Updated: Sep 3, 2021
This week on Linkedin I posted a poll that asked the question: When you want to learn how to #planahead and #invest for your #financialgoals, what’s the best way? The majority of folks said using a financial advisor, or understanding risk and reward better.
Yes, taking a risk can be intimidating, frightening, and sometimes embarrassing because it means you might fail.
But all change, no matter how big or small, has some inherent risk. Whenever we want to do big things — start a business, get a divorce, change careers, go back to school or earn big money — we have to be willing to take some risks. It’s all too easy to find ourselves shying away from (or even completely avoiding) opportunities because of our fear of things not working out.
And the reason why risks always seem like such a big deal — and why they are a big deal — is because we never really know if we’re going to be successful. There’s always that lingering doubt that we might fail…
But wouldn’t it be great if we could approach our risk-taking with a better understanding and mindset that it’s part of what’s normal and required in order to achieve our goals and enjoy lasting success?
What if we could permanently remind ourselves that we are strong, smart, capable, resilient people who will always figure out a way, land on our feet, and find a silver lining even when that sometimes involves some failure along the way?
Failure isn’t a bad thing, and we should embrace it as part of the lesson. When you learned how to ride a bike as a kid, each time you wobbled and crashed taught your body and your mind important principles of gravity and what it feels like when you start to lose your balance. Each crash helped you become a stronger and more confident bicyclist.
Risk and reward is exactly the same. Understanding it helps you learn how to invest with more conviction and confidence, and more importantly, it helps you make decisions to get what you want. The key here is that the greater the risk (fear), the greater the reward (happiness).
“Success is sometimes the outcome of a whole string of failures.” — Vincent van Gogh
While Van Gogh was not the happiest person. He saw the world from a view of opposites, which is something I’m going to talk about more next week.
As part of the human condition, we’re all going to experience the most opposite and extreme feelings of high highs and low lows throughout our lives. Recognizing them, understanding them, and finding a healthy and comfortable balance with them is key.
And it goes beyond money and finances. Your investments can be anything — the amount of time and energy you choose to spend on a relationship, working on an idea or invention, getting a degree, writing a book, getting exercise, learning a language or starting a new hobby.
Because risk-return is also a human capital idea and not just a financial capital concept, you have to get clarity around your goals and what you want to achieve. What is it that you want?
If your heart is set on training for and running a marathon, are you willing to sacrifice time with your family and friends and career to achieve that? If you want to write the great American novel, you might not have time to also cook dinners and apply for a promotion at work.
Put simply, the risk-return spectrum is the relationship between the amount of return gained on an investment and the amount of risk undertaken in that investment. The more return sought the more risk that must be undertaken.
The idea of losing money is scary, so a lot of women don’t invest in the markets and stay in cash — it feels so much safer. I know, I get it. I listen to my clients carefully when they talk about their mindset towards money. Their views range from a very conservative mindset (there will never be enough money, avoid risk, every type of risk scares me) to an abundance mindset (there is plenty of money, I can always make more, I can spend what I want, I’ll seek opportunities, it’s all upside).
As for myself, I went from a very conservative “sitting in cash” mentality earlier in my life to a mindset of I can always make more and see opportunities.
Even though I have invested and analyzed companies my entire career, it was always under the safety of a boss who paid me a salary and a bonus. There wasn’t any downside risk because it wasn’t MY money and I would get paid either way. In addition, I’m married and my husband has earned reliably good compensation and worked at the same company ever since we got married.
However, after the great financial crisis of 2009, the fund I had worked at for 5 years shut down, and I was as scared about my financial future as everyone else was. But I also thought it was a great time to start a company!
I teamed up with a friend who had a tech background and who also worked in financial services, and we had the idea to start a gifting site for parents aimed at friends and family who could contribute to a 529 college savings plans for their kids instead of giving them presents they won’t play with or need in a year. We called it Educated Gift. Great name, right?
We flew down to Florida for a conference on 529 plans, had a few investor meetings, and even got a meeting with some folks at Fidelity who loved the idea. The problem was...there were a lot of problems.
The idea was already out there, but we thought we could do it better.
Even though my friend had a tech background, she couldn’t build a website.
Nor did we have the faintest idea how to integrate a funding account with Fidelity’s systems.
I spoke with a friend who told me she would never ask her friends for money for her kid’s college fund.
So in sum, our idea wasn’t revolutionary, we didn’t have an edge when it came to technology, and we had zero experience in marketing.
But we failed quickly, and there’s value in that. I spoke to potential customers to test out the idea, and it was a dud. At the time, I was very embarrassed and my husband made a few jokes about it but thank goodness my partner and I scrapped the idea and moved on with our lives and stayed in our current careers.
Fast forward to today. About six years ago, I nervously wrote on a piece of paper my dream, which was to start my own registered investment advisory company. There were a lot of unknowns. I didn’t know how to get clients, I didn’t think there was anything special about me as a stock picker other than as a woman investor it's pretty easy to find great consumer names, and I had already failed once before at starting my own business with the 529 plans.
So how did I gain enough confidence to start my own firm a year ago? I made big decisions and took a risk to get my CERTIFIED FINANCIAL PLANNER ™ credential.
For four months, I studied for the big exam, which is almost like getting a law degree. I studied for 8 hours a day, and read six 600-page books. I had to learn about trusts and estates, insurance, tax law, retirement and financial planning, investment management, fiduciary responsibility, ethics, compliance, regulatory matters, and so many other legal and technical things.
There was a chance I wouldn’t pass the exam, but I did! Next, I had to market myself and find clients, and how to show people that I was better and different from the other financial planners out there. My passion and my niche were helping women gain financial literacy and freedom by becoming more assertive and decisive with their own financial decisions so they could secure their future.
I joined a large firm for a few years and learned how they approached client service, and then a stroke of luck happened a year ago - Goldman Sachs bought Folio Institutional. Goldman's investment in Folio helped me go independent with its strong brand. Folio is one of the best technology platforms that integrate custodial broker/dealer tools with an investment management platform.
So it took me five or six years to work through the risks of getting my CFP credential, learn about business development and marketing, find a good technology platform and de-risk the idea of starting my own firm. All of a sudden, all the pieces fell into place and it was the right idea and the right time. It’s been one of the best moves of my entire career.
What is your dream? What are you willing to do to get there? Let’s get started now so we can create a strong financial path to help you achieve it. You can reach me at: