Investing Revisited with the Happy Hour Ladies
Today is the last Friday of the month and my regular listeners know that on the last Friday of the month, I host the happy hour on the podcast where I gather great friends with me to drink cheap drinks and talk about money topics. We’ve been doing these weekly happy hours for quite some time, and we’re always cognizant to try to pick fresh topics that we’ve never addressed before on the show.I knew that we spoke about investing in the past during a happy hour, but a few tidbits from a conversation with Mrs. Frugalwoods made me think that we should revisit this topic having a gut feeling that the conversation would be fresh. Well, as you’ll hear in this show, we were all shocked to find out that it’s been over four years since we talked about investing on the happy hour and you better believe the conversation was fresh. I hope you enjoy hearing our investing experiences.
What are we drinking?
Melanie from Dear Debt — Coffee Martini (Cold brew, kahlua, and vodka)
Tonya from Budget and the Beach — Merlot
Liz, Mrs. Frugalwoods, from Frugalwoods.com — Caramel Vodka and Seltzer
Shannon — Boxed Rosé
Podcast Notes
The last time the Happy Hour ladies talked about investing was April 24, 2015 (Ladies Talk Investing - Happy Hour 4).
At the time, Liz had her husband handle all of the investing, Melanie wasn’t debt free and wasn’t able to invest yet, and Shannon had all of her money invested in the Financial Gym.
All of the ladies are in different places now.
Shannon was disappointed when, before, Liz said she wasn’t really involved in their investments.
Liz’s introduction to money management was debt aversion, being frugal, and saving money, which doesn’t lead well into investing.
The thought of investing was very scary to Liz, because the market goes up and down, and it was difficult for her. She originally started investing by contributing to her employer’s 403(b) and maxing it out.
Liz does total market index fund investing and it is not complicated. You own a little piece of everything in the market and it is a good aspect of diversification.
If you have your debt paid off, if you have an emergency fund, if you have retirement savings, the next step is investing. That could be through the stock market or real estate. This is where you grow wealth.
The Financial Gym has a webinar available on-demand called Investing 101. In this webinar, Shannon goes through the reasons why you should invest.
Liz started getting more involved in investing within the last four years, because of her blog. She has pretty straightforward investments. Usually the best things to invest in are the simplest - buy and hold.
It is hard for people to accept that the most boring answer is the best answer.
Fidelity did a study that showed dead investors performed the best. They literally set it and forget it. The only caveat is to rebalance as you go along.
Think of wealth as a tree. When you start investing, the trunk is your core portfolio, whether in a brokerage account or a retirement account or both. You want to create a really strong foundation for your tree. It is going to be boring, but sturdy and supportive. Once it it starts to grow and take root, then you have the tree branches which include cryptocurrency, individual stocks, and commodities.
Liz has four different index funds through Fidelity. She likes them because their fees are low.
Pick a site that is the easiest to figure out. You want it to be easy when you go to their website.
The website Acorns invests your change. If you use a service like this, ask about their fees and their returns. They invest in low-cost ETFs.
If you are not going to feel comfortable picking two or three funds or rebalancing, it is worth it to go through a roboadvisor to do it for you.
Ninety percent of your returns are based on your asset allocation. The other 10 percent is based on the actual fund and the fees. The best thing to do is to do it yourself. The next best thing is to use a roboadvisor, because it is better than not investing.
The fees are taken out of your investment returns. You don’t actually have to send them a check. If you make a 6 percent return and your fee is .50, you actually make 5.5 percent.
If you do a lot of trading and individual stock picking, some of the sites have trading fees and that is where you are actually paying money.
As Liz got more engaged with her community, she got more engaged with her own investing.
Liz looks at her investment account very infrequently. Her husband looks at them more than her. It is helpful to insulate yourself, especially if you are pretty far from using those funds. Make sure your portfolio matches where you are in life. If you are retiring next year, you need to be in a less aggressive position.
For Liz, this is more of a long-term thing and her portfolio is aggressive and weighted for growth. It is set to automatically invest a set amount every month. It insures they are buying consistently and it spreads out the risk, because they are buying at different times throughout the year.
The last time they did the investing conversation, Shannon had $50,000 of credit card debt from the Financial Gym and her personal finances were a mess. Since then she straightened out her finances and opened a Betterment account.
Shannon started the account with $11,000. In the last year, it was as high as $11,800 and now it is $10,878. In October it was down to $10,200. Sometimes the best way to invest is to just do it.
Shannon wants her clients to consistently contribute. Set it and forget it if you don’t need the money anytime soon.
When investments are down, it is called unrealized losses, because the losses haven’t really happened. It becomes a realized loss if you sell your investments.
If you are really anxious when the market goes down and it is a non-retirement account, when that account does come back to a higher point, you need to consider selling and being more conservative with that money. You don’t want to put yourself into a mental warfare. You don’t want investing to cause more stress in your life.
Don’t invest your rent money or grocery money. If you are going to be buying a house in a couple of years, it is probably not a good idea to invest the money. Investing is a long-term proposition.
The market has about a two-year cycle. Every two years it will go back to where it was.
It took about four years to recover from the 2008/2009 downturn.
What is happening this year in the market is a great example to expect the market overall to grow, because there are always new entrants. Uber, Lyft, and Pinterest weren’t listed before and now they are going to contribute to the market. There are always new things happening. It is always evolving.
In April 2015, Melanie was still in debt and she got out of debt in December 2015. She was so excited to start investing, but then life happened.
In March 2016, she moved back to California, which was expensive, and three months later she had a huge tax bill that wiped out her emergency fund. She was back to ground zero.
Her partner at the time wasn’t bringing in any income, so Melanie was taking care of all of the bills.
In 2017, it was a similar story and it was the collapse of that relationship. She was a mess and could hardly work and her income went down $20,000. All of the money she thought she was going to be saving and investing didn’t happen as much as she wanted.
During this time, Melanie opened a SEP IRA, which is for self-employed people. She also opened a Vanguard account with index funds. Two months after she started investing in Vanguard, she didn’t understand why she wasn’t making any money. She didn’t realize that she had to do another step to purchase the investments.
Melanie used to write for Robert at the College Investor, and when she started investing, she emailed him and asked him what to do. He walked her through step by step so she could get started.
Roboadvisors invest your money for you. Investing is not easy for everyone. If it is going to cause friction, take away the friction and just choose a roboadvisor. You need to know what is going to work for you and the worst thing to do is to not get invested.
Looking at compound interest, you really need as long as you can possibly give yourself in terms of your age versus when you are going to retire.
About every seven years, you can expect your portfolio to double, but you need to have your money in there.
At the time of the last recording, Tonya had her money invested with an active advisor at Raymond James. In December 2015, she worked with Shannon to move her money. Since it has been moved, there is very little she has done with it, other than adding to it or taking money out of her brokerage account.
When Tonya was working full time, she was adding quite a bit of money to a 401(k). Since she has not been working full time, she has not been adding to it and has been taking money out of her brokerage account more than she likes.
She checks her Personal Capital account once a month, because she does a tracking spreadsheet. The last month Tonya did her net worth spreadsheet, it was up the highest it had been even when she had a full-time job, which was more than a year ago. Now it is $10,000 less. Most of that is not something she can control, but seeing it keeps her accountable and more in tune with her money.
If you are in your mid-60s and are going to retire from your full-time job, on average, you are going to be living to 85 (for women it is 87), according to Social Security. You have another 20 plus years that you need your retirement portfolio to work for you.
Many Baby Boomers have been too conservative with their investments and they don’t have enough saved.
If you are near retirement, you still need a portion of your portfolio to be aggressive.
If you do a rollover of your 401(k) into an IRA, the money gets put into a cash account and you need to invest it from there.
Tonya had a financial advisor and now she handles her investments herself. She had never met the advisor in person. Her dad set her up with him, because he is an advisor in her hometown.
Tonya understood nothing, when he did her annual review. She had very little interest in learning, because it wasn’t very fun. After she met with her accountant, she was told about the fees she was being charged.
When Tonya told her dad that she left Raymond James and invested in Vanguard funds, he said that he did that years ago.
Tonya hasn’t done much with her investments. She has let it sit and grow. It makes her feel good that it is there. Tonya is happy she got rid of her advisor. It gives her piece of mind, because she likes to know where her money is and that she has control over it. It is better for her to simplify.
The number one challenge with investing is confusion and jargon. There are roboadvisors that you can use to keep it simple and so you don’t have to get in the weeds on it.
The number two challenge is to have the money to invest. If you don’t have it, you need to work on budgeting expense management to get to that point.
The number three challenge is knowing your different goals. There are different roller coasters for different life goals. Your retirement roller coaster is very extreme. Saving and investing for five to ten year goals is a moderate roller coaster. Investing for two to five years is the kiddie coaster. It is all about knowing what buckets you have.
In 2008, some people who were close to retirement were freaking out, because the market went down. The problem wasn’t the market, the problem was that they had the wrong asset allocation. They were on an extreme roller coaster when they had a different goal.
If you feel like you don’t know how to open the account or if you have questions, call the 800 number at Fidelity, Vanguard, or your 401(k) provider. It is their job to help you and make sure you are comfortable. If they are not, you need to think about moving your account to somewhere that is helpful.
Liz has a 529 plan for each of her kids. She goes back and forth on whether or not they are a good idea. It all depends on your state and your tax situation. It is something to explore and think about it. The other side of it is that you can take out loans for college but not for retirement.
You can go on the Social Security website and find out what you can expect to earn.
Investor.gov is another good website to use.
If you haven’t started investing, or if you feel like you are behind, remember that investing is just one component of your retirement/financial independence. A very large component of it is your lifestyle and the expense choices that you make. Take a deep breath. What you can control is your lifestyle.
Your portfolio only needs to be as big as your lifestyle in retirement. If you can start working on a healthier, lower-cost lifestyle, then you do not need as much money. Your lifestyle is totally within your control.
Make the effort to be consistent. Even if that means contributing only $50 a month. Keep track of it, but don’t go crazy over it.
TAKEAWAY:My biggest takeaway is that investing is personal and can be personalized. Find the best approach that works for you and stick with it.If you want to work with my team at the Financial Gym and let my trainers become your new BFF, best financial friend, remember that Martinis and Your Money Listeners get 15% off Financial Gym services. My financial trainers have seen it all. No matter where you’re starting, we have the tools and resources to get you where you want to go. So head over to, or send friends to, financialgym.com.If you have any topics you would like for us to talk about during happy hour, please feel free to email me at shannon@finblonde.com or tweet to me at blonde_finance or join the private martinis and your money Facebook group and let us know. Until next time, take care!!