Stacy’s “Real World” Financial Education: Three Lessons Learned
“When your values are clear to you, your decisions become easier.”
I gained all of my investment experience while working in the endowment office at my alma mater: University of Oregon. Shortly after I graduated with degrees in Math and Economics, I began my first professional position as an Investment Research Analyst in one of the oldest and least ventilated buildings on campus. The stifling air did not seem to stunt my enthusiasm for learning about the giant world of global investing.
Over the next 13 years, I was on a small team that managed the endowment as it grew from $200 MM to over $1 B in assets under management. My job was primarily to evaluate, select and monitor professional money managers who were hired to invest on behalf of the endowment. I learned about real-world investing from some of the best investors in the country— frantically taking notes during interviews and eagerly reading quarterly letters. Soon I could speak to just about every asset class under the sun: stocks, bonds, real estate, commodities, timber, private companies, derivatives and something called a mortgage-backed security (more on that in a few…)
Baby Stacy and Ted in Naxos, Greece on honeymoon in August 2008.
Shortly after returning from my blissful honeymoon in 2008, the Great Financial Crisis hit and at the age of 25 I experienced one of the worst stock markets in the century. Funny enough, those mortgage-based securities I mentioned above, once the genius invention of financial engineers to produce strong returns with very little risk, brought some of the largest financial firms to their knees. I witnessed Lehman Brothers go bankrupt, AIG get a last-minute bailout and Washington Mutual get swallowed up by JPMorgan Chase.
Crazy enough, almost no one saw this train wreck coming, even the guys at the Federal Reserve whose job was to look for this kind of financial trouble. (If you want to learn more about the one firm who did see it coming— check out “The Big Short” by Michael Lewis.) Lesson #1: No one, not even the government officials or the biggest ivy-league-educated bank moguls on Wall Street has it all figured out. Be skeptical, ask a ton of questions, and always keep some “powder dry” (i.e. cash in the bank) ready to invest in case things go wrong.
When an individual keeps their “powder dry”, it means they are holding at least some of their personal net worth in cash or marketable securities that can be drawn on quickly for spending needs or to invest at lower prices.
During the following months and years, I watched my investment industry mentors (Warren Buffet, Howard Marks and Jeremy Grantham) keep their heads cool and stay consistent to the fundamentals of investing. This is also when I learned about the silver lining of really bad markets: they often created really good investment opportunities. Lesson #2: Be a contrarian: when everyone else is fearful, be opportunistic and look for good assets at cheap prices.
Sadly, I also watched Wall Street get bailed out while “Main Street”, the collection of everyday people and small business owners, suffered the consequences of the Great Recession that followed. People close to me lost jobs, homes and businesses.
After the next year or so, people fortunate enough to have money in the stock market began to wrack up 40%+ returns as the markets recovered faster than the economy did. The public and politicians started to talk more about income and wealth inequality and the Occupy Wall Street movement began.
View from one of my meetings in NYC.
In the Fall of 2011, I remember walking through lower Manhattan in a skirt suit and uncomfortable heels, walking past young protestors and wishing I could join them and express my own anger at the system that failed so many. Through my internal struggle that afternoon, I learned probably the most important lesson. Lesson #3: My personal values were more aligned with Main Street than Wall Street, and I needed a change.
It took a few years (including several years outside of the financial industry), but I’m making progress towards aligning my values with my work. With the launch of Tailored Financial Planning, I’m finally using my financial expertise and experience to help the people and businesses in my community that matter to me.
“Fearless girl” statue stares down the “Charging Bull” outside the New York Stock Exchange.
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About the Author:
Stacy Dervin, CFA, CFP® provides fee-only financial planning and investment management services in Eugene, Oregon. Tailored Financial Planning (TFP) serves clients as a fiduciary and never earns a commission of any kind. As a financial advisor, Stacy is on a mission to help Gen X and Gen Y be truly proactive about their financial futures.
