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Good Friends, Good Investors

Good Friends, Good Investors

I’ve always focused on educating women about financial planning.  It’s personal – my mom has been in charge of her own finances since an early age.  She’s as smart as they come, but certainly had no background in managing money.  And she’s not alone – eight out of ten women will be solely responsible for their financial health at some point in their lives. 1

I think we know why – women live longer than men, and about half of marriages end in divorce.

Are women confident in their ability to invest?  Not as much as men. 2  That’s a shame because a recent analysis shows that women, on average, earn higher returns than men, and consistently save more of their paychecks. 3

You go girls!  You can do this, and you probably are going to have to.

So how can women (and men too!) learn what’s important when it comes to investing?  Take a course?  Look for a trusted financial advisor? (hint: This email address is being protected from spambots. You need JavaScript enabled to view it. ).  Both smart ideas  (the second one best).  But here’s something else to think about.  It came to me during a night out with my girlfriends.

It was a special evening – just because we were getting together.  Delicious food – that night it was Italian - a couple bottles of wine, and of course, such good friends. 

I knew them so well… they were also good investors.

Hmm…  Good Friends.  Good Investors. 

There had to be a link.  Could the same dynamics that help women form such strong bonds help explain the principles that lead to investment success?  As we chatted over salad, I thought more about it…

How were we all able to maintain our friendships, keep in touch, support each other, and get together for fun?  Particularly when we are juggling families, careers, community service, health and fitness, outside interests…  So many people rely on us, yet we figure out a way to be there for each other.  It’s not always easy – but with a little bit of planning…

Aha! Planning!  We’re planning experts.  And guess what, the most important concept in reaching your financial goals - it’s planning.  Putting in place a long-term financial plan and sticking to it.

I had to jot it down on the paper tablecloth.  I think the crayons that were provided might have been to keep kids occupied, but whatever…

Good friends maintain their bonds through planning.  Good investors reach their goals through planning.

I was beaming as I looked out at my girlfriends – college friends, childhood friends, friends of friends...   We all have such diverse life experiences to share.  If one of us was down, there was always someone else to pick her up. 

Kind of like how bonds add stability to a stock portfolio.  “Shari, stop thinking about work!”, I heard in the background.  But my wheels where spinning.

Diversification!  My mind flashed back to “the lost decade” of investing – January 2000 (the dot com bubble was bursting) to December 2009 (the financial crisis).  The S&P 500’s total return was negative!  But diversified stock portfolios fared much better.  International and Emerging market stocks were up significantly.  Real estate stocks as well.

I grabbed a crayon and started writing.  The waiter, looking over my shoulder, must have thought I was nuts.

Good friends benefit from diverse life experiences.  Good investors benefit from diversified portfolios.

My friends started getting on my case.  “Shari, you are not any fun tonight!”, “Shari, no one wants to hear you drone on about small cap premiums… Boring!”  Wow, girlfriends tell it like it is – no B.S.  And you know what, they don’t like to listen to B.S. either.

Wait, that’s another reason they are good investors!  They tune out Wall Street B.S.  The so-called market experts that say they can pick winning stocks.  But research shows that’s B.S.  And of course, the predictions of where the markets are headed – where to put your money “now”.  More B.S.  No one has a crystal ball.

I quietly added a third point to my tablecloth diary.

Good friends don’t B.S. you.  And they don’t listen to Wall Street B.S.

By now it was time to say goodbye (guess who always has the job of allocating the bill?).  We had agreed on the restaurant because it had great food, and wasn’t too expensive.  One of us had a Groupon as well!  We are always talking about where to find a bargain when it comes to food, clothes…   We don’t buy anything until we know all of the costs. Wait, you guessed it!  That applies to investing too!

Many investors don’t know what they are paying for investment advice.  There are mutual fund fees, advisory fees, trading costs - all of which can really impact returns.  It’s important to understand these fees.  It is one of the things you can control as an investor. 

That led to my final scribble on the increasingly crowded tablecloth…

Good friends love to share a good value.  Good investors keep their costs low as well.

I ripped off the section of the tablecloth, stuffed it in my pocket and hugged my girlfriends.

So much we can learn from each other…

  1. UBS Own Your Worth, 2018, National Vital Statistics Reports, Vol. 66. No. 6, Nov. 27, 2017
  2. Women & Financial Wellness: Beyond the Bottom Line, Merrill Lynch and Age Wave Consulting, March 2018
  3. Fidelity Investments, Who's the Better Investor: Men or Women? May 2017
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