Hans Blake, CFA, CPA

HENRY’s Investing Crisis

February 11, 2021 by Hans Blake, CFA, CPA

Reading Time: 2 minutes I recently had the opportunity of being invited back to the South Carolina Business Review on South Carolina Public Radio to discuss the unique problems that HENRYs (High Earner Not Rich Yet) face. Mike Switzer says that in his day, they were referred to as Yuppies (Young Urban Professionals). But no matter how you refer to them, they face unique challenges. You can hear the interview by clicking here.

What is a HENRY?

HENRY is an acronym that stands for High Earner Not Rich Yet. HENRYs are young professionals who have a high salary but don’t have time to manage investments. You finished paying off student loans and are beginning to accumulate a nest egg. You may have a young family and are becoming an expert in your professional field. People make money many ways, but often don’t know what to do with it after they’ve made it. As you accumulate your wealth, you doubt whether you are maximizing your investment portfolio, or perhaps you aren’t sure how it ties to your financial goals. You may struggle with knowing who to turn to for unbiased and trustworthy help.

How we work with HENRYs

Sometimes young professionals partner with an inexperienced or wrong advisor. Perhaps you use a buddy you went to school with who took a 40 hour class on “financial planning” when in reality, your former roommate just learned how to sell a certain financial product. Be sure to check his or her credentials. Because we are a fee-only independent fiduciary firm, we must do what is best for you at all times and strive to put you into a portfolio that matches your willingness to take on risk. Intelligent Investing does not sell any financial products such as insurance or annuities. We want your portfolio to grow–since our management fee is tied directly to the investments we manage. As your fiduciary partner, we provide a human relationship and accountability.

How We Leverage Financial Technology

Sometimes we fool ourselves into thinking we can just “Google” our financial or investment questions. Unfortunately, it’s rarely that easy. Market conditions and economic forecasts change constantly. At Intelligent Investing, we listen to your individual circumstances, personal family history, investment experience, biases, and your goals. Technology can beat humans at computations, but we also believe it is best to receive wisdom from a human who understands investor behavior and who leverages integrated technologies. If you are a fan of Mint.com or other online budgeting tools, then we think you’ll like how we’ve integrated your outside accounts and your investments in realtime. Your online portal can provide you with a real-time snapshot and feedback of your finances. You can get alerts to know if you are approaching your Starbuck’s budget goal. Intelligent Investing integrates a number of financial technologies to improve your investing behavior while providing you with an efficient experience.

We’d Love to Work with You

We work with HENRYs who have at least $100,000 in investable assets. We understand your time is valuable and trusted delegation is rare. You may want to consider an accountability partner to monitor your investments and risk. Or, you may feel it is time to delegate your investment decisions, so you can spend more time with family or doing the things you love. Either way, we’d love to serve you and your family. Schedule a short discovery call or meeting

The Risks of Cryptocurrency & Bitcoin

February 10, 2021 by Hans Blake, CFA, CPA

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On this episode of Intelligent Money Minute, we interview Matt Hougan, Chairman of Inside ETFs on the risks of cryptocurrency and bitcoin. From bitcoin to dogecoin to chainlink, cryptocurrency is a reigning hot topic in the financial realm. That being said, there’s an influx of information and “success” stories making it hard to learn the benefits and or risks of this new age of finance. Matt Hougan is optimistic about the potential future of cryptocurrency, but there are significant risks as well. First, there’s massive behavioral risk in cryptocurrency. For example, Bitcoin has been highly volatile despite its high returns causing people to chase returns or to panic at the bottom. Second, there are potential future legislation concerns or a lack of proper controls on cryptocurrency.

As Matt mentioned, there are a number of risks out there, and always be something to fear. At Intelligent Investing, one of our wealth management principles is Faith in the future.
We want to maintain a positive outlook on life, even when things appear dark or grim. We also believe in Diversification– the spreading of risk and reward across various factors and asset classes. If you never own enough of any one thing to make a killing in it, then you shouldn’t have to worry about owning so much of that thing, that you get killed by it.

Matt Hougan Bio

Matt Hougan is one of the world’s leading experts on crypto, ETFs, and financial technology. He is Global Head of Research for Bitwise Asset Management, creator of the world’s first cryptocurrency index fund. Hougan is also Chairman of Inside ETFs, the world’s largest ETF conference. He was previously CEO of ETF.com, where he helped build the world’s first ETF data and analytics system. Hougan is co-author of the CFA Institute’s Monograph on ETFs. He’s also a crypto columnist for Forbes, and a three-time member of the Barron’s ETF Roundtable. For more resources from Matt Hougan click here.

Lessons Learned From Hedge Fund and Reddit Greed

February 3, 2021 by Hans Blake, CFA, CPA

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Why Brokers Had To Restrain Trading in GameStop Shares

Users of the Reddit forum “r/wallstreetbets” encouraged individuals to bid up Gamestop’s (GME) and AMC’s stock price. Their actions caused a short squeeze on hedge funds who lost more than one billion in a single day. A short squeeze is when a heavily shorted stock suddenly increases in price like GME and AMC. The rise cause traders that are short to begin covering their stock or buy it back. Once traders do this, it further increases the demand and price of stock causing a momentum loop. Essentially, the Reddit crowd gathers more attention as investors misbehave and become greedy as they want in on the action for fear of missing out (FOMO).

The Robinhood app provides retail investors a “free trading” platform. There’s no such thing as a free lunch, and it appears that the Robinhood app and other brokers disabled trading for several stocks citing market volatility. From the mainstream media’s perspective, this hamstrung the retail investors, and rewarded the institutional investors, causing an uneven playing field. In a recent Wall Street Journal Opinion article, the reason had to do with minimizing their own financial and regulatory risk, not trying to bail out hedge funds. Regardless, their decision has enraged its userbase with notable political voices across both aisles like Alexandria Ocasio Cortez and Ted Cruz denouncing Robinhood’s actions.

So, What Can We Learn

There many lessons to be learned amidst all the confusion:

What’s taken place with Reddit and Wall Street is NOT new.
Market manipulation is wrong.
Free trading & free markets are good and necessary.
Both the Reddit users and the Hedge Fund owners were greedy.
Short term momentum trades (if not traded properly) are essentially gambling and speculation.
Speculation is NOT intelligent investing.

Greed Can Hurt You

Those who came late to the party are learning an aweful lesson in greed. As we warned in the video, Gamestop’s stock price has a 52-week high of $483, and now is trading at $66, or essentially -86% from its recent highs. This is not intelligent investing. If there is anything we can do to help you stay off the ledges of fear and greed, we’d love to have a cup of coffee or a quick phone call with you.

Schedule a short discovery call or meeting

Intelligent Investing is a boutique wealth management firm serving high-net-worth individuals and families in Greenville, SC.

The Four Biggest Financial Problems a HENRY Faces

January 28, 2021 by Hans Blake, CFA, CPA

Reading Time: 2 minutes

First of all, nobody likes to be labeled, and there are always exceptions to the rule, but HENRY is an acronym that stands for High Earner Not Rich Yet (coined by Fortune in 2003). HENRYs are young doctors, lawyers, engineers, or other top-earning professionals who have a high salary but don’t have time to manage investments. They are in the process or have finished paying off student loans and are beginning to accumulate a nest egg. They may have a young family and are becoming an expert in their professional field. Essentially HENRYs are young professionals who have a high salary but don’t have time to manage investments.

A couple of quick stats: Many HENRYs are Millennials who like control and technology, and make up the largest generation. They have the highest number of billionaires and are digital do-it-yourselfers. 25% aren’t sure how their retirement savings are invested, and 80% are concerned Social Security won’t be there for them when they retire.

People make money in many ways, but often don’t know what to do with it after they’ve made it. Some of the biggest financial problems a HENRY faces: The 4 Ds

The 4 Ds- Debt, Direction, Discipline, and Digital Dangers

First, they have insurmountable Debt–

The Federal Reserve estimates that Americans owe more than $1.7 trillion in student loans. In addition to student loans, HENRYs face ridiculous rents, or are living with their parents, as they have a hard time saving up enough for a down payment on a home. In addition, they can’t afford enough insurance for a health or disability event.

Second, they lack Direction–

63% of Americans are living paycheck to paycheck, and if faced with a $500 emergency, 8 out of 10 couldn’t cover the cost. As a result, HENRYs haven’t created an Emergency Fund, a Budget, or retirement plan.

Third, they lack Discipline–

They often are unsure where to get sound financial advice and they are too busy developing their own career. They don’t have time, nor the accountability they need to keep them on the right path.
Instead of talking about their latest hot stocks at the water cooler as in prior generations, they are in Reddit chatrooms or Social media feeds convincing each other they know more about a company’s stock than anyone. This overconfidence bias will eventually get them into trouble.

Fourth, They face Digital Dangers–

We live in a digital world that is instantaneous. HENRYs prefer paying by digital wallets, and are comfortable throwing money at cryptocurrencies like Bitcoin. They like the recent high returns of Bitcoin, and they think they are a long way off from retirement so they can afford to take some risks. They remember their parents complaining about the 2008 housing crisis which was the result of bankers and brokers playing fast and loose with “safe investments like stocks and houses.”
We are now seeing a repeat of those behavioral mistakes. By eliminating transaction fees, HENRYs are on the Robinhood app convinced that their stock, Bitcoin, or options purchases can only go up.
In the short run, they may be right as they gamble, but in the long-run, the house always wins.
Sometimes HENRYs fool themselves into thinking they can just “Google” their financial or investment questions. Unfortunately, it’s not that easy. Market conditions and economic forecasts change constantly. Technology can beat humans at computations, but I also believe it is best to receive wisdom from a human who understands investor behavior and who leverages integrated technologies.

Cryptocurrency & How It Works

January 27, 2021 by Hans Blake, CFA, CPA

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On this episode of Intelligent Money Minute, we interview Matt Hougan, Chairman of Inside ETFs on cryptocurrency and how it works. During this episode, Matt pulls back the curtain and sheds light on the nuances of cryptocurrency. According to Matt, cryptocurrency is the first native way that money can move over the internet. For example, if you go online today and pay your internet bill, it could take multiple days for that money to transfer. Contrast that with a Bitcoin transaction. Matt gives an example of a billion-dollar transaction that settled in less than 10 minutes with a fee of .0007%. There are many misconceptions regarding cryptocurrency. Simply put, it’s a new rail for the modern transfer of money.

I recently read a quote, “Knowledge acquired by reason will dispel ignorance and thus destroy the greatest evil—fear.” As Matt points out, when you hear of something new, it is best to do some research in order to gain knowledge and a better understanding. We think the same holds true of cryptocurrency, blockchain, and alternative asset classes. Just because something is new, doesn’t make it wrong. At the same time, just because it is new, doesn’t mean it’s better. To learn more about our philosophies, go to our philosophy page.

Matt Hougan Bio

The Dimensions Of Active Management

January 20, 2021 by Hans Blake, CFA, CPA

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On this episode of Intelligent Money Minute, we interview Larry Siegel, the director of the CFA Institute Research foundation on the dimensions of active management. In this episode, Larry breaks down the various elements of active management. Active management adds three variables: alpha risk, active return, and the cost of active management. It’s not possible for active management as a class to outperform index funds. This is due to active managers betting against each other, which results in lost money relative to index funds over time. Not every active manager is going to lose. Some active managers will win and some will lose, but how long will those losers stay in the active management game? Probably not very long.

We’ll be interviewing Larry on upcoming Intelligent Money Minute podcast episodes, so be sure to subscribe if you haven’t already. Larry mentioned that the world’s population growth explosion looks to taper off this century, leading to more prosperous countries and individuals, which should allow us to solve some of the environmental enigmas that we currently face.

We agree with Larry that there are sometimes active managers that can outperform, but it is very difficult to find another active manager to take the “losing side” and be willing and able to stay in the game. At Intelligent Investing, we use both passive and active management, and focus on keeping our portfolio costs low. Because we are independent, we don’t need to pay any wallstreet middlemen or pay additional fees in order to keep our “big named-financial firm’s headquarters happy” which helps us remove fees and unneeded costs from our portfolios. If you are interested in becoming the next intelligent investor, please visit investedwithyou.com. We’d be honored to serve you and your family.

Larry Siegel Bio

Laurence B. Siegel is the Gary P. Brinson director of research at the CFA Institute Research Foundation and an author, consultant, and speaker on investment management and economics. Before retiring from full-time work in 2009 he was director of research at the Ford Foundation and, before that, head of research at Ibbotson Associates (since acquired by Morningstar). He attended the University of Chicago (BA 1975, MBA 1977). His book, Fewer, Richer, Greener, has been published by Wiley and is available, along with his other work, at https://www.larrysiegel.org.

The Dangers of Commission-Free ETF Trading

January 14, 2021 by Hans Blake, CFA, CPA

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On this episode of Intelligent Money Minute, we interview Matt Hougan, Chairman of Inside ETFs on the dangers of commission-free ETF trading. Recently, custodians have been offering commission-free trading on ETFs, but many believe this can encourage misbehaving. Matt lays out the big picture in regards to the market and the opportunity. During this episode, he highlights the benefit and the behavioral risk of commission-free trading. The benefit is that those paying commissions will experience a leveling of the playing field. On the flip side, the behavioral risk is resisting the temptation to trade more frequently. Just because you can trade something doesn’t mean you should.

The adage, “There’s no free lunch” continues to ring true today. Custodians will make money somehow, and it is important for you to understand that. Investors should be grateful for the recent drop in commissions, but there is a behavioral risk that is attached to commission-free trading. You can learn more about these dangers and the need for having an investor behavioral coach by visiting our philosophy page.

Matt Hougan Bio

How To Invest In A World Of Negative Interest Rates

January 6, 2021 by Hans Blake, CFA, CPA

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On this episode of Intelligent Money Minute, we interview Larry Siegal, the director of the CFA Institute Research foundation on how to invest in a world of negative interest rates. Most environments feel unprecedented, but until 2019 there have never been negative interest rates. What does this mean? Essentially, it means locking in a guaranteed loss over long periods. How does one invest when the riskless rate is negative? Larry suggests that investors could either take more risk or budget for lower returns. According to Jack Bogle, the better of those options is to budget for lower returns. This requires one to save more and spend less.

History doesn’t repeat, but it often rhymes. You can either take more risk and hope equities goes up, or you can budget for lower returns. The prudent investors will save more and spend less, and these are the principles we teach our clients. We’d be honored to have you consider becoming a client. To learn more, please visit Get Started.