[#40] The 5 Minute Investing Guide for Beginners

Plus: Invest in Cows, Crypto is Weird, Rent vs Buy Debate, and Big Mac Index

written by oz chen

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Edition 40 personal finance newsletter for beginner investors

Compliment of the week: You have a beginner’s mind.

With less than 2 months left in 2021, I’m stoked to kick off a writing project I’ve been putting off: beginner guides on money. The first is a quick 5 minute guide to investing. Would love to your thoughts and comments :)

Also in this edition: Invest in Cows, Crypto is Weird, Rent vs Buy Debate, and Big Mac Index.

⏲ The 5 Minute Investing Guide for Beginners

One of my missions is to help people start investing—and feel good about it. For beginners, investing might seem too fancy (Wall Street) or too crazy (Wall Street Bets).

My goal: give beginners the right level of information so that investing feels automatic and simple.

Read it here: The 5 Minute Investing Guide for Beginners

This guide is intentionally written to be a “do this, not that” tactical guide to help the absolute beginner get started. I’m excited to write complementary guides about the behavioral + mindset aspects of investing.

Know someone who would benefit from this guide? Please share it with them.

🐄 Invest in cattle for Moo-ney

Have you noticed that meat (amongst other goods) are more expensive now? Call it Meatflation. Beef prices have gone up around 20% (source). Well, there’s a way to fight back…

Agridime is a company that allows you to buy shares of cattle and earn a handsome profit. From their website:

“All cattle purchased during Q4 of 2021 will be guaranteed 15% yearly profits. We also offer 20% yearly profits on contracts of 50 or more.” Each calf is $2,000.

Not investment advice and I haven’t invested yet. Still researching, though it’s promising that Agridime sells its own beef direct to consumer.

🤪 Crypto is weird now. It may be the new normal soon.

There used to be a clear divide between brick and mortar companies and digital companies.

Now, every company is essentially a digital company. Consider even a “physical” business like a bakery, which uses Yelp to list their business, Square to accept payments, DoorDash for deliveries…you get the point.

A similar trend is playing out with crypto.

First, Bitcoin was just thought of as an alternative currency. It’s weird, it’s a Ponzi scheme, no one’s going to use it…Now the crypto market is worth $3 trillion. Crypto has moved simply beyond just gambling on cryptocurrencies:

Billionaire Mark Cuban explains how crypto now is like dawn of the internet:

“[Crypto is] like the early days of the internet – brand new, no one really knows what it’s going to be. When we were starting AudioNet… I can’t tell you how many times everybody said, ‘Internet broadcasting? There’s no chance…’ A lot of people thought we were crazy.”

Mark Cuban, Early Dotcom Billionaire and Crypto Influencer

What people don’t understand about crypto is that a new financial ecosystem is being built before our eyes. This is why people refer to crypto and DeFi (decentralized finance) “Web 3.0,” because it’s on trend to become the new layer of the internet.

Want to know wrap your head around how crypto is the future? The Bankless Podcast “5 Mental Models for Web 3” really helped me appreciate how fast this space is growing.

🏡 The Rent vs Buy Debate

There’s something I find highly annoying about the “renting vs buying a home” debate.

Americans will rent a car, hotel room, or any other sort of goods without fuss, then turn around and say this about housing: I hate paying for someone’s mortgage.

It’s as if landlords aren’t providing a service just like any other business. Property taxes, repairs, hello??

This logic breaks down pretty easily if we put some numbers to the test. Let’s say a house costs $500K, meaning that a 20% down payment is $100K.

Then let’s use renter’s budget of $2500/month. $100,000 ÷ $2500 = 40 months of rent just to break even on down payment. That’s 3.3 years of the property owner breaking even to rent out space, and that doesn’t even include the cost of mortgage and other expenses in the meantime.

I know, I know — this is an incomplete equation. The numbers could be different and a home’s value could go up. There is structural racism and unfair finances that make it so that the rich own more land. Even less reason to judge that renting is a poor financial choice. For many people, continuing to rent makes more sense financially.

  1. There’s nothing wrong with renting
  2. There’s nothing wrong with owning a home

…As long as it’s the right decision for you.

🍔 Big Mac Index

The Economist started the Big Mac Index in 1986 as a humorous – but real – attempt to measure prices using one iconic good. #Burgernomics

I’ll just use Mexico (my favorite country for vacation) using the most recent Big Mac Index:

A Big Mac costs 64 pesos in Mexico and US$5.65 in the United States. The implied exchange rate is 11.33. The difference between this and the actual exchange rate, 20.14, suggests the Mexican peso is 43.7% undervalued

The Big Mac Index achieves 3 things at once:

  1. Tells you how much a Big Mac costs around the world (damn, more than $5 in the States?)
  2. Reveal the difference in Big Mac costs between country to country
  3. Suggest where real exchange rates might be going, and what’s under/over valued right now.

Only 4 countries are overvalued compared to the U.S. Dollar: Sweden, Switzerland, Norway and Venezuela.

If the Big Mac index is any real indicator of local prices, then for Americans it means it’s a great time to travel and get more bang burger for your buck.

Just for fun: Want to kill some time but don’t want to paint your actual nails? Play with the Lacquer Lacquer website

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