Busting Money Myths | MAKERS Money
Women aren't as good as men at investing—and other crazy money myths get shut down by MAKERS Money host Sallie Krawcheck, CEO and Co-Founder of Ellevest. Guest appearance by Yai Vargas, Founder of The Latinista, a community for Latina Professionals. Produced by MAKERS and Yahoo Finance in partnership with Ellevest.
SALLIE KRAWCHECK: Money is power, and ladies, it's time to level the playing field.
Hi everyone. Welcome to "Makers Money." I'm Sallie Krawcheck, CEO of Ellevest, the investing platform for women.
What a world that we are living in right now. I mean, can you believe it? Can you believe some of these headlines? But here's something we've learned, something super important, which is that money is power. Money evens the playing field for us as women. Money is knowledge, money is confidence, money is freedom, money is take this job and shove it.
And ladies, we don't have as much money as the guys do. We not only earn less, we invest less. This can cost us hundreds of thousands, for some of us millions of dollars, over the course of our lives. The good news, we can fix this. I've been in the financial services industry for nearly 30 years, and I'm going to share with you what I've learned about money. And together, we're going to help you live the most badass life possible.
So let's start with some myth busting. There's things that society tells us, miss that they tell us, that keep us from being fully in control of our money, myths that were even outdated in my mother's era.
Myth number one, men are better at money because men are better at math than women. No, no no no, no, no. Research shows that girls actually get better grades than boys in all subjects in school, math included. Yes, I see you. I know you've got an A minus in eighth grade algebra.
Myth number two. We women don't invest as much as men do because we're risk-averse. That's not true. It's as if the world is telling us that somehow having a uterus tucked inside of our body keeps us from taking on risk. It's not true.
We're more risk-aware than the guys are. That means we want to understand risk before we take it, such as how should this investment perform, and how bad might it yet. Once we understand the risk, we take on no less than the guys.
So number three, the third myth, is that we're not as good at investing as the guys are. Truth is, we're better. We're better because, get this, we don't trade as much. Get this, we don't panic as much because we tend to have more diversified investment portfolios, and that helps us perform better over time. Now, I could go on and on and on, but you get the idea. These myths serve to keep us women from being fully in charge of our money.
Joining me for happy hour and to continue to bust the money myths is Yai Vargas, the founder of The Latinista, a community for Latino professionals. Cheers and welcome.
YAI VARGAS: Cheers.
SALLIE KRAWCHECK: Thank you for being here.
YAI VARGAS: Thank you so much for having me.
SALLIE KRAWCHECK: OK this is a red letter day. When is the last time you've sat down with a friend, have drinks, and talk about money?
YAI VARGAS: Gosh, never.
SALLIE KRAWCHECK: Never. That would be exactly when I had done it. Sex, yes.
YAI VARGAS: Everything else.
SALLIE KRAWCHECK: Kids--
YAI VARGAS: Money, no, never.
SALLIE KRAWCHECK: --work, never. Never. Well, tell us first a little bit about Latinista.
YAI VARGAS: Absolutely. So the Latinista is a network that I created to help women understand what their true value is. It's primarily for professional development. So you would love this because it's all about learning how to negotiate, understanding how to manage your money, and really understanding how to articulate your value.
SALLIE KRAWCHECK: Well I love this, understanding how to manage your money. Tell me what you're hearing from the women. Are they investing?
YAI VARGAS: So sadly, a lot of them aren't. A lot of them aren't. And I know.
SALLIE KRAWCHECK: Yai, what's the number one barrier to investing for women?
YAI VARGAS: The number one barrier is fear. Some women are so afraid to lose everything that they don't even play the game.
SALLIE KRAWCHECK: We hear this all the time. The jargon, the complexity that the investing industry put out, it really serves to keep us women outside of the game. Doesn't it? So what are they doing stuff? Putting it in the bank?
YAI VARGAS: They're putting it in the bank. Right? So they think that their cash is much safer where they can see it. They've worked so hard for this. The last thing that they want is to see it all go away.
SALLIE KRAWCHECK: So if you have your money in the bank, you're earning almost nothing, which means that on a day to day to day to week basis, you're actually going backwards. Because the slight bit of inflation we have eats that away. Do you know what the return on the stock market has been over long periods of time, say, since the 1920s?
YAI VARGAS: Gosh, I don't know. 3%?
SALLIE KRAWCHECK: 3%? 9.5%.
YAI VARGAS: Oh, wow.
SALLIE KRAWCHECK: 9.5%. So even the crash of '29, even the crash of '87, even the crash of '07, '08, has been a 9.5% return. Right? And so the ability to earn 9.5% in equities over time, historically, versus close to zero, life-changing.
YAI VARGAS: Oh, wow.
SALLIE KRAWCHECK: Absolutely life-changing.
YAI VARGAS: So a lot of people don't know that.
SALLIE KRAWCHECK: I know. That's what we're trying to do here, help people who--
YAI VARGAS: So I'm glad that we're here sharing this information, and hopefully it'll empower a lot of people to actually take action.
SALLIE KRAWCHECK: So let's talk about you. I want to embarrass you a little bit. What is the stupidest thing you've ever done with your money? What is the smartest thing you've ever done with your money?
YAI VARGAS: Well, certainly the stupidest thing I've ever done with my money is working really hard for it and then keeping it in the bank. Right?
SALLIE KRAWCHECK: So you're one of these ladies.
YAI VARGAS: I'm one of them.
SALLIE KRAWCHECK: So, OK let me try this.
YAI VARGAS: That's exactly why I started the group.
SALLIE KRAWCHECK: Let me try this. So do you work as hard as the guys do?
YAI VARGAS: Oh, absolutely. Even more so.
SALLIE KRAWCHECK: Do you work harder than guys do?
YAI VARGAS: Absolutely.
SALLIE KRAWCHECK: So therefore, you're working harder than the guys, but you're only getting, let's call it, 2/3 the return over life.
YAI VARGAS: It's silly, really.
SALLIE KRAWCHECK: Right?
YAI VARGAS: It's silly.
SALLIE KRAWCHECK: Yeah, it's silly. OK, what's the smartest thing you've ever done?
YAI VARGAS: So the smartest thing I ever did was actually sit in front of a professional and have them help me understand how to manage my money. That's why I started The Latinista. We need networks of women around us, that know better than us, right, that encourage us to take those leaps. And so the smartest thing I ever did was sat next to someone and said, teach me. I'm all ears.
SALLIE KRAWCHECK: And we need to talk about money. Thank you for being here Yai.
YAI VARGAS: Sure do. Thank you.
SALLIE KRAWCHECK: Cheers.
We know you've got a lot of questions out there. So we're going to answer them, starting with some questions from our followers. So the first one, what are the essentials to keep in mind before I start investing. I'm so glad you asked. And it's a question we get all the time at Ellevest, particularly from women who, I think someone told us along the way, we need to get a PhD in investing before we get started. We don't.
Five things. Number one, I want you to pay off your high cost debt before you invest, credit card debt, auto loan debt, anything that is costing you in the teens or the 20s. Get rid of that first.
Number two, when you begin investing, don't try to time the market. Believe me, you can't. Believe me, the professionals can't. So don't try to pick a time to get in.
Because number three, I want you to make investing a habit. A little bit out of every paycheck, 1% of your salary, 3% of your salary. It means sometimes you're going to buy high, sometimes you're going to buy low. But it's going to even out and do strong work for you.
Number four, diversify your investments. Don't just buy one stock. That is a loser's game. Have a range of stocks, bonds, ETFs, mutual funds. That diversity will help keep your risk down.
Number five, keep costs low. It can be difficult to see what some firms are charging you. Ask them. And you want to keep your cost below 1% of your assets. So those are your five rules that will get you started.
All right, second question, can you explain what an equity is. I love this question because this is one of the terms we hear all the time, sometimes don't totally understand. So let me break it down for you. An equity, which you'll often hear it called a stock, means that you have a piece of ownership, a tiny sliver of ownership, in a company. So owning equity in, say, Facebook or IBM, gives you the right to participate in companies' earnings and losses, when they have losses, through dividends and or changes in the market price. That's an equity.
All right, we're just about out of time now. But I have one final myth to bust, straight from our grandmothers. And that is, women talking about money is crass and attractive. Thanks grandma. The truth, ladies, if we don't talk about money with each other, how in the world do we know what raise to ask for or how to invest or how can we close these money gaps.
So we're right here. We're going to keep talking about money. We want to hear from you. Tweet to us at @MakersWomen, and use the hashtag MakersMoney or send your questions to me at Makers.com. Thanks to Yai for joining us. And until next time, remember, more money, more power.