August 28, 2025 • 42 mins
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Women are consistently outperforming men in investment returns—by about four basis points—yet they're starting later and investing less. This fascinating paradox lies at the heart of our conversation with financial services veteran Megan Smith, who brings decades of experience in alternative investments and client advising to the table.
"Investing is more about patience and consistency than it is about number crunching," Smith reveals, challenging the notion that successful investing requires complex mathematical skills. Instead, she points to women's tendency to be less emotional about their investments and more focused on long-term goals as key factors in their outperformance.
With women currently controlling 32% of global wealth—a figure projected to rise dramatically as wealth transfers from older generations occur—the conversation around women and investing has never been more relevant. Smith shares personal insights from her journey from marketing to sales in financial services, highlighting how her father's simple advice to maximize her 401(k) contributions shaped her financial future: "You'll never see the money, therefore you don't need it."
The democratization of alternative investments emerges as another crucial theme, as assets once reserved for institutional investors become increasingly available to individual investors. Smith offers thoughtful guidance on how millennials and Gen X investors should approach alternatives differently than boomers, emphasizing that time horizon is everything when considering less liquid investments. Her perspective on crowdfunding platforms, values-based investing, and the risks of including alternatives in 401(k) plans provides a balanced view for investors of all experience levels.
Whether you're just starting your investment journey or looking to refine your strategy, Smith's practical advice—start early, maximize employer matches, and develop a thirst for financial knowledge—offers a roadmap for success. Tune in to discover how you can build a portfolio that aligns with both your financial goals and personal values.
As mentioned on the podcast, here is the link to a charity Megan Smith supports:
Straight Talk for All - Nonsense for None
Please check out our other podcasts:
https://skepticsguidetoinvesting.buzzsprout.com
Disclaimer - These podcasts are not intended as investment advice. Individuals please consult your own investment, tax and legal advisors. They provide these insights for educational purposes only.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Steve Davenport (00:02):
Hello everyone and welcome to Skeptic's Guide
to Investing.
Today we're having aninteresting interview and
discussion with Megan Smith.
Megan and I are connectedthrough Providence College.
She's a board of trustee memberat Providence
I went to Providence and Meganhas a lot of experience in the
(00:23):
financial service industry herwhole career and I just thought
it would be interesting to lookat what's happening in this
space, particularly alternatives, with somebody who was deeply
involved in how alternatives fitin various clients and various
situations.
(00:43):
So I think there's a lot to talkabout, but one of the things
that we've been trying to do isto focus on how women view
investments and how women viewthe ability to make better
choices and better outcomes intheir life with finance.
I think there's a lot of cloudshanging around women in
(01:05):
investing and I think we need toclear them out and try to make
it clearer what you should doand how you should do it.
So, as part of our goal inSkeptics to improve the overall
wellness of individuals, we'dlike to focus on women and how
we make that wellness moresuccessful for them as well as
(01:29):
everyone else.
So I guess I'd love to hearMegan kind of tell me a little
bit about where you come from interms of growing up around the
ideas of money and then going towork and working in the
financial industry.
And just give us a little bitof the Megan Smith 101 so that
(01:52):
we can dive into more topics.
Megan Smith (01:55):
Perfect.
Thanks, Steve.
I appreciate it.
I actually grew up the oldestof five children in Worcester,
Massachusetts.
I would say that around thedinner table we weren't talking
about finances.
There was a big age gap betweenthe oldest and the youngest.
It was hard at the in WorcesterMassachusetts, I would say that
around the dinner table weweren't talking about finances.
There was a big age gap betweenthe oldest and the youngest.
It was hard at the dinner tableto come up with conversation
that everyone could be involvedin.
I grew up in a very kind oftraditional Irish Catholic
(02:17):
family of people of that timewhere my father worked, my
mother stayed home and ran thehouse and we didn't have a lot
of money when I was younger andmy mother had a budget that she
had to work within to feed usand to clothe us and she could
always do that.
But she was never the one thatdid the investments.
She was never the one thatlooked for how to invest or how
to save or where the bestmortgage rates were coming from.
(02:39):
My dad did all of that and sowithout that education I kind of
grew up and had to talk, had toteach myself.
So I graduated from college.
Thank you for the ProvidenceCollege.
Providence College mentionedthere, steve I went to New York
and started working in themarketing department of what was
the former Dean Ritter Reynolds, which is now was was purchased
(03:00):
by Morgan Stanley, and I workedin the marketing department and
I learned a lot.
But what I learned very quicklywas if you wanted to make any
money in financial services, youhad to be on the revenue
generating side of the business,so you needed to be on the
sales side.
So I got myself, therefore,involved in a sales role.
That was account management,product development and I've
(03:22):
done that with mutual funds,variable annuities and probably
for the last 20 years of mycareer in the alternative
investment field developingproduct, bringing it to market,
presenting it, dealing withregulators and custodians, as
well as educating sales forcesand home offices.
All of the products that Irepresented were sold through a
financial intermediary.
Steve Davenport (03:43):
Yeah, I mean I think that that background seems
awesome for what is going ontoday.
I mean, you must feel like allof these discussions about
alternatives and adding them to401ks, and what's happening with
crypto and what's happeningwith the markets.
I mean, this has been a year ofquite a bit of change and I
(04:06):
guess I feel as though you knowwomen in general, because of the
pay differential, because ofdisruption in career, because of
a lot of things extra, you know, a longer lifespan means you're
going to have a longerretirement, but that means
you're funding a longerretirement.
(04:27):
So, how do you feel about thegender gap This podcast what
do you think we need to do asindividuals to help others who
are not in the finance industryget better results and avoid
some of the gender gaps?
Megan Smith (04:46):
You know it's interesting.
You say that Women tend tostart investing later and invest
less because they carry morefear.
So, to your point, as they'reliving longer, they end up
having less money to live on inretirement.
What's really interesting,though, is a third of women see
themselves as investors, withthe majority of them saving
consistently.
So a third of women seethemselves as investors, with
the majority of them savingconsistently.
(05:07):
So a third of women save moneyconsistently.
And, interestingly enough, ascompared to their male
counterparts, they tend tooutperform men by about four
basis points.
So you might ask why aboutwomen investing?
Is they tend less to beemotional about it.
They tend to be more consistent, less impulsive and more
(05:27):
focused on the long-term goal,which is retirement.
So the issue is not necessarilycapability, it's confidence in
being able to do it, and thenaccess.
And how do you teach, havingbeen brought up or educated in
the school systems, how toinvest with confidence and get
access to it.
Steve Davenport (05:44):
Yeah, I mean, I think that yesterday we had
this financial literacy friendwho you know.
It's all about taking thatknowledge and then doing
something, and that's the big.
We can deliver more knowledgeto people with AI and everything
else, but if it's not going tolead to action, it's going to be
(06:08):
hard for everyone and that'swhere we're trying to figure out
what is the way that you canbehaviorally help people so that
they don't look at you asprescribing, they don't look at
you as scolding, they look atyou and say, hey, he's trying to
help me understand theperspective and give me a good
long-term result.
Megan Smith (06:27):
Yep.
And I think yeah, Steve, I thinkthe best way to do that is
start them young and get intothe habit of investing in their
401k.
I will say that was one thingthat my dad did for me when I
first started in my career.
He said to me put as much moneyaway in your 401k plan as they
will allow you with the companymatch and what he said.
(06:48):
I'm like, yeah, but I need thatmoney for my rent or I need
that money to go out on aSaturday night.
He's like you'll never see themoney, therefore you don't need
it.
So begin investing when you'reyoung and if five or $10, that
will compound into a decent,into a decent um amount of, to a
decent nest egg when youretirement, I should say um.
(07:10):
I think that investing is more.
You don't need to be a mathguru.
Clem Miller (07:13):
Investing is more about patience and consistency
than it is about money crunchingthat's great, thank you um,
megan, um, if you had to lookaround and identify which you
(07:33):
know women investors, like somemore famous women investors, uh,
women who are younger, uh,should should model themselves.
After who would you recommendand why would you recommend them
?
Megan Smith (07:50):
Huh, that's an interesting one, so I would
actually and it's going to besomeone that not everyone knows
there was a female investor andfemale advisor that I worked
with in a large broker dealerthat I worked with.
She was a really interestingwoman.
She ran her own business.
She had a husband and two kids.
She ran an investing business.
(08:10):
She had probably 30 people thatworked for her and then, as she
got older and her condo in thecity was paid off and her
children were launching andeducated and she was still
working full time, she and herhusband had the ability, because
(08:31):
of her investing andunderstanding the markets and
going out and educating otherpeople on the markets and
educating the people that workedfor her on the best thing to do
.
She and her husband wereactually able to buy a lavender
farm in Michigan.
Steve Davenport (08:46):
Nice, nice.
And when we think about some ofthe people and women, you know,
what do you think are some ofthe myths that are holding back
women?
Do you think it's a a reality?
I mean, I I agree with you that, in returns, I think women are
(09:06):
more balanced and probably moreum likely to follow along, um I
think there's a lot ofmisandhold back women, someone
else to do and they just did.
Megan Smith (09:22):
I lose you guys.
Yeah, a little bit.
Steve Davenport (09:23):
It seems like you might've been um, maybe we
just um go with uh, uh, no videoand we'll try that and see if
it it gives us a betterrecording.
Is that okay?
Megan Smith (09:37):
Great.
Steve Davenport (09:39):
What do you think?
Clem Miller (09:40):
Yeah, sure, I'll turn off my video.
Steve Davenport (09:43):
Um, so anyway, I I think that the myths about
women are very, you know, I Ifind the whole education and the
system is is is not reallyclear about.
You know, women tend to performvery well in the earlier grades
and then somewhere aroundmiddle school, things get a
little more difficult and boysbecome more aggressive, and it
(10:06):
just seems like there's the.
The things that we need to do,like you said, need to start
earlier.
I think that's the key.
Megan Smith (10:15):
Yes, and education Steve.
Steve Davenport (10:18):
Yeah, Um, so it's.
It's really uh, as youmentioned, about trying to start
earlier and get better returnsthrough your results.
Megan Smith (10:28):
You know, an interesting thing, Steve, is as
we start to see more womenworking full time, as we start
to see kind of some of thegender gaps start to balance out
.
Women control about 32 percentof all global wealth and that
number is projected to sharplyrise, especially as wealth
transfer from older generationsmoves.
Steve Davenport (10:50):
Yes, I agree.
Megan Smith (10:52):
So there's a lot of things that are going to happen
in the next 20 years and it'sacross all different types of
assets, different types of assetclasses and, as this generation
starts to leave us, there'sgoing to be a lot of wealth
transfer that's going to go intothe hand, into the hands of of
(11:13):
women.
Steve Davenport (11:14):
Yes.
Clem Miller (11:17):
That raises an interesting Megan.
That raises an interestingquestion.
So you said 32% worldwide.
Obviously there, I wouldimagine, there are big
differences worldwide.
I'm going to guess that Europeis much more advanced in terms
of women holding wealth.
Well, what do you observe inEurope that you wouldn't observe
(11:40):
here in the US or elsewhere?
Megan Smith (11:43):
You know it's interesting.
You ask that Clem.
Europe is just so much.
It's so very different than theUS.
What's interesting about Europeis they tend not to talk about
wealth as much, but they tend toeducate more.
So the things in Europe thatare kind of quiet and not talked
about as much investing wealth,money whereas in the, the U.
(12:04):
S.
, we talk more about that and weshow more wealth, but we don't
talk about things like um,sexual behaviors and things of
that nature that are much morepoliticized in Europe.
I think that Europe has justdone a really at not
broadcasting but of educatingand giving women the confidence
that they can actually succeedin this.
Clem Miller (12:35):
Do you know, when you look at women versus men, do
you observe that women investdifferently, like are they?
Do they sort of focus more onsome asset classes rather than
other asset classes, for example?
Or, yeah, so behaviors that aredifferent, or are there
behaviors that are different?
Megan Smith (12:46):
There are behaviors that are different.
As I mentioned earlier, theytend to be more consistent and
less reactive to the market, sotherefore they tend to weather
storms better than their malecounterparts.
Millennium women, which isinteresting, are more likely
than some of the oldergenerations to invest in
alternative products thanmillennial men are.
Clem Miller (13:10):
Really.
Megan Smith (13:10):
Yes.
Clem Miller (13:12):
Why is?
Megan Smith (13:12):
that they have a better, they believe they have a
better education.
They talk more about crypto.
They've learned more aboutoptions and futures in college
or graduate school classes andthey believe they know more.
Clem Miller (13:27):
I hear the believe they know more as part of that.
Megan Smith (13:32):
But it's interesting, Clem.
The stats I have are formillennials 24% of them will
invest in alternatives.
For Gen Xs it's 20% and forboomers it's only eight Right
Now.
That could also mean that manyalternative asset classes are
illiquid, so it would not besmart for a boomer to be
(13:53):
investing in alternatives as anew asset class.
For millennials and Gen Xers.
It would be a little bit moremainstream.
Clem Miller (14:02):
Right, so let's jump into alts for a bit Sure.
So obviously there's been a bigpush and I treat alts very
differently than crypto.
By the way, I treat crypto as Imean.
My own view is crypto isn'treally an asset class, but it is
(14:26):
very speculative.
I don't want to call it assetor even investment.
It's gambling, essentially.
Megan Smith (14:34):
I do agree with you .
When I think of alternatives, Ithink of things like real
estate, private equity, privatedebt credit.
I throw maybe some VC in thereand maybe a little bit of
something like a tangible item,like artwork.
Clem Miller (14:50):
Right right.
Megan Smith (14:52):
Art collections.
Steve Davenport (14:53):
Yes, I think that the art is part of the
problem, though.
Right, because you look at artand you look at crypto and you
say it's an asset that has aplace, but is it an investment?
And I look at art and I thinkof it as an investment, but I
still have trouble thinkingabout crypto the same way,
Because I view that you canabsorb a benefit from having art
(15:17):
hanging in your house.
You enjoy it all the timeWhereas crypto I'm not sure what
the enjoyment level is, or, youknow, I don't know.
The benefit of crypto, I guess,is my-.
Megan Smith (15:31):
I would agree with you on that, Steve.
I kind of put art in the sameasset class as I would put real
estate in.
It's something that you can useand enjoy, but it's nothing
that you want to have to sell,because if you have to sell it
for a reason, you're going toget what the market's offering
on that particular time, versusif you're not emotional about it
or you don't use it to needsomething, you can actually
(15:52):
trade it when the market willgive you the best price right.
Steve Davenport (15:56):
Well, I look at things like collectibles and
art and think you know they havea much longer time frame.
So if you're going to invest inthese, you have to be willing
to wait because the transactioncosts are so high.
Megan Smith (16:09):
Correct, and that's kind of like real estate.
Steve Davenport (16:12):
I still can't believe we're talking about a 6%
you know commission and maybeit's starting to change with the
new laws around realty, but itstill is such a transaction cost
where the market has notransaction costs.
Now you know it's.
It feels like these other areasI would have thought have been
would be going down the curveand would be at three or four
(16:34):
percent with real estate andwould be you know and lower
commissions for the art space.
I mean, I bought some artonline and it's it's interesting
how you know how it's pricedand how you maintain it and how
you know how much commissionthere is in storage and
transaction costs.
Megan Smith (16:56):
No, I agree with that.
I think we start to see some ofthe commissions coming down,
but to your point, Steve,they're nowhere near where they
should be compared to otherasset classes.
Clem Miller (17:08):
So, Megan, obviously one of the downsides,
or the downside of alts isliquidity, correct, and while
younger people can probablystand to have a little bit more
illiquidity in their portfolios,it's still an issue and you
(17:29):
know younger people do have, youknow, occasional needs for
liquidity, so it's not somethingthey can completely ignore,
completely ignore.
So you know.
My question is you know why,you know if, if there are, you
(17:54):
know, a private credit, privateequity, private, you know other
things that are being issued outof Blackstone or Apollo or
Aries or whatnot, why wouldn'tyou just you know, why wouldn't
a young investor just buy thosestocks, buy Blackstone, buy
Aries, buy Apollo, just buy thatbecause it's liquid.
Megan Smith (18:11):
Buy the firm stock you need versus buy the firm
stock.
Clem Miller (18:14):
Buy the firms, why not?
Megan Smith (18:16):
Well, I think what you see is, with like many
things, higher risk becomes apotential for higher rewards.
So over the long term, if yousee what alternatives look like
again over the long term, thisisn't for immediate investing.
If you need money immediately,buy the stock of the company.
But if you're long terminvesting for your retirement
funding, which is somethingyou're not supposed to touch
(18:38):
until you're over 65, then putsome alternatives in there.
Not a lot.
I don't know what the rightnumber is for the right person.
A lot of asset allocationmodels show 20% for the
millennials and the Gen X agesand then they can weather out
the storm if there are somebumps in the roads and when
(18:59):
there are bumps there are goingto be big valleys and big peaks
but over the long term it willreturn and add to their
retirement funding.
If they need money to buy ahouse, that's not money that
should be invested inalternatives Absolutely not.
Steve Davenport (19:17):
When you look at alternatives and I've, you
know, seen this throughout mycareer is that things that used
to be for investors of 5 millionor up, or 20 million and up,
have now come down to investorsthat are 2 million dollars and
up, and I think it's thedemocratization of the markets.
Do you, do you feel that thatdemocratization and going down
(19:40):
to lower and lower client levelsin terms of sophistication, or
just in general, the ability tolose money, , do you think the
endowment model really transfersto the individual, or is it
something that the industry istelling us is a good and that
actually more individuals arenot a lot like endowments
(20:01):
because they don't have such along horizon they have, you know
, this Friday, when I get paid,is what they're looking forward
to.
Megan Smith (20:09):
Correct.
So, Steve, I'll answer that ina couple of different ways.
One is endowments invest 30percent or more on average.
Big endowments invest 30percent or more into
alternatives.
That is probably too much foran individual investor to be
able to handle.
I don't think an individualinvestor is like an endowment.
Not only does an endowment havea much longer time horizon,
(20:31):
they typically are sowell-funded that they don't need
a lot of cash out of that.
So the cash funding thatthey're getting from their other
70% of their investments ismore than enough for what they
need.
Individuals are not like that.
They need money for today.
They don't need money that'smore than just their paycheck on
a Friday afternoon.
So I don't think that theyshould model after an endowment.
(20:54):
I do believe that the youngergeneration even to some degree
my generation should includesome alternatives in their
long-term investing, but not asmuch as what an endowment adds.
Steve Davenport (21:06):
Right.
I've seen people and Clem willremember this at M&T that they
think about private equity andthink about taking it out of
your equity allocation and thinkabout private real estate and
taking that out of your publicreal estate allocation so that
the amount of actual real estateand I think the most exciting
(21:28):
thing happened is in the fixedspace, because I think the
private credits, where interestrates are so low, relatively
speaking to history, whetherwe're at 2% or 4%, it's still,
I'd say, in a lower bound.
Does the benefits of privatecredit are rewarded by the extra
(21:54):
return or do you think it's anappropriate mix?
You're getting a higher returnbut you're taking a higher risk.
Megan Smith (22:01):
Correct.
I think it is the right balancethe higher risk with higher
return.
However, I keep wanting tofocus on time horizon.
Their time horizon has to belong.
This can't be for an immediateinvestment.
You've got to be looking at itover the long term.
So, steve, when you get yourpaycheck or you get your monthly
statement from wherever youinvest, when you look at the
alternative one, you can't besaying, well, that didn't go up
(22:24):
as much in the higherpercentages as everything else
did, because it's not going to.
If you're looking at on a monthor quarter to quarter basis,
you've got to look at it on, Iwould say, more than an annual
basis.
Steve Davenport (22:35):
No, I agree, it takes a different perspective
in order for you to benefit,because you've got to be patient
and you have to make sure theperson is educated enough to
know that that this is a patientrun.
I think.
I mean, do you want to talk alittle bit about crowdfunding
and some of the things that aregoing on?
Because I think the you know, Ilooked at some of these real
(22:58):
estate and farm investmentswhere you can, you know, own or
lease a piece of land and thefarmers basically produce
something on the land and thenyou, you know, it's like owning
a farm but you don't have any ofthe manure.
Do you think these investments?
(23:22):
I looked at him and said, boy,there could be nothing less
correlated to ai than this pieceof you know, bean farm in north
dakota.
You know, and and I, I don'tknow.
I think it's kind of excitingthat we have all these choices
and people who do the, uh, theloans, you know, and they say I,
I need four thousand dollarsand I'll pay you ten percent,
(23:44):
and you know it's I, I justthink it really has.
The internet and the use ofthese different vehicles has
really created a very uniqueopportunity where you know it
used to be.
You had to buy IBM or GE, andnow you can buy, you know,
pieces of land, pieces ofhousing, pieces of everything,
(24:08):
and it almost seems like we'vebecome, you know, the Amazon of
financial services with allthese different choices.
Megan Smith (24:16):
You know what's interesting Steve is?
You know.
You said going back to what didyou say?
Was it AT&T and IBM?
You said you know which?
is probably you know the fancompanies it's for it's it's
Facebook, apple, netflix, googleand I think those have a right
place in everyone's portfoliobecause they are with.
(24:38):
You know what we don't callblue chip stocks I haven't heard
that term in a while.
But these crowdfundings andthings like that, I think are
really only for high net worthpeople who can afford to take
that risk and afford to takethat loss if it happens.
I don't believe they're for theeveryday investor.
Steve Davenport (25:01):
Yeah, I just remember my uncle used to come
home from the post office andhe'd meet my father and they'd
sit there and have a cup of teaand some cookies and they'd
debate whether GE was betterthan IBM.
And you know it was the classickind of well, I don't know that
GE leader.
You know that guy.
He really knows how to, how tobalance the, manage the balance
(25:22):
sheet and you know they wouldall watch.
Well, you know William Rukeyseron Friday night.
Clem Miller (25:27):
And.
Steve Davenport (25:28):
I just think that money and culture, you know
, have changed so much, right?
I mean, it used to be somethingyou talked about, you know,
once a week and you know myfather wanted to be up to date,
so he was reading his journal onthe, you know, on the T, on the
way to work and it was like,hey, did you see this article?
And I think, about the wayinformation is transmitted, you
(25:52):
know, instantaneously around theworld and immediately something
happens in Taiwan and we knowabout it in know a matter of
minutes.
It just feels like there's a itused to be a much more of a
culture where you kind of youthought about these things and
you did these things.
You know there was much greaterceremony and pomp around.
(26:16):
You know, I made an investmenttoday, you know, I remember when
I was caddying and I made myfirst investment in Unocal and
they had this thing called shalethat they thought was going to
eventually be pretty big, and Iwas invested in it 20 years
before shale became, you know,and I didn't do particularly
well, but it was a concept thatthese people kept talking about
(26:39):
and I was like, well, I get thelong horizon, I can invest in
this and, as a reality, I neededa new bike and my investment in
Unical went south.
Megan Smith (26:52):
You learned a very valuable lesson at a very young
age.
Steve Davenport (26:55):
Right.
Clem Miller (26:56):
Megan, if I might let me, on the alternative issue
still, but focusing on thewhole 401k aspect of this, this
whole kind of push by the altscompanies, the alts providers,
and the greater acceptance byregulators of putting alts into
(27:21):
401ks.
Regulators of putting alts into401ks, and I'm sort of wondering
what you think about that.
And you know I have a specificquestion, which is, you know the
, you know, when companies make401ks available to their
employees, you know they, youknow put they put together lists
(27:45):
of potential investments and,while it's ultimately up to the
employees to select from thoselists, if there are any bad
investments that show up onthese lists, you know, judged
from an ex post perspective interms of performance, those
(28:05):
companies can get sued and doget sued.
And so you know what's thetension there Are we going to
see, are we really going to seethat much use of alts and 401ks
because of that litigation risk,or are we going to see, you
know, greater adoption?
(28:26):
As you know, regulators push asthe alts companies push, you
know, is somebody going to offerlitigation protection?
Or I mean, how is this allgoing to work?
Megan Smith (28:38):
I don't think you're going to see anyone offer
litigation protection and Ithink you are going to see an
increase.
You are going to see anincrease in knowledge just
because we're going from zero,so of course it's going to
increase.
I think the question more ishow much is it going to increase
?
And I go back to education andthose 401k providers need to put
a cap on how much people caninvest in alternatives, and I
(29:02):
haven't read anything that saysthat their plans are capping
that and they need to be capped.
Everyone obviously doesn't needto be capped at the same number
, but, based on people'soutcomes and what people's
financial literacy, financialneeds look like, there needs to
be some sort of a cap on howmuch money they can invest in
(29:24):
alternatives, isn't?
Steve Davenport (29:26):
this kind of like what happened with the
company stock, where it madesense to say you shouldn't own
more than 50% in company stock,but people working there felt,
hey, I know this thing betterthan I know anything else in my
life, so I'm going to put it allin and then eventually they had
to take it away because therewasn't the ability to cap.
(29:49):
I don't think in 401ks and itfeels to me like if you add more
risk, the people who are moredesperate are going to be taking
that risk as much as they can,because they've fallen behind
because of other circumstancesin their life, and it just it
feels like it's a button you'regoing to press if you get
(30:11):
desperate.
Megan Smith (30:12):
You know the other thing, that it comes back.
Another thing we've talked alot about education and
education at different ages anddifferent types of investments
at different ages.
The one thing that we haven'ttalked about is the power of the
investment advisor, and ifsomeone has a financial advisor
that is assisting them with this, that will also help, kind of.
It's not perfect, but it willhelp make the peaks not as high
(30:36):
and the lows not as low and makeit a little bit more consistent
.
Clem Miller (30:40):
Do you think that more young people have
investment advisors today thanthey used to do in the past?
Do you think there's greateracceptance of investment
advisory, or are people doing aDIY more?
Megan Smith (30:53):
Clem, I tend to think that people are doing DIY
more and, simply put, becauseit's cheaper and they think
these young people think thatthey know a lot.
Yeah, I think when you get,when you look at older people,
you know I don't want to, Idon't want to put a specific age
out there, but when you'retalking about us.
Steve Davenport (31:14):
I'm talking about real old people.
Megan Smith (31:16):
Or you know, I'm not talking about kids right out
of college.
You say to yourself OK, maybeit's time that now I have a
little bit of a nest egg.
I've done okay on my own.
Now I need some help and someadvice, and I need somebody to
help me with this, because I'mnot fully trained to do it.
Steve Davenport (31:34):
No, I think that's a great point, and the
other part about alternativesthat we haven't really delved
into but I'm very interested inis this idea of you know,
investing for your values orinvesting for your principles.
You know we have a strategyabout um that's aligned with
what the U S Catholic bishopsthink are socially responsible
(31:55):
investing, and we pick from thatuniverse so that we know that,
whatever portfolio we build,we'll have, you know, the right,
the right values or the rightprinciples underlying it.
Do you?
How do you feel aboutvalues-based investing?
Do you do any yourself?
And what do you think forpeople who?
(32:15):
I like it, because I believethat if you're investing in
something that you believe invalue wise, you're less likely
to be a seller at the wrong time.
If you're, if you're investingin something that you believe in
value-wise, you're less likelyto be a seller at the wrong time
.
If you're behind a company andyou think they do things right
in terms of charitablecontributions or other impact to
their employees or community, Ithink you feel better about it
(32:36):
and you're going to be a betterinvestor and therefore you're
going to have better returns.
Is it really that simple?
Megan Smith (32:43):
You know, Steve, I do agree with you, but remember
that when you're investing thatway, you're investing with your
heart, not necessarily your head.
So my gut would tell me thatyou invest that way.
But invest very carefully andvery limited.
You will probably weather astorm better because you won't
(33:05):
have the emotion.
No-transcript.
But it shouldn't be the largestasset in your portfolio.
Steve Davenport (33:13):
Yeah, well, I mean, the beta of the portfolio
is still 0.98 or what you know.
It still has a lot of goodnames and a lot don't get.
You know, it doesn't own themilitary, the Raytheons and the
others, and it doesn't own someof the weapons and it doesn't
own some some healthcare.
But I guess I'm just saying doyou do you find that yourself
(33:37):
you gravitate towards?
Uh, uh?
I don't know if you've heard ofthe state street uh ETF, she,
um, that goes and tries to findcompanies that treat women
better in terms of their, um,you know, management team and
how many women on the boards.
I mean, I, I kind of thinkthose things.
I thought they would be morepopular with women in general,
(33:59):
with more popular with peoplewanting to be values-based.
Megan Smith (34:04):
I actually did not invest that way personally.
Steve Davenport (34:07):
Okay, and do you think it's a return thing,
or you just find yourself more,more attached to, to things that
you understand more?
Megan Smith (34:20):
I would say it's twofold, steve.
I look at it as being a littlebit more of a riskier investment
because you're investing morewith your heart than you are
your head, and my more riskierinvestments just in my personal
portfolio are more alternativedriven.
Riskier investments in my justin my personal portfolio are
more alternative driven.
There's.
I don't any more in therebecause it's just, in my opinion
, going to increase the riskportfolio, the risk in the
(34:40):
portfolio.
Clem Miller (34:42):
Okay, in a sense, you've chosen where to put your
risk.
Megan Smith (34:46):
I put my risk in alternatives.
Clem Miller (34:48):
Right, exactly, whereas some people might choose
to put their risk in more valueareas, in values-driven areas.
Megan Smith (34:56):
You know, as is all of investing, it's a personal
decision, right.
Steve Davenport (35:02):
Right people who are getting started, in
terms of if you know yourprescription to somebody who's
younger and trying to start offand figure this out, are there
things that they should?
(35:22):
You know some guidelines theyshould follow in terms of how to
get started?
Megan Smith (35:27):
yeah, um, you know, I think they need to.
It depends on different agegroups.
Um, I did find some stats forthis that women typically don't
start investing until they're 27years old, which I think is too
late.
They've missed five years ofthat money compounding.
I think you should start assoon as you graduate from
college and put something away,as my father did teach me that
(35:49):
you need to kind of look at whatyour overall goals are going to
be, both short-term andlong-term.
So do you want to buy a house?
If you want to buy a house, youneed to be invested in more
liquid assets.
If you're investing more forretirement, you can do some of
these more riskier investmentsthat we've talked about that
have a more long-term timehorizon.
I think that the investorsshould pick what type of
(36:12):
platform they want to investthrough.
Think that the investors shouldpick what type of platform they
want to invest through.
So do they go to a place likeFidelity or Vanguard, or do they
go to a trusted financialadvisor?
That's, a person that can helpthem understand their needs and
goals and then execute on them?
For the younger generation, Iwould say start small, but
maximize everything you can.
If you've got a Roth, maximizeit.
(36:32):
If you've got a 401k, maximizeit.
If you've got an employee stockpurchase plan, maximize it,
because you'll never miss themoney that comes out of your
paycheck.
You could never see it.
And then I would also encouragepeople to have what I call a
thirst for knowledge and educateyourself, whether it's online
articles, whether it's podcastslike this, whether it's getting
(36:55):
a subscription to Barron's Dosomething that helps educate
yourself so that you understandwhat's going on and you can take
an active role in managing yourfuture.
Steve Davenport (37:07):
No, I think that's great.
That was a great advice.
That's great advice.
When we talk about investments,we're trying to expand the
concept a little bit into howyou invest your time and how do
you invest in things in thecommunity that help, and I know
that you're committed to PCbeing a trustee, and Providence
(37:27):
College has been very good to alot of people and I think it's a
great place to to make aninvestment.
But can you just talk to meabout personally, how you feel
about giving back in your timeor treasure and and just what
what it means to you in terms of, uh, you know, is this
investment as important as someof the other ones you're making?
Megan Smith (37:49):
I think for a well-balanced person, you need
to invest in more than justmoney, right?
I think you have to invest inpeople.
I think you have to invest inyour community.
I am very involved in theMelanoma Foundation, a
not-for-profit called ImpactMelanoma.
I have sat on that board and Iwas actually the clerk of that
(38:09):
board for a little while I timedoff the board.
My husband passed of melanomawhen he was 45 years old, so I
have a very personal connectionthere and want to help educate
people on the importance ofsunscreen shame, all of that.
So that's kind of a little bitmore of a personal connection.
And it started very small.
(38:30):
This started very small inBoston is now it's got tethers
out to to other areas.
So that's one thing.
Another thing I'm looking intoSteve is giving back in a active
way with a committee, a boardin Boston that raises money and
(38:53):
coordinates the Archdiocese ofBoston's priests and their
retirement funding and theirretirement home and how those
priests are taken care of oncethey're out of the diocesan
churches.
Steve Davenport (39:07):
Wow, I'm sorry to hear about your husband, yeah
.
Megan Smith (39:12):
Thank you, but I do try to you know, all of those
hit me at a different place formy personal experiences, and I
think that's very important.
You've got to.
If you're going, in my opinion,if you're going to do something
that you're not being paid for,it's coming out of the goodness
of your heart.
It has to be something that'sin your heart and something
that's very important to you.
Steve Davenport (39:30):
Yeah, I would love to get those links and
share them with our listeners.
Um, because part of what one ofthe advisors we had last week
was, you know, talking about.
He's graduating from west pointand one to support vets and I
think that we all look atadvisors and we say, oh, let's
look at their returns or let'slook at what they you know what
they're doing or how many peoplethey have on staff.
(39:52):
And I think that, looking atindividuals and thinking about
gee, there are complex peoplewho have done a lot of good
things and are trying to helpothers, not just in the world of
finance that they're familiar,but also in these other worlds
and these other orbs.
Megan Smith (40:10):
Right, you know, my father always taught me to
which much is given, much isexpected.
Steve Davenport (40:15):
So yes, I've heard that a few times.
Megan Smith (40:20):
And he lived it and he taught that.
He taught all of us that aswell.
Steve Davenport (40:24):
Clem, do you have any final questions?
Clem Miller (40:27):
No, I think I've covered all my questions.
Thank you very much, Megan.
Megan Smith (40:31):
Thank you all, thank you both for your time
today.
I appreciate it.
This is fun.
Steve Davenport (40:35):
Sure, we appreciate having you and we'd
love to continue the story andhear some more about some of
those charities maybe goingforward.
So, everybody, thank you forlistening and I think today's
podcast brought up a lot oftopics and really did a good job
of covering them.
(40:55):
So I thank Clem and Megan and Ihope everybody has a great
Labor Day weekend and I hopeeverybody continues, as Megan
says, to find that quench forknowledge so they can also
satisfy some of their passions.
Be good everyone.
Hello everyone and welcome to Skeptic's Guide
to Investing.
Today we're having aninteresting interview and
discussion with Megan Smith.
Megan and I are connectedthrough Providence College.
She's a board of trustee memberat Providence
I went to Providence and Meganhas a lot of experience in the
(00:23):
financial service industry herwhole career and I just thought
it would be interesting to lookat what's happening in this
space, particularly alternatives, with somebody who was deeply
involved in how alternatives fitin various clients and various
situations.
(00:43):
So I think there's a lot to talkabout, but one of the things
that we've been trying to do isto focus on how women view
investments and how women viewthe ability to make better
choices and better outcomes intheir life with finance.
I think there's a lot of cloudshanging around women in
(01:05):
investing and I think we need toclear them out and try to make
it clearer what you should doand how you should do it.
So, as part of our goal inSkeptics to improve the overall
wellness of individuals, we'dlike to focus on women and how
we make that wellness moresuccessful for them as well as
(01:29):
everyone else.
So I guess I'd love to hearMegan kind of tell me a little
bit about where you come from interms of growing up around the
ideas of money and then going towork and working in the
financial industry.
And just give us a little bitof the Megan Smith 101 so that
(01:52):
we can dive into more topics.
Megan Smith (01:55):
Perfect.
Thanks, Steve.
I appreciate it.
I actually grew up the oldestof five children in Worcester,
Massachusetts.
I would say that around thedinner table we weren't talking
about finances.
There was a big age gap betweenthe oldest and the youngest.
It was hard at the in WorcesterMassachusetts, I would say that
around the dinner table weweren't talking about finances.
There was a big age gap betweenthe oldest and the youngest.
It was hard at the dinner tableto come up with conversation
that everyone could be involvedin.
I grew up in a very kind oftraditional Irish Catholic
(02:17):
family of people of that timewhere my father worked, my
mother stayed home and ran thehouse and we didn't have a lot
of money when I was younger andmy mother had a budget that she
had to work within to feed usand to clothe us and she could
always do that.
But she was never the one thatdid the investments.
She was never the one thatlooked for how to invest or how
to save or where the bestmortgage rates were coming from.
(02:39):
My dad did all of that and sowithout that education I kind of
grew up and had to talk, had toteach myself.
So I graduated from college.
Thank you for the ProvidenceCollege.
Providence College mentionedthere, steve I went to New York
and started working in themarketing department of what was
the former Dean Ritter Reynolds, which is now was was purchased
(03:00):
by Morgan Stanley, and I workedin the marketing department and
I learned a lot.
But what I learned very quicklywas if you wanted to make any
money in financial services, youhad to be on the revenue
generating side of the business,so you needed to be on the
sales side.
So I got myself, therefore,involved in a sales role.
That was account management,product development and I've
(03:22):
done that with mutual funds,variable annuities and probably
for the last 20 years of mycareer in the alternative
investment field developingproduct, bringing it to market,
presenting it, dealing withregulators and custodians, as
well as educating sales forcesand home offices.
All of the products that Irepresented were sold through a
financial intermediary.
Steve Davenport (03:43):
Yeah, I mean I think that that background seems
awesome for what is going ontoday.
I mean, you must feel like allof these discussions about
alternatives and adding them to401ks, and what's happening with
crypto and what's happeningwith the markets.
I mean, this has been a year ofquite a bit of change and I
(04:06):
guess I feel as though you knowwomen in general, because of the
pay differential, because ofdisruption in career, because of
a lot of things extra, you know, a longer lifespan means you're
going to have a longerretirement, but that means
you're funding a longerretirement.
(04:27):
So, how do you feel about thegender gap This podcast what
do you think we need to do asindividuals to help others who
are not in the finance industryget better results and avoid
some of the gender gaps?
Megan Smith (04:46):
You know it's interesting.
You say that Women tend tostart investing later and invest
less because they carry morefear.
So, to your point, as they'reliving longer, they end up
having less money to live on inretirement.
What's really interesting,though, is a third of women see
themselves as investors, withthe majority of them saving
consistently.
So a third of women seethemselves as investors, with
the majority of them savingconsistently.
(05:07):
So a third of women save moneyconsistently.
And, interestingly enough, ascompared to their male
counterparts, they tend tooutperform men by about four
basis points.
So you might ask why aboutwomen investing?
Is they tend less to beemotional about it.
They tend to be more consistent, less impulsive and more
(05:27):
focused on the long-term goal,which is retirement.
So the issue is not necessarilycapability, it's confidence in
being able to do it, and thenaccess.
And how do you teach, havingbeen brought up or educated in
the school systems, how toinvest with confidence and get
access to it.
Steve Davenport (05:44):
Yeah, I mean, I think that yesterday we had
this financial literacy friendwho you know.
It's all about taking thatknowledge and then doing
something, and that's the big.
We can deliver more knowledgeto people with AI and everything
else, but if it's not going tolead to action, it's going to be
(06:08):
hard for everyone and that'swhere we're trying to figure out
what is the way that you canbehaviorally help people so that
they don't look at you asprescribing, they don't look at
you as scolding, they look atyou and say, hey, he's trying to
help me understand theperspective and give me a good
long-term result.
Megan Smith (06:27):
Yep.
And I think yeah, Steve, I thinkthe best way to do that is
start them young and get intothe habit of investing in their
401k.
I will say that was one thingthat my dad did for me when I
first started in my career.
He said to me put as much moneyaway in your 401k plan as they
will allow you with the companymatch and what he said.
(06:48):
I'm like, yeah, but I need thatmoney for my rent or I need
that money to go out on aSaturday night.
He's like you'll never see themoney, therefore you don't need
it.
So begin investing when you'reyoung and if five or $10, that
will compound into a decent,into a decent um amount of, to a
decent nest egg when youretirement, I should say um.
(07:10):
I think that investing is more.
You don't need to be a mathguru.
Clem Miller (07:13):
Investing is more about patience and consistency
than it is about money crunchingthat's great, thank you um,
megan, um, if you had to lookaround and identify which you
(07:33):
know women investors, like somemore famous women investors, uh,
women who are younger, uh,should should model themselves.
After who would you recommendand why would you recommend them
?
Megan Smith (07:50):
Huh, that's an interesting one, so I would
actually and it's going to besomeone that not everyone knows
there was a female investor andfemale advisor that I worked
with in a large broker dealerthat I worked with.
She was a really interestingwoman.
She ran her own business.
She had a husband and two kids.
She ran an investing business.
(08:10):
She had probably 30 people thatworked for her and then, as she
got older and her condo in thecity was paid off and her
children were launching andeducated and she was still
working full time, she and herhusband had the ability, because
(08:31):
of her investing andunderstanding the markets and
going out and educating otherpeople on the markets and
educating the people that workedfor her on the best thing to do
.
She and her husband wereactually able to buy a lavender
farm in Michigan.
Steve Davenport (08:46):
Nice, nice.
And when we think about some ofthe people and women, you know,
what do you think are some ofthe myths that are holding back
women?
Do you think it's a a reality?
I mean, I I agree with you that, in returns, I think women are
(09:06):
more balanced and probably moreum likely to follow along, um I
think there's a lot ofmisandhold back women, someone
else to do and they just did.
Megan Smith (09:22):
I lose you guys.
Yeah, a little bit.
Steve Davenport (09:23):
It seems like you might've been um, maybe we
just um go with uh, uh, no videoand we'll try that and see if
it it gives us a betterrecording.
Is that okay?
Megan Smith (09:37):
Great.
Steve Davenport (09:39):
What do you think?
Clem Miller (09:40):
Yeah, sure, I'll turn off my video.
Steve Davenport (09:43):
Um, so anyway, I I think that the myths about
women are very, you know, I Ifind the whole education and the
system is is is not reallyclear about.
You know, women tend to performvery well in the earlier grades
and then somewhere aroundmiddle school, things get a
little more difficult and boysbecome more aggressive, and it
(10:06):
just seems like there's the.
The things that we need to do,like you said, need to start
earlier.
I think that's the key.
Megan Smith (10:15):
Yes, and education Steve.
Steve Davenport (10:18):
Yeah, Um, so it's.
It's really uh, as youmentioned, about trying to start
earlier and get better returnsthrough your results.
Megan Smith (10:28):
You know, an interesting thing, Steve, is as
we start to see more womenworking full time, as we start
to see kind of some of thegender gaps start to balance out
.
Women control about 32 percentof all global wealth and that
number is projected to sharplyrise, especially as wealth
transfer from older generationsmoves.
Steve Davenport (10:50):
Yes, I agree.
Megan Smith (10:52):
So there's a lot of things that are going to happen
in the next 20 years and it'sacross all different types of
assets, different types of assetclasses and, as this generation
starts to leave us, there'sgoing to be a lot of wealth
transfer that's going to go intothe hand, into the hands of of
(11:13):
women.
Steve Davenport (11:14):
Yes.
Clem Miller (11:17):
That raises an interesting Megan.
That raises an interestingquestion.
So you said 32% worldwide.
Obviously there, I wouldimagine, there are big
differences worldwide.
I'm going to guess that Europeis much more advanced in terms
of women holding wealth.
Well, what do you observe inEurope that you wouldn't observe
(11:40):
here in the US or elsewhere?
Megan Smith (11:43):
You know it's interesting.
You ask that Clem.
Europe is just so much.
It's so very different than theUS.
What's interesting about Europeis they tend not to talk about
wealth as much, but they tend toeducate more.
So the things in Europe thatare kind of quiet and not talked
about as much investing wealth,money whereas in the, the U.
(12:04):
S.
, we talk more about that and weshow more wealth, but we don't
talk about things like um,sexual behaviors and things of
that nature that are much morepoliticized in Europe.
I think that Europe has justdone a really at not
broadcasting but of educatingand giving women the confidence
that they can actually succeedin this.
Clem Miller (12:35):
Do you know, when you look at women versus men, do
you observe that women investdifferently, like are they?
Do they sort of focus more onsome asset classes rather than
other asset classes, for example?
Or, yeah, so behaviors that aredifferent, or are there
behaviors that are different?
Megan Smith (12:46):
There are behaviors that are different.
As I mentioned earlier, theytend to be more consistent and
less reactive to the market, sotherefore they tend to weather
storms better than their malecounterparts.
Millennium women, which isinteresting, are more likely
than some of the oldergenerations to invest in
alternative products thanmillennial men are.
Clem Miller (13:10):
Really.
Megan Smith (13:10):
Yes.
Clem Miller (13:12):
Why is?
Megan Smith (13:12):
that they have a better, they believe they have a
better education.
They talk more about crypto.
They've learned more aboutoptions and futures in college
or graduate school classes andthey believe they know more.
Clem Miller (13:27):
I hear the believe they know more as part of that.
Megan Smith (13:32):
But it's interesting, Clem.
The stats I have are formillennials 24% of them will
invest in alternatives.
For Gen Xs it's 20% and forboomers it's only eight Right
Now.
That could also mean that manyalternative asset classes are
illiquid, so it would not besmart for a boomer to be
(13:53):
investing in alternatives as anew asset class.
For millennials and Gen Xers.
It would be a little bit moremainstream.
Clem Miller (14:02):
Right, so let's jump into alts for a bit Sure.
So obviously there's been a bigpush and I treat alts very
differently than crypto.
By the way, I treat crypto as Imean.
My own view is crypto isn'treally an asset class, but it is
(14:26):
very speculative.
I don't want to call it assetor even investment.
It's gambling, essentially.
Megan Smith (14:34):
I do agree with you .
When I think of alternatives, Ithink of things like real
estate, private equity, privatedebt credit.
I throw maybe some VC in thereand maybe a little bit of
something like a tangible item,like artwork.
Clem Miller (14:50):
Right right.
Megan Smith (14:52):
Art collections.
Steve Davenport (14:53):
Yes, I think that the art is part of the
problem, though.
Right, because you look at artand you look at crypto and you
say it's an asset that has aplace, but is it an investment?
And I look at art and I thinkof it as an investment, but I
still have trouble thinkingabout crypto the same way,
Because I view that you canabsorb a benefit from having art
(15:17):
hanging in your house.
You enjoy it all the timeWhereas crypto I'm not sure what
the enjoyment level is, or, youknow, I don't know.
The benefit of crypto, I guess,is my-.
Megan Smith (15:31):
I would agree with you on that, Steve.
I kind of put art in the sameasset class as I would put real
estate in.
It's something that you can useand enjoy, but it's nothing
that you want to have to sell,because if you have to sell it
for a reason, you're going toget what the market's offering
on that particular time, versusif you're not emotional about it
or you don't use it to needsomething, you can actually
(15:52):
trade it when the market willgive you the best price right.
Steve Davenport (15:56):
Well, I look at things like collectibles and
art and think you know they havea much longer time frame.
So if you're going to invest inthese, you have to be willing
to wait because the transactioncosts are so high.
Megan Smith (16:09):
Correct, and that's kind of like real estate.
Steve Davenport (16:12):
I still can't believe we're talking about a 6%
you know commission and maybeit's starting to change with the
new laws around realty, but itstill is such a transaction cost
where the market has notransaction costs.
Now you know it's.
It feels like these other areasI would have thought have been
would be going down the curveand would be at three or four
(16:34):
percent with real estate andwould be you know and lower
commissions for the art space.
I mean, I bought some artonline and it's it's interesting
how you know how it's pricedand how you maintain it and how
you know how much commissionthere is in storage and
transaction costs.
Megan Smith (16:56):
No, I agree with that.
I think we start to see some ofthe commissions coming down,
but to your point, Steve,they're nowhere near where they
should be compared to otherasset classes.
Clem Miller (17:08):
So, Megan, obviously one of the downsides,
or the downside of alts isliquidity, correct, and while
younger people can probablystand to have a little bit more
illiquidity in their portfolios,it's still an issue and you
(17:29):
know younger people do have, youknow, occasional needs for
liquidity, so it's not somethingthey can completely ignore,
completely ignore.
So you know.
My question is you know why,you know if, if there are, you
(17:54):
know, a private credit, privateequity, private, you know other
things that are being issued outof Blackstone or Apollo or
Aries or whatnot, why wouldn'tyou just you know, why wouldn't
a young investor just buy thosestocks, buy Blackstone, buy
Aries, buy Apollo, just buy thatbecause it's liquid.
Megan Smith (18:11):
Buy the firm stock you need versus buy the firm
stock.
Clem Miller (18:14):
Buy the firms, why not?
Megan Smith (18:16):
Well, I think what you see is, with like many
things, higher risk becomes apotential for higher rewards.
So over the long term, if yousee what alternatives look like
again over the long term, thisisn't for immediate investing.
If you need money immediately,buy the stock of the company.
But if you're long terminvesting for your retirement
funding, which is somethingyou're not supposed to touch
(18:38):
until you're over 65, then putsome alternatives in there.
Not a lot.
I don't know what the rightnumber is for the right person.
A lot of asset allocationmodels show 20% for the
millennials and the Gen X agesand then they can weather out
the storm if there are somebumps in the roads and when
(18:59):
there are bumps there are goingto be big valleys and big peaks
but over the long term it willreturn and add to their
retirement funding.
If they need money to buy ahouse, that's not money that
should be invested inalternatives Absolutely not.
Steve Davenport (19:17):
When you look at alternatives and I've, you
know, seen this throughout mycareer is that things that used
to be for investors of 5 millionor up, or 20 million and up,
have now come down to investorsthat are 2 million dollars and
up, and I think it's thedemocratization of the markets.
Do you, do you feel that thatdemocratization and going down
(19:40):
to lower and lower client levelsin terms of sophistication, or
just in general, the ability tolose money, , do you think the
endowment model really transfersto the individual, or is it
something that the industry istelling us is a good and that
actually more individuals arenot a lot like endowments
(20:01):
because they don't have such along horizon they have, you know
, this Friday, when I get paid,is what they're looking forward
to.
Megan Smith (20:09):
Correct.
So, Steve, I'll answer that ina couple of different ways.
One is endowments invest 30percent or more on average.
Big endowments invest 30percent or more into
alternatives.
That is probably too much foran individual investor to be
able to handle.
I don't think an individualinvestor is like an endowment.
Not only does an endowment havea much longer time horizon,
(20:31):
they typically are sowell-funded that they don't need
a lot of cash out of that.
So the cash funding thatthey're getting from their other
70% of their investments ismore than enough for what they
need.
Individuals are not like that.
They need money for today.
They don't need money that'smore than just their paycheck on
a Friday afternoon.
So I don't think that theyshould model after an endowment.
(20:54):
I do believe that the youngergeneration even to some degree
my generation should includesome alternatives in their
long-term investing, but not asmuch as what an endowment adds.
Steve Davenport (21:06):
Right.
I've seen people and Clem willremember this at M&T that they
think about private equity andthink about taking it out of
your equity allocation and thinkabout private real estate and
taking that out of your publicreal estate allocation so that
the amount of actual real estateand I think the most exciting
(21:28):
thing happened is in the fixedspace, because I think the
private credits, where interestrates are so low, relatively
speaking to history, whetherwe're at 2% or 4%, it's still,
I'd say, in a lower bound.
Does the benefits of privatecredit are rewarded by the extra
(21:54):
return or do you think it's anappropriate mix?
You're getting a higher returnbut you're taking a higher risk.
Megan Smith (22:01):
Correct.
I think it is the right balancethe higher risk with higher
return.
However, I keep wanting tofocus on time horizon.
Their time horizon has to belong.
This can't be for an immediateinvestment.
You've got to be looking at itover the long term.
So, steve, when you get yourpaycheck or you get your monthly
statement from wherever youinvest, when you look at the
alternative one, you can't besaying, well, that didn't go up
(22:24):
as much in the higherpercentages as everything else
did, because it's not going to.
If you're looking at on a monthor quarter to quarter basis,
you've got to look at it on, Iwould say, more than an annual
basis.
Steve Davenport (22:35):
No, I agree, it takes a different perspective
in order for you to benefit,because you've got to be patient
and you have to make sure theperson is educated enough to
know that that this is a patientrun.
I think.
I mean, do you want to talk alittle bit about crowdfunding
and some of the things that aregoing on?
Because I think the you know, Ilooked at some of these real
(22:58):
estate and farm investmentswhere you can, you know, own or
lease a piece of land and thefarmers basically produce
something on the land and thenyou, you know, it's like owning
a farm but you don't have any ofthe manure.
Do you think these investments?
(23:22):
I looked at him and said, boy,there could be nothing less
correlated to ai than this pieceof you know, bean farm in north
dakota.
You know, and and I, I don'tknow.
I think it's kind of excitingthat we have all these choices
and people who do the, uh, theloans, you know, and they say I,
I need four thousand dollarsand I'll pay you ten percent,
(23:44):
and you know it's I, I justthink it really has.
The internet and the use ofthese different vehicles has
really created a very uniqueopportunity where you know it
used to be.
You had to buy IBM or GE, andnow you can buy, you know,
pieces of land, pieces ofhousing, pieces of everything,
(24:08):
and it almost seems like we'vebecome, you know, the Amazon of
financial services with allthese different choices.
Megan Smith (24:16):
You know what's interesting Steve is?
You know.
You said going back to what didyou say?
Was it AT&T and IBM?
You said you know which?
is probably you know the fancompanies it's for it's it's
Facebook, apple, netflix, googleand I think those have a right
place in everyone's portfoliobecause they are with.
(24:38):
You know what we don't callblue chip stocks I haven't heard
that term in a while.
But these crowdfundings andthings like that, I think are
really only for high net worthpeople who can afford to take
that risk and afford to takethat loss if it happens.
I don't believe they're for theeveryday investor.
Steve Davenport (25:01):
Yeah, I just remember my uncle used to come
home from the post office andhe'd meet my father and they'd
sit there and have a cup of teaand some cookies and they'd
debate whether GE was betterthan IBM.
And you know it was the classickind of well, I don't know that
GE leader.
You know that guy.
He really knows how to, how tobalance the, manage the balance
(25:22):
sheet and you know they wouldall watch.
Well, you know William Rukeyseron Friday night.
Clem Miller (25:27):
And.
Steve Davenport (25:28):
I just think that money and culture, you know
, have changed so much, right?
I mean, it used to be somethingyou talked about, you know,
once a week and you know myfather wanted to be up to date,
so he was reading his journal onthe, you know, on the T, on the
way to work and it was like,hey, did you see this article?
And I think, about the wayinformation is transmitted, you
(25:52):
know, instantaneously around theworld and immediately something
happens in Taiwan and we knowabout it in know a matter of
minutes.
It just feels like there's a itused to be a much more of a
culture where you kind of youthought about these things and
you did these things.
You know there was much greaterceremony and pomp around.
(26:16):
You know, I made an investmenttoday, you know, I remember when
I was caddying and I made myfirst investment in Unocal and
they had this thing called shalethat they thought was going to
eventually be pretty big, and Iwas invested in it 20 years
before shale became, you know,and I didn't do particularly
well, but it was a concept thatthese people kept talking about
(26:39):
and I was like, well, I get thelong horizon, I can invest in
this and, as a reality, I neededa new bike and my investment in
Unical went south.
Megan Smith (26:52):
You learned a very valuable lesson at a very young
age.
Steve Davenport (26:55):
Right.
Clem Miller (26:56):
Megan, if I might let me, on the alternative issue
still, but focusing on thewhole 401k aspect of this, this
whole kind of push by the altscompanies, the alts providers,
and the greater acceptance byregulators of putting alts into
(27:21):
401ks.
Regulators of putting alts into401ks, and I'm sort of wondering
what you think about that.
And you know I have a specificquestion, which is, you know the
, you know, when companies make401ks available to their
employees, you know they, youknow put they put together lists
(27:45):
of potential investments and,while it's ultimately up to the
employees to select from thoselists, if there are any bad
investments that show up onthese lists, you know, judged
from an ex post perspective interms of performance, those
(28:05):
companies can get sued and doget sued.
And so you know what's thetension there Are we going to
see, are we really going to seethat much use of alts and 401ks
because of that litigation risk,or are we going to see, you
know, greater adoption?
(28:26):
As you know, regulators push asthe alts companies push, you
know, is somebody going to offerlitigation protection?
Or I mean, how is this allgoing to work?
Megan Smith (28:38):
I don't think you're going to see anyone offer
litigation protection and Ithink you are going to see an
increase.
You are going to see anincrease in knowledge just
because we're going from zero,so of course it's going to
increase.
I think the question more ishow much is it going to increase
?
And I go back to education andthose 401k providers need to put
a cap on how much people caninvest in alternatives, and I
(29:02):
haven't read anything that saysthat their plans are capping
that and they need to be capped.
Everyone obviously doesn't needto be capped at the same number
, but, based on people'soutcomes and what people's
financial literacy, financialneeds look like, there needs to
be some sort of a cap on howmuch money they can invest in
(29:24):
alternatives, isn't?
Steve Davenport (29:26):
this kind of like what happened with the
company stock, where it madesense to say you shouldn't own
more than 50% in company stock,but people working there felt,
hey, I know this thing betterthan I know anything else in my
life, so I'm going to put it allin and then eventually they had
to take it away because therewasn't the ability to cap.
(29:49):
I don't think in 401ks and itfeels to me like if you add more
risk, the people who are moredesperate are going to be taking
that risk as much as they can,because they've fallen behind
because of other circumstancesin their life, and it just it
feels like it's a button you'regoing to press if you get
(30:11):
desperate.
Megan Smith (30:12):
You know the other thing, that it comes back.
Another thing we've talked alot about education and
education at different ages anddifferent types of investments
at different ages.
The one thing that we haven'ttalked about is the power of the
investment advisor, and ifsomeone has a financial advisor
that is assisting them with this, that will also help, kind of.
It's not perfect, but it willhelp make the peaks not as high
(30:36):
and the lows not as low and makeit a little bit more consistent
.
Clem Miller (30:40):
Do you think that more young people have
investment advisors today thanthey used to do in the past?
Do you think there's greateracceptance of investment
advisory, or are people doing aDIY more?
Megan Smith (30:53):
Clem, I tend to think that people are doing DIY
more and, simply put, becauseit's cheaper and they think
these young people think thatthey know a lot.
Yeah, I think when you get,when you look at older people,
you know I don't want to, Idon't want to put a specific age
out there, but when you'retalking about us.
Steve Davenport (31:14):
I'm talking about real old people.
Megan Smith (31:16):
Or you know, I'm not talking about kids right out
of college.
You say to yourself OK, maybeit's time that now I have a
little bit of a nest egg.
I've done okay on my own.
Now I need some help and someadvice, and I need somebody to
help me with this, because I'mnot fully trained to do it.
Steve Davenport (31:34):
No, I think that's a great point, and the
other part about alternativesthat we haven't really delved
into but I'm very interested inis this idea of you know,
investing for your values orinvesting for your principles.
You know we have a strategyabout um that's aligned with
what the U S Catholic bishopsthink are socially responsible
(31:55):
investing, and we pick from thatuniverse so that we know that,
whatever portfolio we build,we'll have, you know, the right,
the right values or the rightprinciples underlying it.
Do you?
How do you feel aboutvalues-based investing?
Do you do any yourself?
And what do you think forpeople who?
(32:15):
I like it, because I believethat if you're investing in
something that you believe invalue wise, you're less likely
to be a seller at the wrong time.
If you're, if you're investingin something that you believe in
value-wise, you're less likelyto be a seller at the wrong time
.
If you're behind a company andyou think they do things right
in terms of charitablecontributions or other impact to
their employees or community, Ithink you feel better about it
(32:36):
and you're going to be a betterinvestor and therefore you're
going to have better returns.
Is it really that simple?
Megan Smith (32:43):
You know, Steve, I do agree with you, but remember
that when you're investing thatway, you're investing with your
heart, not necessarily your head.
So my gut would tell me thatyou invest that way.
But invest very carefully andvery limited.
You will probably weather astorm better because you won't
(33:05):
have the emotion.
No-transcript.
But it shouldn't be the largestasset in your portfolio.
Steve Davenport (33:13):
Yeah, well, I mean, the beta of the portfolio
is still 0.98 or what you know.
It still has a lot of goodnames and a lot don't get.
You know, it doesn't own themilitary, the Raytheons and the
others, and it doesn't own someof the weapons and it doesn't
own some some healthcare.
But I guess I'm just saying doyou do you find that yourself
(33:37):
you gravitate towards?
Uh, uh?
I don't know if you've heard ofthe state street uh ETF, she,
um, that goes and tries to findcompanies that treat women
better in terms of their, um,you know, management team and
how many women on the boards.
I mean, I, I kind of thinkthose things.
I thought they would be morepopular with women in general,
(33:59):
with more popular with peoplewanting to be values-based.
Megan Smith (34:04):
I actually did not invest that way personally.
Steve Davenport (34:07):
Okay, and do you think it's a return thing,
or you just find yourself more,more attached to, to things that
you understand more?
Megan Smith (34:20):
I would say it's twofold, steve.
I look at it as being a littlebit more of a riskier investment
because you're investing morewith your heart than you are
your head, and my more riskierinvestments just in my personal
portfolio are more alternativedriven.
Riskier investments in my justin my personal portfolio are
more alternative driven.
There's.
I don't any more in therebecause it's just, in my opinion
, going to increase the riskportfolio, the risk in the
(34:40):
portfolio.
Clem Miller (34:42):
Okay, in a sense, you've chosen where to put your
risk.
Megan Smith (34:46):
I put my risk in alternatives.
Clem Miller (34:48):
Right, exactly, whereas some people might choose
to put their risk in more valueareas, in values-driven areas.
Megan Smith (34:56):
You know, as is all of investing, it's a personal
decision, right.
Steve Davenport (35:02):
Right people who are getting started, in
terms of if you know yourprescription to somebody who's
younger and trying to start offand figure this out, are there
things that they should?
(35:22):
You know some guidelines theyshould follow in terms of how to
get started?
Megan Smith (35:27):
yeah, um, you know, I think they need to.
It depends on different agegroups.
Um, I did find some stats forthis that women typically don't
start investing until they're 27years old, which I think is too
late.
They've missed five years ofthat money compounding.
I think you should start assoon as you graduate from
college and put something away,as my father did teach me that
(35:49):
you need to kind of look at whatyour overall goals are going to
be, both short-term andlong-term.
So do you want to buy a house?
If you want to buy a house, youneed to be invested in more
liquid assets.
If you're investing more forretirement, you can do some of
these more riskier investmentsthat we've talked about that
have a more long-term timehorizon.
I think that the investorsshould pick what type of
(36:12):
platform they want to investthrough.
Think that the investors shouldpick what type of platform they
want to invest through.
So do they go to a place likeFidelity or Vanguard, or do they
go to a trusted financialadvisor?
That's, a person that can helpthem understand their needs and
goals and then execute on them?
For the younger generation, Iwould say start small, but
maximize everything you can.
If you've got a Roth, maximizeit.
(36:32):
If you've got a 401k, maximizeit.
If you've got an employee stockpurchase plan, maximize it,
because you'll never miss themoney that comes out of your
paycheck.
You could never see it.
And then I would also encouragepeople to have what I call a
thirst for knowledge and educateyourself, whether it's online
articles, whether it's podcastslike this, whether it's getting
(36:55):
a subscription to Barron's Dosomething that helps educate
yourself so that you understandwhat's going on and you can take
an active role in managing yourfuture.
Steve Davenport (37:07):
No, I think that's great.
That was a great advice.
That's great advice.
When we talk about investments,we're trying to expand the
concept a little bit into howyou invest your time and how do
you invest in things in thecommunity that help, and I know
that you're committed to PCbeing a trustee, and Providence
(37:27):
College has been very good to alot of people and I think it's a
great place to to make aninvestment.
But can you just talk to meabout personally, how you feel
about giving back in your timeor treasure and and just what
what it means to you in terms of, uh, you know, is this
investment as important as someof the other ones you're making?
Megan Smith (37:49):
I think for a well-balanced person, you need
to invest in more than justmoney, right?
I think you have to invest inpeople.
I think you have to invest inyour community.
I am very involved in theMelanoma Foundation, a
not-for-profit called ImpactMelanoma.
I have sat on that board and Iwas actually the clerk of that
(38:09):
board for a little while I timedoff the board.
My husband passed of melanomawhen he was 45 years old, so I
have a very personal connectionthere and want to help educate
people on the importance ofsunscreen shame, all of that.
So that's kind of a little bitmore of a personal connection.
And it started very small.
(38:30):
This started very small inBoston is now it's got tethers
out to to other areas.
So that's one thing.
Another thing I'm looking intoSteve is giving back in a active
way with a committee, a boardin Boston that raises money and
(38:53):
coordinates the Archdiocese ofBoston's priests and their
retirement funding and theirretirement home and how those
priests are taken care of oncethey're out of the diocesan
churches.
Steve Davenport (39:07):
Wow, I'm sorry to hear about your husband, yeah
.
Megan Smith (39:12):
Thank you, but I do try to you know, all of those
hit me at a different place formy personal experiences, and I
think that's very important.
You've got to.
If you're going, in my opinion,if you're going to do something
that you're not being paid for,it's coming out of the goodness
of your heart.
It has to be something that'sin your heart and something
that's very important to you.
Steve Davenport (39:30):
Yeah, I would love to get those links and
share them with our listeners.
Um, because part of what one ofthe advisors we had last week
was, you know, talking about.
He's graduating from west pointand one to support vets and I
think that we all look atadvisors and we say, oh, let's
look at their returns or let'slook at what they you know what
they're doing or how many peoplethey have on staff.
(39:52):
And I think that, looking atindividuals and thinking about
gee, there are complex peoplewho have done a lot of good
things and are trying to helpothers, not just in the world of
finance that they're familiar,but also in these other worlds
and these other orbs.
Megan Smith (40:10):
Right, you know, my father always taught me to
which much is given, much isexpected.
Steve Davenport (40:15):
So yes, I've heard that a few times.
Megan Smith (40:20):
And he lived it and he taught that.
He taught all of us that aswell.
Steve Davenport (40:24):
Clem, do you have any final questions?
Clem Miller (40:27):
No, I think I've covered all my questions.
Thank you very much, Megan.
Megan Smith (40:31):
Thank you all, thank you both for your time
today.
I appreciate it.
This is fun.
Steve Davenport (40:35):
Sure, we appreciate having you and we'd
love to continue the story andhear some more about some of
those charities maybe goingforward.
So, everybody, thank you forlistening and I think today's
podcast brought up a lot oftopics and really did a good job
of covering them.
(40:55):
So I thank Clem and Megan and Ihope everybody has a great
Labor Day weekend and I hopeeverybody continues, as Megan
says, to find that quench forknowledge so they can also
satisfy some of their passions.
Be good everyone.
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