I have 2$ how to make 5$?2 min read

Blog visitor Nicholas K. asked…

I have been cepted by economics to become econocepted. My dream is to make money for studying. You give me money, I give you grades & love. I also got 2$ how to make 5$.

Thank you for the question. That’s a cool dream you have there. Sadly we don’t have money to offer you but don’t let that stop you from getting your grades. And yes we would like more love.

We would answer that second part though… Here are some ways we thought might work.

1. Savings

This is a slow and painful way to get your $5. You can save the money in a bank and earn interest rates. Singapore has an annual interest rate of 0.05%; it will take you about 611 years to get the $5. Moreover, this does not account for inflation, which erodes the value of your money. Most probably, your $2 will be worth $1 in about 20 years’ time given Singapore’s 3-5% annual inflation rate.

In the current low interest rates environment, savings is definitely not the way to go to turn your $2 to $5, but if you save your money in a foreign bank (i.e. Australia) with a higher interest rate and experience an appreciation in the currency, the combined effect may turn your $2 into $5 in a shorter time.

Also, read The Richest Man In Babylon.

2. Perceived Value > Market Price

Find something that you value at $5 but costs $2 or less and consume it (think consumer surplus.) You will receive satisfaction that is worth $5 upon consumption.

3. Making investments

Check out this Quora thread: http://www.quora.com/Im-18-years-old-and-want-to-learn-how-to-invest-my-money-How-do-I-get-started

The gist of it: take on risk and let the market do the heavy lifting for you.

4. Imperfect information

In the A level syllabus you learn that imperfect information exists in the market and is a form of market failure. So find something that you think is mispriced and buy it. Here comes the next assumption, the imperfect information has to be rectified in the future. The market has to realise the true value of the goods such that the market price will increase and you are able to sell it for a profit.

In other words, you need to be smart but not too smart.

5. Trading

For short term gains, you can capitalise on the short term volatility of assets. Traders do this. Use leverage for faster results. Of course, chances are if you have zero experience, you will lose the $2 (and more).

Till next time, dream economics. And really, ask anything.

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