invest in yourself
A W O M E N ’ S W E A LT H W O R K S H O P
WI-FI NETWORK: FUTUREADVISOR GUEST
PA S S W O R D :
WELCOME AND AGENDA
• Welcome
• Women & Investing by Megan Graf
• Presentation: 60 Minutes to Change your Future
by Robert Shaye
• Q&A
• Break-out Sessions with the FutureAdvisor Team
WOMEN IN THE MEDIA
http://www.investmentnews.com/article/20140623/BLOG05/140629978
http://www.thinkadvisor.com/2014/07/28/women-money-and-the-confidence-gap
WOMEN AS INVESTORS
A study published this month, for example, claims
that hedge funds run by women returned 9.8% in
2013 (to the end of November), versus a paltry
6.13% for the HFRX, which tracks hedge funds
generally.
Men trade 45 percent more than women, and
trading reduces men’s net returns by 2.65
percentage points a year as opposed to 1.72
percentage points for women. Women trade less
frequently and hold less volatile portfolios. Thus,
women beat men by an average of about one
percentage point annually on a risk-adjusted basis.
http://gsm.ucdavis.edu/blog-feature/gender-differences-investing
“Do men doubt themselves sometimes?
Of course. But they don’t let their doubts
stop them as often as women do.”
The Confidence Gap, The Atlantic
THE VISION – INVEST IN YOURSELF
RE-DEFINE PERCEPTIONS
•
Clarify what makes a good investor
“THE MOST POWERFUL
WOMAN ON WALL STREET”
EDUCATE
•
“We see that women, who were taught about investing by someone, tend to be more
confident in investing. Financial literacy makes a huge difference and has positive
rippling effects for future generations.”
•
https://www.wellsfargo.com/press/2013/20130919_womenachieveaffluence
•
Simplify jargon and complex topics
•
Answer questions
PROVIDE ACTIONABLE NEXT STEPS
•
Outline options and resources
invest in yourself
60 MINUTES TO CHANGE YOUR FUTURE
BY ROBERT SHAYE
W O U L D Y O U R AT H E R … .
Have 3.5 million dollars
up front?
or
Start with a penny and have
your balance double every
day for one month?
The value of the balance doubling after 30 days is: $5,368,709!
HOUSEKEEPING
Who I am
Where my approach/advice comes from
Who I’m not (Disclaimer)
Although I have a passion for these
topics, the views expressed are not
intended to serve as a forecast, a
guarantee of future results, investment
recommendations or an offer to buy or
sell securities. This should not be
interpreted as tax advice and please
consult your personal tax advisors if you
have any questions.
Housekeeping
@FutureAdvisor
#InvestInYourself
TOPICS
• Behavioral Finance
• Understanding your current situation
• Credit Scores
• Retirement, the time value of money,
& 401k / 403b
• Investing 101
• Savings accounts & fees
• Love & Money
• Home ownership, mortgages, refinancing, & renting
• Tax strategy
• Life insurance / Health Insurance
• Tactical next steps
IF NOTHING ELSE, REMEMBER THIS!
• Save 20% of your salary
• Pay Yourself First!
• Live below your means
• Invest in low-cost index funds
• “Be Average” – it’s a good thing
• Don’t react emotionally
• Stay with your strategy for the long haul - “Don’t Dance”
Happiness
H A P P I N E S S & W E A LT H
Wealth
W H Y W E N E E D A N A U T O M AT I C P L A N
• People are not rational with financial decisions
(susceptible to framing, prospect theory, anchoring, choice architecture, & the default option)
• Study: the more often you check your portfolio the worse you do
• We don’t like losing! (Prospect Theory) (DMR)
• Commitment devices!
• Google’s anchoring experiment (3% increase)
W H Y W E N E E D A N A U T O M AT I C P L A N ( C O N T I N U E D )
• “Save More Tomorrow” (12% vs 4%)
• Allocation Decisions & 1/n:
Scenario 1:
Scenario 2:
Scenario 3:
Fund A: Stocks
Fund B: Bonds
Fund A: Stocks
Fund B: ½ Bonds ½ Stocks
Fund A: ½ Bonds ½ Stocks
Fund B: Bonds
54% allocation to stocks
73% allocation to stocks
35% allocation to stocks
PRIOR TO THE WORKSHOP
• 20 mins - capture your “Net Worth” (all assets & debts)
• Use Mint.com; connect banking & investment accounts, student/car loans
• Include property (homes & cars)
• Homes: zillow.com
• Cars: edmunds.com
• 10 mins - understand your credit score
• Signup for CreditKarma
• Pull a free credit report from annualcreditreport.com; Experian in Jan,
TransUnion in Apr, Equifax in Aug
• 15 mins – analyze your current investments and get free advice:
www.FutureAdvisor.com
• (optional) 30 mins - create a spending plan (aka budget)
• Can be in Mint or even Excel
• Savings must be a part of your plan
U N D E R S TA N D I N G Y O U R C U R R E N T S I T U AT I O N
• Check Mint often
• Spend < make
• Save xx% of your income
• “Pay yourself first” – schedule savings
• Debts
• Credit Cards & student loans
• BT offers
• Understand your current allocation & fees
“ I ’ L L W O R R Y A B O U T R E T I R E M E N T L AT E R … ”
• Time Value of Money is HUGE
See handout 
• The “Rule of 72”
• $$ saved from 25-35 > $$ saved 35 on
• Everyone should have a (ROTH) IRA & 401k!
• Are you on-track?
• ~75% of ending salary per year
• 1x by 35, 3x by 45, 5x by 55
RETIREMENT ACCOUNTS
IRA
401(k) / 403(b)
• 2014 Limit: $5,500
• 2014 Limit: $17,500
• No matching
• May get matching
• Hold at any institution
• Hold at company’s chosen firm
• Thousands of investment options
• Limited choices
• Only contribute cash
• Only contribute from payroll
• Income limits
• Different for Roth vs Trad
• No income limits
• May get a Roth option
• Jan 1 – Apr 15 (of following year) open
period
• Jan 1 – Dec 31 open period
U N C L E S A M W I L L A L W A Y S G E T PA I D
Roth
• After-tax contributions (pay tax now)
Traditional
• Pre-tax contributions (get a tax break
now)
• Earnings grow tax-free
•
• Roth IRA’s have no RMD’s
•
•
• Roth IRA income limit: < $114k
• “Backdoor Roth” option
$120k salary, contribute max amount
of $17,500
Taxable income now $102,500
28% x $17,500 = $4,900
• Taxed on the way out
• Traditional IRA’s have RMD’s
• Really depends on tax bracket now vs. retirement
• Beliefs on long-term tax brackets / code / law
• Solution: have some in each
INVESTMENT TYPES
• Cash
Cash
• Bonds
•
•
•
Debt instrument
Corporate, government, municipal
Value fluctuates based on demand and interest rates
Bond
• Stocks
•
•
•
Underlying ownership in a publicly-traded company
Value fluctuates based on demand in the marketplace
All research shows stock picking does not work!
Stock
• Mutual Funds
•
•
A pooled basket of cash, bonds, and/or stock
Can be actively managed or track an index (called index funds)
Mutual Fund
• Exchange-Traded Funds (ETFs)
•
•
•
•
Also a pooled basket of cash, bonds, and/or stock
More tax-efficient than mutual funds
Typically cheaper
Trade & settle quicker than mutual funds
Exchange Traded Fund
(ETF)
Goals
Account Types
Investment Types
INVESTING 101
Stock
Cash
Exchange Traded Fund
(ETF)
Mutual Fund
Bond
Checking
Taxable
Account
Traditional IRA
Roth IRA
(Can be Roth
or Traditional)
(Individual,
Joint, Trusts)
Expenses and
Emergency Savings
Expenses prior to
retirement: house,
college, wedding
401(k)
Expenses in
retirement
Stock
Cash
Exchange Traded Fund
(ETF)
Mutual Fund
Bond
Account Types
Investment Types
INVESTING 101
Goals
Checking
Expenses and
Emergency Savings
Taxable Account
Expenses prior to
retirement: house,
college, wedding
Traditional IRA
Roth IRA
Expenses in
retirement
401(k)
Stock
Cash
Exchange Traded Fund
(ETF)
Mutual Fund
Bond
Account Types
Investment Types
INVESTING 101
Goals
Checking
Expenses and
Emergency Savings
Taxable Account
Expenses prior to
retirement: house,
college, wedding
Traditional IRA
Roth IRA
Expenses in
retirement
401(k)
I N V E S T I N G 1 0 1 & A C T I V E V S . PA S S I V E
• Write down your financial principles / guidelines
• 20-25% for “fun” if you must
• Active vs. Passive Investing:
research shows ~80-90% of
active funds underperform their
benchmark
• 8,000  2,000  500  125
• 20% most actively traded
accounts performed much worse
-men worse than women
• Past fund performance has very little predictive power to future performance!
• In fact, expense ratios are the best predictor
E X P E N S E R AT I O S ( T H E E N E M Y )
• Industry average (0.80%  2.50%)
• Low cost options (0.06%  0.50%)
• Get angry…it’s your money!
• Use the calculator
• Who wins the prize?
• Why rollover an old 401k
“It is difficult to get a man to understand something, when his salary depends on his not understanding it.”
–Upton Sinclair
A S S E T A L L O C AT I O N A N D R E B A L A N C I N G
• With proper allocation, you should reduce risk (volatility) and outperform
the S&P 500
• Rebalancing: meeting long-term policy target
weights
• Use it as a disciplined way of buying low and
selling high
• “..shunning the loved & embracing the
unloved. Most people do the opposite.”
(Swensen)
• Example: 1990-2012 portfolio: +0.5%
difference in return, -2% difference in volatility
MY TARGET ALLOCATION
PRECEDENCE OF SAVING
Matching 401(k) or 403(b)
– Max It!
Emergency Fund
(~6-9 months)
Pay Down Debt(s)
Roth IRA / 401k
Traditional IRA
/401k
Invest In Yourself Too!
What about alternatives?
Taxable Account
Home ownership & mortgages
• Up to a $300/month because of credit score
• Real estate is a key component
• Consider NOT holding your mortgage with the same bank
as your investments
• Typically 20% down, qualify for a home 3x your annual
gross income
• Closing costs, points
• Refinancing
• Being a landlord can be tough!
RENT
• Rent : Income < 30% (rule of 36)
• Impact in high-rent markets (SF / NYC)
• Have rental package ready
• Credit pull
• Ask for a copy of credit report
• Security deposit & interest
• 0.3% currently in SF
• Zillow’s “zestimate”
R E D U C E Y O U R TA X E S
• Look for ways to reduce your taxes
• Traditional 401k / IRA
• Mortgage interest (& property management fees)
• Education expenses
• Consider capital gains (realize gains if you ever find yourself in the
10 or 15% tax bracket. 0% long term gains)
• IRA conversions
• Donate to charity with
appreciated stock
• Hire a professional – taxes
are “grey” – ask questions!
STUDENT LOANS VS. SAVING
Paying down student loans vs. saving for retirement
• Max matching contributions
• Consider interest rates:
• Loan rate:
• <2%  Invest
• 2% - 10%  Calculate
• >10%  Pay Down
• Both are urgent!
• Save some to build the habit
• Consider tax deduction
• Windows are closed for good!
• Grandma’s inheritance
OTHER RANDOM ADVICE
• Never go without health insurance!
• “Exotic” or “alternative” asset classes
• Careful with your contracts
• Always look for discounts
•
•
•
•
Cell phone bills (15%-20%)
AAA, movies, restaurants, museums, parks
Driving habits
Avoid buying a new car
• Remember: smart investing
is not very exciting, but it is
very rewarding! (Be average!)
• Fatwallet Cash Back
• Company stock plans
TA C T I C A L N E X T S T E P S
• Automate your savings (pay yourself first)
“Hack human biases”
• Open a (ROTH) IRA
• Enroll in your company’s 401k
• Stick to low-cost index funds
• Help a friend (ER) or 19 yr
old cousin
• Don’t let inaction win!
YOUR TURN!
A chance to apply what you just learned:
Meet Hannah:
Hannah is 28 years old and lives in San Francisco.
Hannah makes $85k / year and is anticipating a $5k
raise in Jan 2015. She is engaged and is getting married
in 10 months, and hopes to have kids in the next 2-3
years. She has $45k in student loan debt at 6% and $4k
in credit card debt at 14%. She is currently contributing
to her Roth IRA but it is sitting in cash and she doesn’t
know how to invest it. She thinks her company may
offer matching 401k contributions but she isn’t quite
sure how to set up contributions.
What advice could you give Hannah?
How should she proceed?
MY PERSONAL FAVORITE FINANCE RESOURCES
ONLINE
• Fatwallet Finance Forums
• Bogleheads
• Blogs: Mr. Money Mustache, Oblivious Investor, CoffeeHouse Investor
READINGS/BOOKS
• Planet Money - NPR
• http://www.forbes.com/sites/quora/2013/05/01/personal-finance-for-youngprofessionals/
• http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Amount-of-RothIRA-Contributions-That-You-Can-Make-for-2014
• The Missing Link – Personal Financial Management (geared towards college students
and young adults)
• Random Walk Down Wall Street
QUESTIONS?
• Save 20% of your salary
• Pay Yourself First!
• Live below your means
• Invest in low-cost index funds
• “Be Average” – it’s a good thing
• Don’t react emotionally
• Stay with your strategy for the long haul “Don’t Dance”
From Registration
•
•
•
•
Does it matter whether I invest with Charles Schwab, Vanguard, etc.?
How to invest wisely. Ok to invest in pre-IPO or post-IPO stocks?
Are bonds worth investing in these days?
Most 401k funds have fees associated with it, which eat into your investment.
What is a good way to avoid this or be mindful of this?
WORKSHOP
1. Investment Strategies + Recapping the Basics
•
Bo Lu – Co-Founder and CEO
•
Sean – Client Services Specialist
•
Patrick – Financial Advisor
2. Credit Scores + Precedence of Saving
•
Robert – Head of Customer Education
•
Brian – Director of Activation
3. Product Demo + Service
•
Ephrat – Director of Algorithms
•
Jeannie – Operations Analyst
•
Megan – Enrollment Lead
4. General Q&A
•
Lisa – Software Engineer
•
Will – Financial Advisor
•
Mitch – Financial Advisor