The Savvy Wallet

How Confirmation Bias Can Hurt Your Finances Confirmation bias is the tendency to look for, interpret, and remember information that confirms what we already believe, while ignoring or rejecting information that contradicts our beliefs. This cognitive bias can affect many aspects of our lives, including our financial decisions. In this post, we will explore some examples of how confirmation bias can influence our money habits, and what we can do to overcome it. Examples of Confirmation Bias in Finance Investing : Confirmation bias can lead us to invest in stocks or funds that match our existing views, and avoid those that challenge them. For example, if we are bullish on a certain sector or company, we may only pay attention to positive news and data, and disregard any negative signs or risks. This can result in overconfidence, poor diversification, and missed opportunities. Budgeting : Confirmation bias can also affect how we track and manage our spending and income. For example, if w...

Trust Funds Explained Trust funds are often associated with wealthy families and inheritance, but they are not as exclusive or complicated as they may seem. In fact, trust funds can be a useful tool for anyone who wants to protect their assets, plan for the future, or provide for their loved ones. In this post, we will explain what trust funds are, how they work, and what benefits they offer. What is a trust fund? A trust fund is a legal arrangement that allows a person (called the grantor or settlor ) to transfer their property or assets to another person or entity (called the trustee ) who will manage them for the benefit of one or more people (called the beneficiaries ). The grantor can set the terms and conditions of the trust, such as when and how the beneficiaries will receive the income or principal from the trust, what purposes the trust can be used for, and who can revoke or amend the trust. There are many types of trust funds, depending on the goals and preferences of the gr...

Investors vs. Speculators: Investing and Speculating Defined Investing and speculating are two common ways of making money in the financial markets. But what is the difference between them? And which one is better for you? What is Investing? Investing is the process of buying an asset with the expectation of earning a return over a long period of time. Investors typically look for assets that have intrinsic value, such as stocks, bonds, real estate, or commodities. They also analyze the fundamentals of the asset, such as its earnings, cash flow, growth potential, competitive advantage, and risk factors. Investors are not concerned with short-term price fluctuations, but rather with the long-term performance of the asset. They aim to benefit from the power of compounding, which means reinvesting their returns to generate more returns over time. Investors are usually patient, disciplined, and rational in their decision-making. What is Speculating? Speculating is the process of buying an ...

The Economics of Corruption Explained Corruption is a widespread phenomenon that affects many aspects of society, politics, and economy. But what exactly is corruption and how does it impact economic growth and development? In this blog post, we will explore the economics of corruption, its causes, consequences, and possible solutions. What is corruption? Corruption is the misuse of public power for private benefit. It can take many forms, such as bribery, embezzlement, nepotism, fraud, extortion, and favoritism. Corruption can occur at different levels of government, from local to national, and in different sectors, such as public administration, judiciary, health, education, and security. Corruption is often measured by the frequency and size of bribes paid to public officials to obtain government benefits or avoid costs. However, this is not a perfect indicator, as corruption can also go unpunished or unreported. Therefore, subjective measures, such as surveys of firms and citizens,...

Cryptocurrency Exchanges Explained Cryptocurrencies are digital assets that can be used as a medium of exchange, store of value, or unit of account. They are powered by blockchain technology, which is a distributed ledger that records and verifies transactions without the need for a central authority. Some of the most popular cryptocurrencies include Bitcoin, Ethereum, Litecoin, and Ripple. But how do you buy, sell, or trade cryptocurrencies? This is where cryptocurrency exchanges come in. A cryptocurrency exchange is a platform that allows you to exchange one cryptocurrency for another, or for fiat currency (such as US dollars or euros). There are different types of cryptocurrency exchanges, each with its own features, advantages, and disadvantages. In this blog post, we will explain the main types of cryptocurrency exchanges and how they work. Centralized Exchanges A centralized exchange (CEX) is a cryptocurrency exchange that is operated by a company or an organization. It acts as a...

2024 Economics in One Minute: Poor Sentiment vs. Strong The year 2024 has been a roller coaster ride for the global economy. On one hand, we have seen some positive signs of recovery from the pandemic-induced recession, such as the rapid rollout of vaccines, the easing of lockdowns, the rebound of consumer spending, and the surge of e-commerce and digital services. On the other hand, we have also faced some major challenges and uncertainties, such as the emergence of new variants, the uneven distribution of vaccines, the rising inflation, the geopolitical tensions, and the environmental crises. So, how do we make sense of this mixed picture? One way to look at it is to compare the sentiment and the strength of the economy. Sentiment refers to how people feel about the current and future economic conditions, while strength refers to how well the economy is performing in terms of output, income, employment, and trade. In general, sentiment and strength tend to move in the same directio...

Stablecoins (Crypto) Explained If you are interested in cryptocurrencies, you may have heard of stablecoins. But what are they and how do they work? In this blog post, we will explain the basics of stablecoins and why they are important for the crypto ecosystem. What are stablecoins? Stablecoins are a type of cryptocurrency that aim to maintain a stable value relative to another asset, such as a fiat currency (e.g., U.S. dollar), a commodity (e.g., gold), or a basket of assets. Unlike most cryptocurrencies, which are subject to high volatility and price fluctuations, stablecoins try to offer a more predictable and reliable store of value and medium of exchange. Stablecoins can be useful for various purposes, such as: Facilitating cross-border payments and remittances without intermediaries or high fees Providing a hedge against inflation and currency devaluation in unstable regions Enabling access to decentralized finance (DeFi) applications and services that require stable collateral ...