Investing

What the Hell is Robo-Investing? And Why Should I Care?

In the beginning, I was skepticalvery skeptical. Now I’m a raging fan.

Robo-Investing is the best thing to happen for investors since index funds were invented.

In Robo-Investing, a computer—not a person—creates and manages a portfolio of index funds and ETFs. What are advantages for you, the investor?

The price is right. Fees are very low (0.15% to 0.50% compared to 1%-2% for human advisors). Plus there’s either no, or a very low, minimum required to open an account.

It’s easy to start. You fill out a short questionnaire to assess your situation, goals and risk tolerance, then choose among suggested portfolios based on your answers. That’s it…you’re ready to invest.

Great customer service, at no extra charge. Offerings include automatic rebalancing so your portfolio doesn’t get out of whack; tax harvesting to offset capital gains; retirement planning; and a variety of educational classes.

Compare Robo-Investing to traditional advisors or managed funds, which require much higher minimums, charge much higher fees, yet consistently underperform indexing (often called passive investing) over time.

No wonder Robo-Investing has experienced explosive growth since it started in 2008.

Interested? Here are my recommendations. Check them out.

Have you tried Robo-Investing? Share your experience.

The Timeless Wisdom of Wealth Creation

The year is 1926. Henry Ford announces the 40-hour work week. The first SAT test is administered. And the notorious gangster, Al Capone, is terrorizing New York.

But the real news is this. The Richest Man in Babylon by George Clausen—perhaps the best financial book ever written–hits the shelves.

This quaint parable, filled with timeless wisdom, became a classic because it demystifies wealth building like nothing else I’ve read.

When we first meet the richest man in Babylon, he is telling friends the secret to his fortune.

“I found the road to wealth,” he tells them, “when I decided that a part of all I earn is mine to keep.”

The men look at him incredulously. “Is that all?” one asks, insisting that of course everything he makes is his to keep.

The wealthy man just shakes his head. “You fool, you pay everyone but yourself,” he cries, pointing to the clothing sellers, sandal makers, and wine merchants.

Instead, the rich man counsels them, learn to spend less and pay yourself first. “For every 10 coins thou places in thy purse, take out for use but nine.”

This is the way that Wealth Builders live—a part of all they earn goes into their personal savings on a regular basis. In other words, they pay themselves first.

I’ve watched countless underearners transform small salaries into hefty bank balances by simply socking away small amounts into a savings account every month.

But now, unlike 95 years ago, you can do this automatically. Fill out a form and voila, the bank takes care of everything.

What do you do next? The rich man’s guidance is simple. Once you learn to live on less than you earn, next “seek advice from those who were competent through their own experiences to give it. And, lastly…make gold work for you.”

If you follow Clausen’s timeless wisdom faithfully—pay yourself first, learn from those with experience, and invest for long term gain–you’ll find yourself well on the way to wealth!

What gets in your way to creating wealth? Comment below and let me know

What Covid Taught Us About Money

I’m a Wall Street Journal junkie. When I first subscribed, 25 years ago, I was totally intimidated. But I’d lay it on the kitchen counter and every day I’d pass by it figuring, by osmosis, I’d pick something up. I credit that ritual for greatly reducing my fear of investing.

The Journal is always filled with interesting and instructive articles. Last week, for example, I was riveted by the headline Personal Finance Lessons We Can All learn From a Pandemic Year.

“With 2020 in the rearview mirror,” the article began, “there’s a lot of economic damage to be assessed. But there are a lot of personal finance lessons we can learn—lessons that will put us in good stead whatever the economic future holds.”

There were 15 excellent lessons. Let me share my 5 favorites.

The Power of Celebration

Here’s a question for you. When was the last time you celebrated or simply acknowledged yourself for making the tiniest bit of progress—despite the difficulty?

Sadly, the answer for most will be ‘I can’t remember.’ Perhaps this is why so many struggle, in vain, to change.

Positive reinforcement—anything from patting yourself on the back to popping open the bubbly—works for one simple fact. Rewarding yourself feels good.

And any pleasant sensation triggers the release of pleasurable chemicals, like dopamine, encouraging the brain to keep repeating the behavior.

“It’s no secret that we derive pleasure from doing things we enjoy,” said neuroscientist Rui Costa, CEO of Columbia’s Zuckerman Institute. “The brain learns which activity patterns lead to feel-good sensations and reshapes itself to more efficiently reproduce those patterns.”

It’s why teachers give kids gold stars and cute stickers to encourage behaviors that may not come naturally or feel good right away.

Rewiring for Wealth is anything but pleasurable in the beginning because it often requires delayed gratification. There’s no immediate reward for spending less, saving more, or investing wisely. But the feel-good payoff for dining out, buying a new pair of shoes, or traveling to Tahiti is instantaneous.

Thank You!

Today, in the spirit of Thanksgiving, I’m taking this opportunity to say Thank You…

…to all of you who are reading this blog, even if it’s the only time you ever do, I truly appreciate you reading it today.

…to everyone who’s ever written to tell me how my work has impacted your life, you have no idea how your words have impacted mine. In fact, your notes and emails are tucked in a box beside my desk.

…to anyone who’s bought my books and perhaps passed it onto a friend, this means more to me than you can ever know.

…to those of you who’ve joined my groups or signed up for coaching, I’m endlessly grateful you trusted me to guide you while teaching me to be a better guide.

…to my amazing team—Lynda Jo, Carney, Jayme & Ben—for taking care of all the details I abhor and for supporting me in such a deeply loving way. I really would be lost without each of you.

…to my ex who gambled away my inheritance and my father who wouldn’t lend me money, you taught me that, indeed, the obstacle is the path, leading me straight to my life’s purpose.

…to my wonderful financial team, because despite current events, my portfolio has more than doubled since I first found you.

…to McGraw Hill, the publisher who said yes to my latest book, when all the other said no.

…to my kids and grandkids who are coming to spend Thanksgiving with us. Truly, my cup runneth over.

…to my beloved husband who rarely lets a day pass without expressing his love, appreciation and support for me.

Once again, from the bottom of my heart…THANK YOU ALL!

I’d love to know who’d you like to thank this holiday season. Leave me a comment below.

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Investing During a Pandemic…Isn’t it too Risky?

Yes we’re in a pandemic. Yes, investing now may feel very risky. But understanding risk is what makes you wealthy. And so few people actually get it.

You want to know your most dangerous risk? It’s not the market’s gyrations. It’s your emotional reactions.

The emerging field of neurofinance has proven that most investors, regardless of gender, tend to act on emotions, not rational thinking, when making financial decisions.

The reason? Our brain registers risk even before we’re conscious of it. Consequently we tend to make rash decisions that rarely end well, even if we know better.

So when markets take a tumble, our emotions, especially fear, take over. And we make very bad decisions. It also happens in reverse.

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I Know What To Do! So Why Don’t I Do It????

Could this be you? You’ve read a ton about investing, attended some classes. You understand stocks, bonds, and the value of diversification. You own a few funds in your retirement account.

Still, you continue to ignore or neglect your money, even though you know better. Why?

Blame it on traditional financial education…where the emphasis is on filling your head with facts rather than fostering your courage to change.

Raise your hand if you’ve ever been given the tools to boost Self-Efficacy, the most powerful predictor of financial well-being. (I didn’t think so.)

Self-Efficacy—a concept developed by the Stanford psychologist Albert Bandera—is a person’s belief in their ability to succeed in a given task or goal.

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Words of Wisdom for Weathering A Crisis

I’ve been wracking my brain all week…wanting to find just the right words for these whacky times. Then a newsletter from Ellevest—an online women-centric financial firm—showed up with the perfect message.

I could not have said it any better.

Three Things I’m Telling Myself 

By Sallie Krawcheck

What we’re going through is scary. On many levels.

As an investor, it’s been stomach-lurching. And so I keep reminding myself of three things:

  1. We’ve recovered from every recession and depression. Some have been longer; some have been shorter. But we’ve recovered from every one of them since 1854, and the economy has continued to grow.

  2. Time has been your friend. We’ve recovered from every “bear market” in history. Some have been longer; some have been shorter. But consider this: You could have invested in the stock market on any given day since the mid-1920s, and if you had stayed invested for 15 years, your chances of a positive return historically were 99%.

  3. Stillness is your other friend. Remember the research that women are better investors than men? That’s because women more often do what so many professionals (Ellevest included) advise: Invest according to a plan — and then leave it alone.

Click here to read the rest of the article.

Do you have an investment plan in place? Leave me a comment.

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Losing Sleep Over Sinking Markets? Advice from a Wall Street Expert…and a Veteran of 2 Major Crashes—Me!

Last week, the market took the worst dive since 1987. Ahhhhh, yes, 1987.  I remember that October day quite well. Black Monday they called it.

I’d been in the market for about a year.  I knew nothing about investing, but I trusted my broker. However, when the market went into free-fall, I went into full blown panic. 

I called my broker, insisted he sell everything. He begged me not to, insisting the market will go back up…it always does.

I didn’t listen. If I’d stayed put, like he instructed, I’d be a lot richer today.

Yet it was a priceless lesson.Ten years later, in 1997, almost to the day, the market crashed again. Only this time I didn’t see disaster. I saw a sale. 

Fast forward to today. I’m not saying you should go on a buying spree. Though it is a sale. But I am imploring you not to sell everything in a panic. Investment decisions, based on emotions, rarely end well.

However,  if your nervous system can’t stand the heat, don’t rush out of the kitchen or do anything rash. Take advice from my favorite financial writer, Jason Zweig,

“If you feel you can calm yourself only by ditching some stocks,” he wrote in last Fridays Wall Street Journal, “sell a fixed amount each month for the next year.” By taking small steps, and automating them, you take the emotion out of the decision.

And if you’re going to sell, sell the losers, he advised. “That will turn some of your losses into cash—and a write-off on your taxes.”

Or, instead of selling, “You could direct your dividends into cash, rather than more shares, for now.”

 

I’d love to hear how you’re reacting to this crazy market? Buying? Selling? Waiting and watching? Or frozen in fear? Leave me a comment below.

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Investing vs Gambling…Is there a difference?

Not long ago, a woman in one of my groups proudly announced that she‘d maxed out her 401(k) and had been buying stocks outside her retirement plan based on a friend’s advice.

She had a right to be proud. But when I asked if she was following a plan, she looked puzzled.

“How do you know whether or not your portfolio is properly diversified?” I asked her. “Or if you’re taking too much or too little risk?”

I spoke from experience. For years, I bought individual stocks and mutual funds, based on other’s suggestions. I had no plan.

Then, I hired financial advisor Eileen Michaels. Initially, I wanted her to manage my individual stock portfolio. She wouldn’t have it.

“You can’t invest like that, without a strategic plan,” she told me. “Keeping your investments fragmented is how you’re keeping yourself small.” She had me at ‘small.’

Planning, I learned, is what separates investing from gambling.

Picking stocks willy-nilly, trying to time the market or deferring investment decisions to another and turning your back…that’s gambling.

It’s risky in the worst possible sense.

Investing, on the other hand, is a means to an end. The whole point of investing is to ensure you achieve your goals and protect your future.

I highly recommend hiring a fee only financial planner. Unsure where to find one? I suggest  Garrett Financial Planning https://garrettplanningnetwork.com, a world-wide network dedicated to offering professional planning at affordable prices.

Are you gambling with your future or investing in it? Let me know below.


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Meet Barbara Huson

When a devastating financial crisis rocked her world, Barbara Huson knew she had to get smart about money… and she did. Now, she wants to empower every women to take charge of their money and take charge of their lives! She’s doing just that with her best-selling books, life changing retreats and private financial coaching.

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