The US consumer drives the world economy. In the past two recessions, spending by the US households got the economy growing. Can they do it again? Read More

Stocking up on Super Bowl Ads

Super Bowl ads cost $3 million per 30 seconds of air time. Do good commercials lead to good stocks?

The Super Bowl is the most watched TV event of the year. Does advertising during the Super Bowl justify its enormous cost? Kenneth Kim at the University of Buffalo examined 529 commercials that ran during 17 Super Bowls.

The US House passed an $800 billion stimulus bill yesterday. What is $800 billion?

With large numbers flying around recently, it is useful to frame the $800B within references of the day or those that might be on your mind.

Do religious people put their money where their morals are?

Investors may seek both utilitarian and expressive benefits from their investments. The utilitarian benefits are investment risks and rewards. Expressive benefits vary depending on the individual, but investors may seek status, patriotism, consistency with social and religious beliefs, etc.

Do religious people put their money where their morals are?

Savvy people make dumb diversification mistakes. Read More

Is the Stock Market Trustworthy?

Are the people and institutions of Wall Street worthy of being trusted? Do you care?To see the general relationship between trust and stock investing, see my post about trusting the stock market. There are two aspects to having trust in the stock market. The first is the characteristics of the stock market. Read More

Can YOU Trust the Stock Market?

Trust is important for people to invest in stocks. But how well do you trust? Read More

It takes Trust to Invest

Trust is important for people to invest in stocks. This posting illustrates the general relationship between trust and participation in the stock market.

The stock market involves much risk and uncertainty. Let's face it, the majority of people who invest in stocks (directly, through funds, or in a retirement plan) don't fully understand how the capital markets actually function.

After reading several of these posts, you may think that investors need more regulations created to protect them from themselves. It is true that cleverly designed policies, rules, and laws can help investors. Unfortunately, these are few and far between. Why? Because the political process is just as impacted by psychological biases as individual investors. Read More

All That Glitters: Buying Attention Grabbing Stocks

Fools Gold One stock gained 10% yesterday...another lost 15%. One company has been splashed all over the TV lately. Another has had very high trading volume. We notice these things. In fact, we typically buy attension-grabbing stocks. Do stocks that glitter turn out to be gold? Read More

What Investment Characteristics are Important to You?

environmentally friendly investing Are risk and return the only investment characteristics that matter to you? Do you consider social values, patriotism, social status, or religious beliefs when investing? Read More

Familiarity Bias PART I: What is it?

location Investors tend to trade in the secrities with which they are most familiar. There is comfort inhaving your money invested in a business that is visible to you. But this familiarity bias has a strong influence on what you buy and the investment risks you take. Read More

Surprised Again? The Anchoring Bias of Investors

Anchor Price People anchor to specific prices or amounts and make small adjustments from these anchors as their predictions. This anchor bias impacts everything from lawsuit awards to online auction bids to analsyst forecasts...and to how you feel about your own investments. Read More

Portfolio Creation: Concentration or Diversification?

gears Don't put all your eggs in one basket. The wisdom of diversification has been touted for decades. Why do investors concentrate their portfolios rather than diversify? Read More

Bubble Emotions: Where are we with financial stocks?

Bubbles The behavior and emotions of investors during a price bubble can be extreme. Consider the cycle of investor emotions spurred by a bubble and shown in the figure. These emotions can cause investors to "buy high" during the thrilling and euphoric stages of a bubble, and "sell low" at the panic and capitulation stages. Warren Buffet recommends that you be "fearful when others are greedy and greedy when others are fearful." Read More