Invest Like Jeremy Siegel, Wharton Women
- by Laurie Itkin
This month marks the 25th anniversary of my graduation from Penn. I was a Wharton student, and I earned a bachelor’s degree in economics with a concentration in finance. I loved the curriculum, especially the class in which I learned about the valuation and pricing of options. It was exciting and challenging to apply the math I studied in high school to derivatives. The class that had the biggest impact on my life was the one taught by Wharton’s Russell E. Palmer Professor of Finance Jeremy Siegel.
I recall the graph Siegel showed the class that depicted the long-term returns of the following asset classes: stocks, bonds and gold. (Nearly 30 years later—and notwithstanding the 2008 stock market crash—he still uses the asset long-term returns graph to make his point.) It was such a simple concept to understand, and it stuck with me. So much so that in January 1993, when I was 24 years old and received a $1,600 inheritance from my poor grandmother from the Bronx, I followed Siegel’s advice: I invested in stocks for the long run. I bought 40 shares of Starbucks (SBUX) at 39.75 a share. I am embarrassed to admit that I forgot about the importance of diversification and put all my eggs in one basket.
In those days, we didn’t have online trading through the Internet. I would patiently wait to receive my monthly statement in the mail. Having been laid off twice already in my short career, I cannot through words share the sense of empowerment I felt reading those monthly statements and watching my money grow. I vowed never to depend solely on an employer for financial security.
Instead of impulse shopping for clothes and shoes when I received my paycheck from work, I developed a budget for shares of stocks. The Wall Street Journal was the primary resource I used to learn about companies, industries and international markets. Without knowing it, I set forth on a 15-year path of dollar-cost averaging in my brokerage account—buying stock in different companies whether the market went up or down. As my career in public policy and government relations progressed, so did the level of contributions to my 401(k), individual retirement account (IRA) and taxable brokerage account. I lived frugally in order to feed my stock appetite. By the time I turned 39 and was listing my assets for a prenuptial agreement I had asked my husband to consider, I had built a $1 million portfolio.
It’s a nice story, isn’t it? But what isn’t nice or cute is that throngs of 30-, 40- and 50-something professional women who hear that story every time I deliver a presentation think $1 million is out of their reach. Shame on our educational system. Not every female is as privileged as I to be a Wharton graduate, but every female should have a basic understanding of investing. (That’s why I wrote Every Woman Should Know Her Options: Invest Your Way to Financial Empowerment.)
Although I wish Siegel’s Stocks for the Long Run was as popular with women as Cosmopolitan, that will never be the case. Therefore, I feel compelled to share my personal story of wealth-building through the stock market; stories of women who learned how to successfully invest their money; and unintimidating, easy-to-understand explanations of investment concepts, like compound interest, exchange-traded funds versus mutual funds, and how conservative option strategies—such as covered calls—can be overlaid on a stock or exchange-traded fund (ETF) portfolio to generate income and reduce volatility. The latter is a significant, but underused, strategy for investors who are uncomfortable with the ups and downs of the stock market and would agree to forgo potential future capital appreciation in exchange for guaranteed income today (particularly useful in a low-interest rate environment).
Over the past several years, a number of studies have concluded that although women are increasingly becoming the primary breadwinners in their households, their investing confidence remains low. A recent Fidelity survey found that only 4 percent of women spearheaded their family’s investment strategy and, among affluent women, 80 percent considered themselves “beginner investors” compared with 50 percent of men.
I’m honored that my book was included on the “Watch List” in Wharton Magazine’s Winter 2015 issue and hope that other female investors will write similar books to inspire women of all ages to become financially empowered through investing.
Editor’s note: Historical performance is not an indication of future returns. Investing in the stock market can be risky so consult with a financial professional who understands your personal financial situation.