Women Can Become Great Investors with 5 Life-Changing Rules

Interview with Alice Finn

Alice Finn is an author and the CEO of PowerHouse Assets. She talks about women and investing, and expounds on two of her rules of investing. She gives solid advice on what women need to do to change the age-old stereotypes about women as investors.

Douglas Goldstein: I am very excited to have on The Goldstein on Gelt Show Alice Finn, who is a wealth management expert and the CEO of PowerHouse Assets. In fact, she was featured as “The Giant” by Barron’s in its inaugural list of the Top 100 Independent Financial Advisors.

One of the things Alice focuses on, which is a topic we talk a lot about here, is women and investing. Alice, tell me, why did you get into that?

Women and Investing

Alice Finn: First of all, I just want to say I am delighted to be here. The reason that I got into focusing on women and investing is because not enough women pay attention to investing for their future. There’s a number of reasons for that, but I felt like there is such a need, and it is something that I can do something about.

Douglas Goldstein: I hear you, and that’s actually something that has come up quite a bit in my life. When I started in the business on Wall Street, I was actually partners with my mother, who was the vice president at the big firm for about 17 years.

My mother’s mother had been one of the first women to be licensed as a stockbroker in America. It always used to sound funny to me when people said, “Oh, you know, women don’t know much about investing.” I would say, “I am learning everything about investing from women.”

But unfortunately, as I’ve gotten into the business and spoken to more and more people, I see that that’s not really the case. What do you attribute it to?

Alice Finn: First of all, your mother and grandmother sound amazing, and I’d love to hear more about them some other time. But I attribute it to two main things; one is cultural and one is pragmatic.

Culturally, women don’t picture themselves as investors. When you say “investor” they think of an older man, or a man with white hair. That’s what studies show.

We, therefore, need to change that image. Anybody that has anything in a retirement account—in a 401K or an IRA or in anything that they’re hoping to earn a return on for the future—is an investor. Most people, in some way, are investors—man or woman.

Douglas Goldstein: What does someone have to do in order to change the way women look at money?

Women’s Attitude toward Money

Alice Finn: I and lots of other women in this industry are trying to change what it looks like to be a woman. We’re trying to get the word out that this is something that not just men do, but women do it too.

I wrote a book called Smart Women Love Money: 5 Simple, Life-Changing Rules of Investing. That’s my most recent way to try and change that image so that women don’t think that if they focus on investing, it’s somehow unfeminine.

Douglas Goldstein: That’s interesting. I haven’t actually seen that. One of the things that I find in my practice—I think you and I actually have a very similar practice, except mine is in Israel and yours is in America—is that I work with a lot of women who are widows. I try to talk to them about money, and when they say, “Oh, my husband always used to deal with that,” I’ll say, “Okay. Well, now it’s time for you to deal with it.”

I always try to explain that you don’t have to become a money expert. You just have to become an expert about yourself and talk about what your goals are and what your risk tolerance is. Sometimes I find that they don’t see the connection between risk tolerance, goals, and money. Do you find that also?

Alice Finn: You’re right in that women especially, but probably some men as well, think that the whole subject of investing is daunting. Risk sounds scary, so what I do in my book is break it down and make it so that it’s pretty simple.

I have five rules, and I explain how risk fits into that. Just getting over the idea that this is complicated and overwhelming is one of the most important things that you and I can do to get both men and women focused on their investing in a productive way.

Rule Number One of Investing: Invest in Stocks for the Long Run

Douglas Goldstein: What’s your number one rule for getting people started?

Alice Finn: One is to invest in stocks for the long run, so I give them a perspective. For example, if in the early 1970s, they had taken $10,000 and put that in a diversified portfolio of stocks, 40-plus years later, or now, when they want to retire, that would be worth over $2 million.

Just give people that perspective that stocks really are the place to be and that the compounding return of stocks is like magic. If I give people that perspective, they get more motivated and excited, and I’ve got their attention. That’s the first thing that I do.

Douglas Goldstein: Alice, let’s just talk about this point, which is that people should invest in stocks for the long run. When the market goes up and up, of course people get a little bit wary, and some people say, “Great, it looks like we’re at the beginning of a trend.” Other people say, “Well, it must have reached the top.”

If someone who wants to invest says, “You know, now I am getting a little bit older. I’m already retired, and I don’t see myself as a long-term investor. If the market’s gone up a lot, what am I supposed to do?” how do you explain it? Well, you say, “Let’s go back to the 1970s.” All of a sudden, the 1970s seem to be a long time ago.

Alice Finn: If someone’s just retiring now, hopefully they still have decades ahead of them. They’re going to want to live on their money, and they need to make their money work for them so they can actually live on it.

I try not to make it a short-term prospective. If someone’s in their mid-sixties or something, and they’re retiring, again, they hopefully could have 30-plus years. I always plan for my clients to live to at least 100. Because my biggest nightmare is that I am in my eighties or nineties, and I have a clients who are 100, and they come and they’ve run out of money.

Hopefully, people will continue to live for a very long time. Even if you’re just retiring, you hopefully have a long time ahead that you need your money working for you.

Douglas Goldstein: Let’s go back to real-life stories. One of the things that I’ve also found happens a lot of times is that a woman comes into my office, and she’s inherited money from her husband who passed away.

It isn’t stocks and it’s not in any broadly diversified portfolio either, but it’s in four or five stocks. When I talk to her about selling them, she says, “Oh, well, my husband did a lot of research on these.”

What am I supposed to say? Because they may even be good companies. It’s just a question of whether it’s really appropriate for someone to have that kind of risk, and, of course, there’s the tax risk of selling. How do you explain that to someone?

Alice Finn: That’s actually a typical situation that does happen. People come with something they’ve inherited, and they feel like it embodies their loved one. The first thing I do is try to explain and say, “Take a picture of that statement, but don’t keep those investments because whatever the decisions that got your loved one to invest in the stocks, things change. We need to look at where we are now and make a plan for your future. Fall in love with the memories but not those particular investments.”

Then there are the questions, such as “What do you do about the tax ramifications?” That’s a very good question, and sometimes you have to build a portfolio around it. Sometimes if it’s in a retirement account, then, of course, you don’t need to worry about the tax consequences because you can sell without triggering taxes.

But if it’s in a taxable account, it’s something you have to work on with your financial advisor to do a cost-benefit analysis.

Rule Number Two: Understand the Categories and the Percentages When Investing

Douglas Goldstein: Okay. That’s rule number one of your list. We’ll get to one more. Alice, you said the number one thing is to look for the long-term investment, and stocks are good tools. What’s number two in your list of suggestions?

Alice Finn: It’s to ask for your assets. The idea is to come up with a strategy. What assets do you want to invest in, in terms of the categories of investments, and then, in what percentages?

You and I could talk all day about whether Apple or Google or Microsoft is a better stock, but in the end, that’s not as important a discussion as what percent do you want in stocks vs. bonds? Then within stocks, what percent in U.S. stocks vs. international stocks, if you’re living in the U.S.? If you’re living in Israel, that’s a different perspective. But again, what percent of Israel stocks vs. international stocks, for Israelis?

Then within those categories, there are large stocks, small stocks, growth stocks, and value stocks. I think in categories when I come up with an asset allocation. That is the most important decision that an investor can make.

Douglas Goldstein: Do you feel the investor—him or herself—has to make that decision, or just has to decide overall what percentage of the portfolio should be in the stock market?

Alice Finn: If they’re doing it themselves, they’ll have to decide in more detail. If they’re working with an investment advisor, usually just at the high level, they can have that discussion. Then they should understand what categories they’re investing in, and in what percentages. But they don’t need to make those decisions.

Follow Alice Finn

Douglas Goldstein: That’s great. We’ve gotten through rules number one and number two. I guess to get through three, four, and five of your list, Alice, people are going to have to buy your book.

Alice, we’re just about at the end of our time, but tell me, in the last few seconds, how can people follow you and get a copy of your book?

Alice Finn: Related to the book, it’s called Smart Women Love Money: 5 Simple, Life-Changing Rules of Investing. You can go online anywhere—Amazon, Barnes and Noble, or many other places—and get the book. Or go into one of your local bookstores. A lot of them have it.

Then, if you want to reach me, my company website is powerhouseassets.com, and you can email info@powerhouseassets.com. If you do, two things: if you’re interested, we will send you a list of questions to ask your financial advisor. So just email us and say that you would like that list.

Also, we’re making a list of people that we’d like to participate in what we call “PowerHouses,” where we get women together in groups to talk about how they got started investing or how to improve their investments. You can let us know if you’d like to sign up for one of our “PowerHouses” that’ll be happening across the country.

Douglas Goldstein: Okay, that sounds great. We will put links to that in the show notes of today’s show at GoldsteinOnGelt.com. Alice Finn, thanks so much for taking the time.

Alice Finn: Thank you. I’ve enjoyed talking with you.