Why Investing Is Important (Especially for Women) and How To Get Started
Can you share with readers about professionally investing in the private markets?
Many of the discussions you’ve had so far have focused on the public markets (i.e. “the stock market”), so first I can describe what makes the private markets different. Access to the private markets is typically limited to “accredited investors” such as endowments, pensions, professional investment funds, and high net worth individuals. While private equity generally generates higher returns than public equity, private equity investors trade-off liquidity. You cannot simply “sell” your private investment holding with the click of a button as you can with a public stock. The typical private equity hold is 3-7 years, so you are locking away money for a significant period of time, in hopes of compounding returns.
I’ve been investing professionally across venture capital, growth equity, and buyout private equity. In each role, I was tasked to execute a different investment strategy based on our specific “edge”. When I invested on behalf of ultra-high net worth tech executives (think Facebook, LinkedIn, Twitter), one of my strategic goals was to find investments that diversified their holdings beyond where they first generated their wealth. One of the avenues we sourced deals was through the name recognition of our clients, which increased our deal pipeline and the way we could add value to the underlying management teams such as technical knowledge in technology. That was our edge. When I co-founded SLK Venture Capital along with one of the former Partners I previously worked with, our investment strategy was different – we focused on a geographic market (Austin, Texas), which was emerging as one of the fastest growing cities in America and an entrepreneurial hotspot without strong access to capital. Our edge was our investment focus, since we were able to develop close relationships with local entrepreneurs, to hear about potential deals, and to send out term sheets first. Lastly, at American Securities, our edge came from our track record over 25 years and our operational expertise. Our “Resources Group” is a dedicated team of former consultants - larger in size than our investment team - that helps the management teams of our portfolio companies in functional areas and in strategic execution.
I’ll caveat that the investment decisions I have made in my professional investing career are quite different from how I personally invest – and this should be the case! My different investment goals, size, and “edge” drive these differences.
What do you want to say on the topic of women investing?
Women are under-invested when it comes to their personal capital. Taking the “safe” route by keeping savings in cash, however, contributes women to being unprepared for retirement among other societal repercussions.
Here are some eye-opening facts: Women control 70%-80% of all consumer purchasing today. Women are also projected to inherit 70% of the coming “Great Wealth Transfer” between Boomers and our generation. Yet while women earn more than ever before, and are expected to inherit even more, they invest 40% less, on average, than men. And we lose out on big gains over our lifetimes as a result. Women retire with two-thirds as much retirement  income as men do, despite living six to eight years longer . I’m surprised by how little this is discussed relative to the gender wage gap. Unlike our wages, we have full control over our investing and we are leaving money on the table: $100 per day, $4 per hour, $3,000 a month .
In addition to providing for retirement, money has become a clearer source of power and instrument for change. Aside from being a store of value, money finances integral parts of society such as elections, new businesses, old businesses, and academic research. So between politics, entrepreneurship, public company boards, and healthcare research, it’s no coincidence that these are also areas where women do not have equal representation at the table. In short, women’s reluctance to invest in the markets diminishes our voice – and our vote - in the global economy. How can we run the world if we don’t own the world? Every woman deserves to have control over her finances and her future so that she can lead her fullest and most impactful life. I see investing as an empowering tool to do so.
Can you talk about impact investing?
Charitable donations were previously seen as the way people could monetarily further a mission or a cause. Impact investing has become a relatively new instrument to drive social and economic change in communities through specific investments or omissions of investments. Families and institutions have become more sophisticated and holistic with the way they think about investing capital to reflect their core beliefs. In a prior role, I saw families starting to actively ask questions about impact-focused funds and screens in addition to donating to charities through Donor Advised Funds (DAFs). Some even set up their own investment vehicles to focus on funding disease eradication, women-led businesses, education, and other social enterprises. One of my favorite projects was to assess the market to see what options existed.
Impact investing is becoming a more developed investment style and “product” in the financial world. Today, major private equity firms such as Blackstone and TPG have dedicated impact investment funds led by investors who actively seek private investments to further certain impact initiatives. Blackrock, the world’s largest asset manager, offers an array of what they call “sustainable” investing strategies and screened indices. You can decide to screen out fossil fuel investments in your portfolio, for example, to prevent financing corporations that contribute to climate risk. Ellevest has also created “intentional impact” portfolios, which take a stance on issues like women’s equality and - as of July 13th - racial justice. Still, impact investing is relatively nascent and open to new players. Finuprise can play a role in making investing more personalized and mission-driven for millennials.
How should women in particular start investing?
I would first calculate how much you can invest without risking your current spending needs like rent, food, clothing, and other living expenses while still having emergency cushion. Then, I would see if there are any retirement investment products offered by your employer. In the U.S., common account types offered are 401Ks or Roth-IRAs. Not only do these accounts allow you to benefit from pre-tax contributions or tax-free distributions, but employers may also match your contributions as a work benefit. If you’re not investing in these employer-sponsored plans, you could be leaving thousands of dollars on the table. In the U.S., you can also enroll in a 529 fund to accrue investment income tax-free before using the funds to pay off your educational expenses. Retirement and educational plans typically default to a “Target Fund” that personalizes your allocation and risk by your expected retirement age or age of attending school. It’s one of the simplest and rewarding ways to invest for the long-term.
For women just starting to invest outside of these accounts, I would recommend using a robo-advisor such as Ellevest, Wealthfront, or Betterment to understand the fundamentals of diversification. These tools generate a portfolio based on your answers to basic questions that assess your risk tolerance. My risk tolerance, as someone with decades before I expect to retire, is quite high. Wealthfront would put me at a 9/10. My mother, who is in her early sixties, has a low risk tolerance because she will soon be using her savings to live off of rather than her earnings.
If they have the interest and/or the time, women can later consider opening accounts with companies with consumer-friendly interfaces like Robinhood or M1 that allow them to actively trade single-stock names at no cost. I actively invest a portion of my portfolio in specific public companies (i.e. non-indices), considering them “long-term holds”. These are stocks that I have conviction behind and bought at a lower price than what I believe the stock will be worth in the long-term. I am not heart-broken if these stocks end the trading day lower than the day before because I am tracking their investment return over several months or years rather than daily movements. Making short-term investments, on the other hand, is difficult and even some of the most famous investors have had losing streaks – I wouldn’t recommend this to anyone just starting to invest. If you have a short-term view on the market, chances are that it is already priced into the current trading cost - public knowledge is not a good “edge”. If you do want to actively trade for shorter investment horizons, I suggest sizing your investments thoughtfully.
Do you have any thoughts on the current investment landscape?
The stock market has been volatile the last several months as the world responds to uncertain impacts of COVID-19. We have experienced volatility in the past and, if one thing is certain, it’s that we will continue to face market uncertainty in the future. However, research tells us that retail investors (meaning you and me) are not good at timing the markets and, for long-term oriented investing, the best strategy is to continue staying the course and making small changes over time. Resist the temptation of responding emotionally to market fluctuations and try to understand when information you’re hearing is simply “noise”. Having a long-term perspective is important when thinking about impact and your investments!
Are there other resources you would recommend to get educated / empowered for investing?
If you’re in college, seek out student investment clubs to develop confidence in your knowledge and ability to speak “the language”. In the U.S., we have an organization called Smart Woman Securities (SWS) that helps educate college women through weekly seminars and also helps give them practical exposure to investing. I co-founded the Penn/Wharton chapter of SWS and can say first-hand that having a sense of community and peers to speak to about investments makes it all the more interesting. Girls Who Invest is another women’s program and has the related goal of bringing women into investing careers.
I personally read the newsletters, “Term Sheet” , “Money Stuff”  and “Morning Brew”  daily to keep up with the markets. Other great content tailored for women can be found from Ellevest’s online “magazine”  and “The Uptick” , a weekly newsletter that summarizes what happened in the markets and key investment themes. My favorite book discussing investment “noise” is Fooled by Randomness by Nassim Taleb. If you’re a nerd like me and want a textbook-level understanding of investment concepts, I recommend Expected Returns by Antti Ilmanen.