Please don’t judge me.
Listen, I’m not ashamed to admit that I am a reality TV connoisseur. True, I am a nerd through-and-through (and not the cool-yet-awkward, tech-savvy, Lena Dunham kind). I get excited discussing the value of credit shelter trusts or whether the AMT should be repealed for Pete’s sake! But on the other hand, I will get super passionate and opinionated when debating whether it was cool for “Housewives of the OC” ladies Tamra, Vicki and Lydia to ditch Gretchen and Heather after dinner on their recent trip to Cabo San Lucas. (By the way, it was. Gretchen and Heather are just a couple of sticks-in-the-mud with veneers.)
I also watch “Keeping Up With the Kardashians” on E. It’s not because I like watching rich people lay in bed all day in fluffy white robes talking about how stressed out they are, or go on long extravagant family vacations to foreign lands where they lay around in bed all day in fluffy white robes. And while I am fascinated (and confused) by the imagination of Bruce Jenner’s plastic surgeon, no, I don’t tune in to the show just to get a glimpse of Bruce’s Farrah Fawcett hair and high cheekbones. And maybe others are but I am not watching for cracks in the relationship between Kourtney and baby-daddy Scott Disick.
I guess I watch the show because it serves its purpose. Once in a while I want to relax and settle in for completely mindless, unuseful, brain-cell murdering entertainment–and I’m never disappointed!
Well this week was a big week for the Kardashians because Kim and Kanye who’ve been dating since early last year, finally had their baby. The baby girl came a few weeks early, and while reporters had hovered around Kim throughout her pregnancy and reported her every outfit flub, extra pound gained and every Kim outing sans Kanye, since the birth of Baby K, the family has been very private.
Since I follow the media-hungry Kardashians, I know the eery silence is intentional, even strategic. Both Kim and Kanye know how to make a ton of money by being in the limelight. Kim is worth about $40 million while Kanye’s net worth is estimated at $90 million. Between the two of them, they have been paid millions for sex tapes, law suits, clothing and fragrance lines, appearances and more. If anyone knows how to turn the birth of a baby into millions of dollah-bills, it’s Kimye.
So while Baby North or Kaedance or Kris, Jr. is still only about 6 days old, we know she’ll be well taken care of and will likely be financially savvy and earning her first millions before age 5. Here are some investment lessons we can learn from the newest edition to America’s Royal Family:
1. Timing is everything
Baby K arrived five weeks early but right before Kanye’s new album Yeezus dropped (ugh). As a result she secured the time and attention of both mommy and daddy. If she’d been born around her due date in July, Kanye would’ve been on tour and may have missed the birth and corresponding media circus. Not to mention Baby K beat out the arrival of a real Royal (Prince William and Kate’s) Baby.
Similarly when investing in the market, it’s important to know when to get in and when to sell. While a typical buy-and-hold strategy (investing in a mix of assets for a long period of time) can be smart over the long-term, there is value in watching specific companies or sectors for the right time to buy in or cash out. Most of us are not financial professionals so it’s wise to team up with a trusted advisor who does watch the market, and can guide you in reaching your goals. And make it a point to learn about investing yourself. The more familiar you are with the market, the more equipped you’ll be to take advantage of market movements.
2. Sell High
Has anyone seen a picture of Baby K? No? Seems odd, doesn’t it, that a family that makes millions from having cameramen documenting their every move (weddings, births, fights, drunken escapades) hasn’t yet thrown open the doors of the NICU to let the cameras in. Obviously, Kimye–or more likely momager Kris–is shopping around exclusive photos of baby K to the highest bidder–and will likely get millions!
This rule of thumb seems like a no-brainer when investing in equities but it’s hard to determine when the market has peaked and when is a good time to sell off certain positions. Many investors learned this the hard way back in March 2000 when the tech bubble burst and tech stocks that plummeted. A similar thing happened when the housing market collapsed in the fall of 2008, leaving stocks, property values and retirement plans at historic lows. Yet all along, many experts had warned about the markets collapsing–as the market was skyrocketing– but the general consensus was that the market will only go higher, culminating in what former Fed Chief Alan Greenspan warned was dangerous and “irrational exuberance.”
To take advantage of market highs but minimize risk, consider investing in an ETFs (exchange traded funds) which combine a group of stocks in a specific sector to mimic a particular index. An ETF can be a low-cost strategy that gives you exposure to a particular area of the market. It offers diversification so if one position loses value, the value of the ETF doesn’t necessarily plummet. In addition to ETFs, many investors appreciate the simplicity and diversification of a traditional balanced mutual fund that leverages equity exposure for higher returns along with consistent returns from government bonds and cash.
3. Acquire an entourage
Have you ever seen photos of Kim or Kanye walking to their car or through the security line at the airport? True, they are usually mobbed by the paparazzi but look closely and you’ll see a gaggle of handlers behind them. Baby K is sure to have her share of men-and-ladies in waiting to handle her every whims–and when it comes to investing, so should you!
A financial entourage can include anyone from a financial advisor to an investment club that meets every month, to an online community, a group of friends or an investment buddy, to a collection of trusted websites and television shows that helps you keep up on the markets and the economy. To find a fee-only financial advisor, try http://www.napfa.org to find someone in your area. For advisors who work on commission, check out http://www.fpanet.org. Many websites are available to help you learn about and undertsand the markets like http://www.bloomberg.com,www.Wealthwatch.com, http://www.yahoofinance.com and more.
4. Don’t be afraid to go international
I’ve read that when Kim went into labor, Kanye was just stepping off a plane from Switzerland. In fact, many credible sources (ummm…US Magazine) reported that Kanye was abroad during much of Kim’s pregnancy, and that after the birth of the baby the couple plan to move to France. Whether for more privacy or for the fine wine and decent coffee, the couple may decide that living in Europe provides a better lifestyle for their family.
While world markets have all experienced their share of ups and downs over the past few years, many investors have seen strong returns by diversifying their portfolio and including international and emerging market funds. Countries like Brazil, India, China and Russia have seen positive earnings in their markets, and emerging markets like Indonesia, the Middle East and Chile are also benefiting from cheap labor and strong demand. While an overall portfolio of international and emerging market stocks may not be wise, consider adding exposure to overseas funds as a way to increase returns. Most of the top fund companies like Vanguard, Fidelity, Franklin Templeton, etc. offer international and emerging market funds so check out how the funds rate on http://www.morningstar.com before investing.
5. Don’t always believe what you hear
It goes without saying that Kanye West talks a big game. In recent interviews and song lyrics, he has compared himself to God, Andy Warhol and Steve Jobs, among others and made references to his superior artistic and leadership abilities. The guy is anything but humble and whether his proclamations are accurate, that’s up for debate. That’s why, as Baby K grows up, she must use good judgement and scrutiny when taking advice from everyone around her. While her father may announce that he is the king of rap or whatever, and her mother brightly responds with, “That’s AMAZING!” Baby K would be wise to keep critical eyes and ears open and continue searching for the truth.
As investors, we’re inundated on a daily basis with information, facts, opinions, analyses and rhetoric on the market, how it’s doing and where it’s going. At the office water cooler, there’s always that guy that goes on about his friend’s “genius” start-up. Turn on the TV at dinnertime and you have red-faced Jim Cramer hollering at a caller from Long Island about why he thinks Home Depot stock is sinking. Turn to MSNBC and you’ll watch a White House spokesperson clumsily attempting to explain the benefits of the health care legislation. Change to FOX News and you’ll likely hear a doomsday scenario of where the market –and basically the world–is headed.
All this information can have negative effects on investing if you let it. On the other hand, tuning into these shows once in a while can provide perspective as long as you continue to work with a financial advisor, pay attention to investment accounts and how they’re moving, maintain a daily routine of reading about the markets (like reading a financial article per day) and discussing your thoughts with your advisor or trusted investment buddy. It’s important not to give in to the confusion and make investing decisions based on that.
Welcome to the world, Baby K! May your future–and ours– be filled with bling!
By Lena Rizkallah, Money Moxie
Like many adults with time and a little money on their hands, I have a gym membership. I discovered the gym back in college–and over the years, I have tried almost everything, from step aerobics to jazzercise, cardio machines and free weights, to yoga and “barre burn”–but I’m not naturally athletic. When I was younger, my hard-working immigrant parents had the best intentions for me, but instead of enrolling me in soccer or volleyball where I could practice drills and build stamina, improve my social skills and maybe stop eating lunch by myself, they thought hours practicing the piano, flute and French in complete solitude would prepare me for life. The end result was an awkward childhood. So when it comes to sports, I have no skills, grace or eye-hand coordination. I was reminded of this most recently when my temperamental Argentinian tennis coach stopped calling me back to schedule our lessons.
Thus, the gym has been the place for me to get some exercise, as long as I don’t have to serve, kick or dribble a ball.
For a long time, the one area of the gym that I felt was off-limits to me was the weight room, the area designated for free weights; this is the space that usually takes up an entire mirrored wall in the gym and is lined with weights from five to 500 pounds with benches facing the wall. I’d always avoided that area because I thought I didn’t belong there. For one thing, it was all men that hung out there, most of them with muscles up to their ears. For another thing, the noises coming from the weight room would scare away Dexter Morgan. Grown men stood in front of the mirrors or lay on benches, lifting huge weights. Loud grunts, shouts and moans could often be heard, usually followed by someone dramatically dropping the weights to the floor. I wanted no part of that action.
But eventually I joined a gym that kept all the free weights in the weight room, even my measly 7.5 pound hand weights, so I was forced to meander over to the weight area to retrieve them. At first, I was pretty intimidated by the meaty crowd at the weights. I apologized a lot, thanked the men working out there, would move to the furthest bench to give them room. Once someone dropped a towel and I scampered over to get it like the Hunchback of Notre Dame, handing the murky wet towel to a bald, tattooed, pierced ‘roid-head. “You dropped your towel, sir.”
Soon, however, I noticed other women using the weight area, standing in front of the mirrors doing their reps, and they seemed right at home. It gave me more confidence to stick around and do my reps, and it dawned on me how different men and women can be when we work out. I’m not saying all men holler like they’re being waterboarded when they lift weights, but I’ve witnessed a lot of veins popping, red faces and childbirth grunts over there (and not from the women!). On the other hand, most women lifting weights handle the stress quietly; I guess some of us think that if you’re grunting and straining from lifting weights, maybe it’s time to check your ego and lighten your weights.
Over time I’ve become a lot more comfortable in the weight room. Nowadays, I stand my ground when someone eyes the bench I’m using, and I stake out my space in front of the mirrors. Who cares if I’m just lifting 7 pounds next to a guy lifting 150?? And the weight-lifting screams? I rarely hear them anymore.
This experience got me thinking about the differences between men and women in investing. For years, men have dominated finance and investing, presumably because they were the major breadwinners, they spent the most time in the workplace and were more likely to be socialized to be responsible for managing the family finances. Over the past few decades, however, as more women entered the workplace and climbed the corporate ladder, there has been a shift. Nowadays, most women are as likely to invest as men, and are often better savers than men.
How Do We Invest?
– When it comes to investing, women tend to be conservative investors and prefer a buy-and-hold strategy rather than taking a more active approach to their portfolios. Women will invest in a carefully selected portfolio of investments based on their saving and investing goals, and then make minor changes going forward. Men, on the other hand, have a stronger stomach for risk and are more likely to move in and out of various stock positions; thus they are more likely than women to buy at market highs and sell low, often miscalculating the market. In fact, a recent Vanguard study showed that men that make frequent changes to their portfolios will miss out and often see returns almost 1% less than their female counterparts.
– Men tend to trade more, while women prefer to sit tight–but there are many factors for this and it’s not just about knowledge or confidence in the markets. Experts believe that the investing tendencies of men and women are partially biological. A study by John Coates, a former Wall Street trader, revealed that what triggers risk-taking behavior in men is not more knowledge or skill in investing but actually high levels of certain hormones like testosterone and cortisol. This elevated amount of testosterone encourages men to take risks mainly for the rush of it. Women, historically the mothers and caregivers, on the other hand, focus on protection and sustenance and these characteristics also extend to investing habits.
– Men are more likely to seek advice for their finances, using newspaper articles, the internet and are more likely to hire a financial advisor. Women on the other hand are less likely to have financial advisor. Many may seek professional advice with a spouse but otherwise, most women more on friends and family to help them with their finances. And when they do have a financial advisor, studies reveal that many women are dissatisfied with their advisor.
– Confidence is an issue. A recent Prudential study on how men and women invest, it revealed that men tend to be more confident when managing their finances than women, are more comfortable with different types of investments and strategies and make their own investment decisions. Women, on the other hand, are less aware of investment strategies and feel less confident. As a result, many women tend to make conservative choices and seek FDIC-backed investments–safety without the higher yields of the market.
Speaking The Same Language; How Can Men and Women Learn From Each Other?
– Because women live an average of 5-7 years longer than men do, longevity is a factor and retirement income must last. Consider stocks and alternative investments to provide more exposure to the market. In addition, while women statistically save more than men do, they spend less time in the workforce, and often leave work entirely or take many years off during their peak earning years (ages 35-50) to raise children and/or care for ageing parents. Men are more likely to invest in equities but should think twice before moving positions.
– Diversification is key. Investing the bulk of your money in bonds or in company stock may seem safe but could be detrimental in the long run; the investment may plummet in value or fail to keep up with inflation. When you hold a diversified portfolio that includes a mix of cash, bonds, equities and alternative investments, you’ll have a better chance to achieve higher returns in the portfolio.
– Studies show that men learn independently about finances while women prefer to learn in groups. Education is crucial! Both men and women could benefit from mixing it up once in a while. Make sure you that you are using the right online tools and webinars, attending seminars and face-to-face meetings and getting the big picture from the experts. While the internet is a great source of knowledge for financial literacy and investing, attending occasional live seminars give you the chance to ask questions and hear questions and answers from the group. Be sure that the “expert” is a true expert and is focused on providing financial education rather then selling you products.
– Have the right mixture of curiosity and confidence. If you don’t already, challenge yourself to learn more about the financial markets by reading one article a day on Bloomberg.com or yahoofinance.com, and watch 10 minutes a day of market news. Talk to friends and family about their investing behavior, impressions on the market or the economy. The more we’re engaged in the markets, the more we learn and the more confidence we attain as a result. However, while confidence is good, overconfidence leads to risky behavior, erratic movements and poor decision-making so remember to think twice and do a little extra research before taking the plunge.
– Find the right financial advisor and meet (by telephone or in person) on a quarterly basis. Make sure you’re in touch with your advisor, ask questions, check on your own investments and make changes when appropriate, and if they aren’t hustling for your business it’s time to find a new advisor.