Wednesday, April 24, 2019

Think You're Good At Spotting Scams? I Bet I Can Fool You.

Photo by Ahmed Syed  

Not A Real Prince


Scams are usually easy to spot. You know that Nigerian prince did not randomly pick you to help get his $10 million dollars out of his bank or to avoid government taxes. They're easy to spot, in part, because they ask you to pay a small amount of money in exchange for a larger amount of money. You’re probably good at ignoring these scams. You may even pride yourself in being too smart to fall for them.

Beware. People who think they are too smart to fall for scams are often some of the easiest people to fool.

Can You Spot This Scam?

Let’s play a little game and see if you can spot the scam.

You get an email from someone, let’s call him Sammy The Amazing Stock Picker, claiming to write a stock trading newsletter that has a 100% success rate in picking stocks. He’s analyzed the market and has come up with a secret proprietary formula that can correctly predict when a stock is going to go either up or down. There’s lots of mumbo jumbo about technical analysis, trading patterns, candlestick charts, trend lines, etc. It all sounds very impressive and scientific. For just $1,000, you can subscribe to this newsletter and get stock picks that are guaranteed to make you money!

But he doesn’t expect you to believe him. To prove his formula works, he’s going to give you a stock tip today. He predicts that the stock of Company ABC will go up in three weeks. You are intrigued. You’re not going to buy the stock, but you decide to watch it and see what happens.

Three weeks later, you are surprised to discover that the stock of Company ABC did, in fact, go up. Huh. You could have made some money if you listened to that guy’s tip. Still, you reason, he could have just gotten lucky.

The next day, you get another email from Sammy. He points out that his prediction was correct. He’s asking you again for $1,000 to subscribe to his newsletter, but he understands you may still be reluctant. To convince you, he’s going to give you another tip. His proprietary formula predicts that stock XYZ is going to go up in 2 weeks. Once again, you decide not to invest, but you’ll track the stock for 2 weeks.

Wow.. Two weeks later, you are surprised to find that stock XYZ did go up. In fact, it went up quite a bit. You could have made a couple thousand dollars had you bought some shares. You start to think Sammy might be on to something.

Sammy sends you another email, again reminding you that he has now correctly predicted an increase in two stocks. His formula surely works. He really wants to share this information with people so he can help others get rich and stick it to those greedy Wall Street traders and again asks you to subscribe to his newsletter for $1,000. In case you still doubt him, he passes along another tip. This time, his formula says stock LMN is going to drop in 18 days. He recommends you short the stock. (Shorting is a way to make money when the price of a stock goes down.)

You are really intrigued now. Sammy is 2 for 2. Maybe he is on to something. Still, shorting a stock can be dangerous, so you decide to hold off and again just monitor the price. Eighteen days seems pretty specific. His formula must be really accurate.

Sure enough, exactly 18 days later, stock LMN has dropped. This is amazing! Sammy has correctly picked not 1, not 2, but 3 winning stock trades in a row! You are slowly starting to believe there might be something to Sammy’s secret formula after all. Still, $1,000 is a lot to cough up. On the other hand, you could easily recoup that cost plus more with just one trade...

You are a smart guy. You think this still might be a scam, but how? Sammy is correctly predicting stock prices in the future!

You get two more emails from Sammy, each time he recommends a stock and each time, the stock does exactly what he predicts. OK, you think, he’s for real. No one can correctly predict five stock trades in a row!

You start to think of all the money you can make following Sammy’s recommendations. In just a couple of months, you can quit your job. You can retire early. You decide Sammy is somehow legit and you send him $1,000 to subscribe to his newsletter. After all, you’ll make that money back and more just following his first tip!

Congratulations! You’ve just been scammed.

You never get his newsletter. Or even worse, you get a newsletter with a hot tip and you invest a couple thousand. Somehow, the trade loses money. You’re stuck with a 75% loss. Sammy doesn’t return any of your emails. The newsletters stop coming. You feel sick.

What happened? You had proof that Sammy had a magic formula! The odds of successfully picking five stock trades in a row are tiny. How did you get scammed?

Hubris

You got scammed because you thought you couldn’t be scammed.

You thought you had proof that Sammy was a genius. Did you stop to ask yourself why Sammy would be selling a newsletter to people if he could correctly predict the stock market? Why wouldn’t he just keep his secret formula to himself and make millions? If someone could really do this, why would he share that information?

No, you saw what you thought was proof and you started to get greedy. You started to imagine all the money you could, against all odds, make just by following someone’s advice and without any thought or work on your part.

You fell victim to one of the classic blunders! The most famous of which is “never get involved in a land war in Asia!” But only slightly less well-known is this: “If something sounds too good to be true, it usually is.”

So how did Sammy do it? How did he know those five stocks were going to move in the direction he said they would?

He didn’t. It was pure luck.

How Sammy Did It

When you got Sammy’s first email, you were one of 10,000 people Sammy sent it to. What you didn’t know is that 5,000 of those people got an email saying the stock would go up. The other 5,000 got one saying it would go down.

Sammy purposely picked a volatile stock, so he could be pretty sure there would be some serious price movement one way or the other. Whichever way the stock moved, some people would believe Sammy correctly predicted it.

After three weeks, Sammy emailed the 5,000 who got the email that correctly predicted the price of stock ABC. Of those, he now told 2,500 people that stock XYZ would go up in 2 weeks and he told the other 2,500 it would go down. Sneaky Sammy can’t lose!

After two weeks, 2,500 people now believe Sammy can predict the future. Some people have decided to send him $1,000 at this point and Sammy starts raking in the dough.

He now does the same thing with his next mailing to the 1,250 people who got the email that correctly predicted stock XYZ and he recommends the LMN stock trade. Then he does it once more to 625 people. With each mailing, he gets several more people to send him $1,000. By now, ol’ Sammy has made tens of thousands of dollars and he eventually disappears from the internet.

Well, probably not. He probably just made some new email accounts and started the process over with a new batch of suckers.

Stay Skeptical

Things are not always what they seem. No one can predict the future, even if you have what you think is incontestable proof. Don’t be so sure of your ability to spot scams that you willfully see only what you want to see.



Wednesday, April 17, 2019

After Six Years, Time To End My Online Courses

Photo by Matt Botsford

Back in 2014, when I started this blog, my goal was to get enough passive income to pay for a Tesla. That goal, of course, changed, but passive income is still a great thing to have and to strive for.

One of my passive income streams has been from teaching online courses. These are courses I created and recorded, uploaded to a couple instructional sites, and then collect money from each month from students who enroll. It's a pretty sweet deal.

Sadly, I think it's time to end those courses. The courses are getting a bit long in the tooth. I made four of them, all about a database product from Microsoft called SQL Server. That's what I've built my career on and what I know, so it made sense to teach others about it.

Why I'm Taking Them Down

Like all technology products, SQL Server is evolving and changing. My courses were made with the latest version of SQL Server at the time - SQL Server 2012. Since then, versions 2014, 2016, and 2017 have been released. SQL 2019 is due to be released soon. While the information in my courses is still applicable, the graphical interface has changed and new features have been added. In short, someone watching my courses today would think the videos are old. And they are. The first one was made 6 years ago.

I've seen my sales start to drop off. The last couple of months have only seen 10 - 15 new students per month. New reviews are rare - maybe 1 or 2 per month. I've come to the conclusion that I need to either make new courses with updated content and using the latest software version or take the old courses down before people start leaving bad reviews because the software shown is old.

Making the courses was a lot of work. Hours and hours writing the scripts, creating demos, then a couple of weekends recording it all. I'm not really looking forward to doing that again and, truthfully, I don't have the burning desire to any more. I already have my Tesla. My wife and I are in a much better place financially than we were six years ago. My passive income stream is now mainly from stock dividends.

Another (small) factor that contributed to my decision to take the courses down was paperwork. Neither of the sites that sell my courses provide tax forms at the end of the year. This means I have to manually track all the payments they make to report them on my taxes. Further, the IRS considers this self-employment income, meaning I also have to pay the employer share of Social Security and Medicare taxes as well as my own share. For a while, I was also making quarterly estimated tax payments. When I was making $200 to $400 per month, I was fine with this. Now however, the amounts are so small, it's more trouble than it's worth. I've got too many other demands for my time.

My courses were available on two platforms: Udemy.com and Skillshare.com. Udemy provides lifetime access for students who have purchased courses, so I can't actually delete my courses there. Instead, I'm setting my courses to private. This means they will no longer show up in any search results. The only way new students can enroll is if I give them a link.

Udemy Almost Final Results

So how much money did these courses make for me? Was it worth it?  Without a doubt, yes.

As I have pointed out before, my total initial investment was a $149 high quality microphone (which is even cheaper now). All the other tools I used, video editing software, graphics programs, etc. were free. I either used freeware products or program such as PowerPoint, which I already owned.

From that initial $149 investment, on Udemy, I have earned over $11,000!


My total figure should go up another $120 or so because there are still two months Udemy has not paid me for yet. (They pay one month behind because they offer students a 30 day money back guarantee.) So all in all, I'll have made about $11,500. Not too shabby.

As the above graphic shows, I had almost two thousand students and my average rating was 4.4 out of 5 stars. I've helped students in 81 different countries:



That's something I'm proud of.

SkillShare Almost Final Results

I earn money differently on SkillShare. Whereas a student on Udemy pays for each course and a portion of each student's purchase price goes to me, a SkillShare student pays a monthly subscription fee and I am paid for each minute of my courses a student views. So on Udemy, earning money is all about recruiting new students. On SkillShare, it's all about getting students to actually watch your courses.

Based on this income model, I'm going to leave my courses up on SkillShare since I don't have to rely on attracting new students to earn money. Because students pay a monthly fee for all content on the site, I don't think any students would leave a bad review if my courses seem out of date. After all, it's more or less free to them with their monthly subscription. In fact, user reviews seems unimportant on SkillShare. As you can see below, I've only had one review out of almost 300 students.

I've talked with SkillShare's tech support and it is unclear to me that they will actually pay out minutes viewed once I deactivate my account. So I don't really see a downside to just letting the courses stay up.

My courses have not been on SkillShare as long as they have on Udemy. I think I first posted them in November 2017 and I've made $633 so far.


SkillShare was never meant to replace or outperform Udemy. It was simply a new platform I heard about and, since I already had all the courses created, I just thought I'd put them up there as well and try to get some more money from them. More money for zero extra work.

The End Of An Era

I'm somewhat sad to be taking these courses down. It was crazy fun getting money each month for doing basically nothing. I remember sitting on a beach in Hawaii four years ago and getting email notifications of money coming in. It's a great feeling :-)

I'm still not sure if I'll make new courses. If I do, they most likely won't be about computer-related topics. I've pondered making some financial-related ones, but can't seem to come up with any good ideas. Does anyone have any suggestions?

Wednesday, April 10, 2019

On Vacation!


Taking some time off this week as we head to Washington D.C. for spring break! We're taking a train across the country, spending a couple of days in D.C., then flying back home. See you next week!

Wednesday, April 3, 2019

Net Worth Update: End of March 2019

At the end of each month, I post an update of my net worth, including a brief discussion of any notable events that might have occurred. The latest month's figures can always be found under the Featured menu in the menu bar at the top of the blog.

Last updated: End of March, 2019
Net Worth: $950,528
Change from last Month: +$15,683

Events Of Note Last Month:


My SQL courses on Udemy generated $59.91 of income. My courses on SkillShare, meanwhile, earned $47.10. I've decided to scale back on my courses. More details on that next week.

Taxes

Well, this year was better than last year. For the last three or four years, I've had to pay thousands of dollars in taxes come April, despite dramatically increasing the amount withheld from our paychecks each year. For 2018, we're actually getting a $6,199 refund! Yay!

If we didn't have the Tesla $7,500 tax credit, we would have owed about $1,300. My accountant attributes this to the fact that the IRS changed the tax withholding rates last year. Less money is being withheld each paycheck due to the decrease in tax brackets, but when they set the withholding rates, the IRS did not account for the loss of many deductions - such as the $10,000 deduction cap on state and local taxes, mortgage interest, etc. You may have heard about this last year. There were a ton of stories advising people to adjust their tax withholding.

Given that we are having an extra $7,200 in taxes withheld during the year, I didn't bother adjusting our withholding. Between that extra and the $7,500 Tesla tax credit, I figured we'd be OK.

And we were. We're still getting money back. I'm not going to bother adjusting my withholdings for 2019 either because the purchase of my wife's Tesla qualifies us for a $3,750 tax credit for 2019. If things stay the same for 2019, we should get a refund next year as well.


Net Worth Update

We had a big increase in our net worth this month: over $15,000!


February 2019 March 2019


























Our Property category increased due to the new car we bought at the beginning of the month. Our loan amount also went up, as we took a loan for the vehicle. The rest of the gains came from increases in our stock portfolio and our home value.

Oh, and hey... Look there... We're sneaking up on a net worth milestone....

If you have any questions or suggestions for topics, please drop me a line in the comments section!