When you’re just getting started, investing can seem scary. But it isn’t that difficult to dip your toes in, I swear — and you don’t have to take my word for it, either. I recently had the chance to speak with Cynthia Loh, vice president of digital advice and innovation at Charles Schwab, home to Schwab Intelligent Portfolios, which was just named one of the best robo-advisors in GOBankingRates’ 2018 Best Broker rankings.
Loh told me she “always had a head for numbers,” but just like everyone else, she had to start somewhere. And after years in the industry, she found out that the best method for investing is to just do it — just invest. Of course, there’s a lot more to Loh’s advice than that, so read below to find out exactly why and how you should start investing now.
If someone hasn’t invested before, how should they start?
Just get into the market, just start investing. When I hear about individuals that have their first job and they don’t know what to do with their money, and they’re [parking] it all in cash for years and years, that can really set you back. A robo-advisor is a great entry point, and a way to get involved in the market.
So what exactly are robo-advisors?
Robo-advisors are online services that provide automated investment portfolios based on a client’s preference and goals. A lot of people think that robo-advisors are a bunch of computers, or a bunch of robots making decisions, but that’s not true with every robo-advisor. With Schwab Intelligent Portfolios you get 24/7 access to our customer service center and our Schwab Intelligent advisory, and you get unlimited access to our certified financial planners to help you plan for big goals in your life like a wedding or a new baby.
Another misconception is that you can’t personalize robos as much as you can working with a financial planner. I think as technology in the financial services industry gets better, your ability to customize and use digital tools to manage your portfolio continues to increase — and in some cases can even be better than an individual managing your portfolio.
What are the perks of using a robo-advisors? Any downsides?
I think the biggest perk, honestly, is that over the last 10 years robo-advisors have been around, planning and investments have been more accessible. It used to be that you needed to be fairly wealthy in order to access a financial planner or even investment strategies, and today there’s been a democratization of advice in the financial services world.
I think what it also does is make everything easier. “Robo” is a catch-all term for how we’ve been able to leverage technology to make finance and investing easier, and that can be everything from digital account openings and money movements to re-balancing [a portfolio]. Many robo-advisors use tax-loss harvesting, so you can manage your portfolio in a tax-smart way.
Are there any potential risks or rewards to keep in mind?
I think there’s kind of a risk and a reward. One of the benefits of a robo is that there’s really no emotion involved. A robo is able to re-balance a portfolio to sell your losses, and hopefully help offset your taxes and efficiently manage that portfolio.
The other side of that is that robo-advisors have never really seen a [market crash like in] 2008. There hasn’t been a long period of downward trajectory within the markets in the last 10 years, so there is really no robo that has gone through the test of what would happen through that period of time.
Where is robo-advising going next?
I feel like we won’t really be in the future until you are able to say, “Managing my finances is as easy as ordering an Uber.” It’s gotta be so straightforward, and I think we’re definitely not there yet. There’s still a lot of nervousness and questions out there, but I think as more data comes to light, we are able to personalize solutions much more with clients. And [I think in the future we’ll be] able to aggregate all components of your financial life, whether that’s investments or life insurance or saving for your child’s college or whatever it is in one place. I think those will be exciting things to come in the future.
Have you ever had a personal investing failure? And what was your biggest investing success?
I don’t know if this was a failure, but buying my first apartment in San Francisco was a big learning experience for me. I did not know how to assess the state of a home, and I think it was built in 1904, so it [needed] tons of repairs. I didn’t really understand how mortgages worked, and ended up with an interest-only mortgage when they were just handing out mortgages like candy.
I’ve always been told to max out your 401k and save as much as you can in that. And the trick I used is to make sure it would come out of your paycheck, so I would never even see it. Since I was 22 years old, even if I was eating ramen noodles, I was maxing out my 401k. If you can set aside an extra $50 a month within your investment account, over the years, that can really impact your retirement and everything else.
What advice would you give to women trying to break into the fintech space?
I have always had a head for numbers, but my major when I was in college was cognitive science with a focus on artificial intelligence. And back then, AI was not a very popular major. I interviewed at Merrill Lynch at their tech group — so kind of a finance and tech blend — and ended up starting there as my first job. So I started my career in tech and finance and have been straddling both industries for a while now.
What’s really interesting about finances, and when I think about household financial management, I believe the stat is that in 10 years over 50 percent of households’ finances will be managed by women. And that’s a pretty dramatic split from what it’s been decades ago. So what I’d say is that there is a huge opportunity for financial services firms, for fintech companies, for anyone in this space to start thinking about how women invest and what their goals are, because historically the whole industry has really been tailored around a male managing the household finances, and that’s going to flip.
Have you ever had a money champion moment, where you personally had the chance to help someone with their money?
I was talking with someone on our team who is getting married about things you can do to save on your wedding. We talked about how, when I got married, I donated my flowers the same day. You can actually donate your flowers to a hospital or charity nearby, and get a tax deduction on the amount you paid for your flowers while also donating to the community and giving back, so that these flowers are delivered to children or elderly. It can be a not insignificant tax deduction!
This interview has been edited and condensed.
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