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Invest Well Seminar

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Andy Rachleff delivered this Invest Well seminar at Dropbox. How intuitive is investing? Find out.

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Invest Well Seminar

  1. 1. Investment Seminar
  2. 2. ©2014 Wealthfront Inc. • Rising Market • Declining Market • Indifferent 2 When would you prefer to invest? Investment Seminar for Airbnb
  3. 3. ©2014 Wealthfront Inc. • Rising Market • Declining Market • Indifferent 3 When would you prefer to sell? Investment Seminar for Airbnb
  4. 4. Actual Behavior Investment Seminar for Airbnb ©2014 Wealthfront Inc. 4 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 50% 40% 30% 20% 10% 0% -10% -20% -30% -40% -50% $400 $300 $200 $100 $0 -$100 -$200 -$300 -$400 Equity funds net New Cash Flow ($B) 12 month S&P 500 Index Return
  5. 5. Slow and Steady Wins the Race ©2014 Wealthfront Inc. 5 Investment Seminar for Airbnb
  6. 6. Which market behavior would you prefer? Investment Seminar for Airbnb ©2014 Wealthfront Inc. 6 500 100 Today + 30 Years 500 100 Today + 30 Years 500 100 Today + 30 Years
  7. 7. Investment Seminar for Airbnb 7 ©2014 Wealthfront Inc. Don’t Worry About Market Performance
  8. 8. ©2014 Wealthfront Inc. • The one that previously performed the best • The one that previously performed the worst • It doesn't matter 8 Which investment would you prefer? Investment Seminar for Airbnb
  9. 9. ©2014 Wealthfront Inc. 9 Investment Seminar for Airbnb
  10. 10. Investment Seminar for Airbnb 10 ©2014 Wealthfront Inc. Don’t Chase Returns
  11. 11. Which investment would you prefer? Asset Class Expected Return Standard Deviation US Stocks 6% 17% Foreign Stocks 5% 18% Bonds 3% 6% Risk Adjusted Return 0.35 0.28 0.50 Optimal Mix 4% 7% 0.55 ©2014 Wealthfront Inc. 11 Investment Seminar for Airbnb
  12. 12. Investment Seminar for Airbnb 12 ©2014 Wealthfront Inc. Diversification Matters
  13. 13. ©2014 Wealthfront Inc. • Buy more of the winners • Buy more of the losers • Do nothing 13 How do you maintain your ideal risk/reward? Investment Seminar for Airbnb
  14. 14. Natural Progression of Risk 100% 75% 50% 25% Investment Seminar for Airbnb ©2014 Wealthfront Inc. 14 20% 15% 10% 5% 0% 0% % Equity Standard Deviation
  15. 15. Investment Seminar for Airbnb 15 ©2014 Wealthfront Inc. Need to rebalance
  16. 16. ©2014 Wealthfront Inc. • Great mutual fund with 1% management fee • Index fund with 0.05% fee 16 Which investment would you prefer? Investment Seminar for Airbnb
  17. 17. ©2014 Wealthfront Inc. • Research says both will generate market return • Therefore, index fund will likely outperform by 0.95% 17 Returns Net of Fees Investment Seminar for Airbnb
  18. 18. Investment Seminar for Airbnb 18 ©2014 Wealthfront Inc. Fees Matter
  19. 19. Which investment would you prefer? Asset Class Expected Return Standard Deviation Risk Adjusted Return US Stocks 6% 17% 0.35 Real Estate 7% 18% 0.39 ©2014 Wealthfront Inc. 19 Investment Seminar for Airbnb
  20. 20. ©2014 Wealthfront Inc. • US Stocks: • Real Estate: 20 After Tax Returns Investment Seminar for Airbnb 6%*75%*(1-.25) + 6%*25%*(1-.25) = 4.5% 7%*50%*(1-.25) + 7%*50%*(1-.4) = 4.375%
  21. 21. Risk Adjusted Returns Asset Class Pre-Tax Risk Adjusted Return After Tax Risk Adjusted Return US Stocks 0.35 0.26 Real Estate 0.39 0.24 ©2014 Wealthfront Inc. 21 Investment Seminar for Airbnb
  22. 22. Investment Seminar for Airbnb 22 ©2014 Wealthfront Inc. Taxes Matter
  23. 23. ©2014 Wealthfront Inc. • Different allocations for taxable & IRA accounts • Use index funds • Rebalance with dividends • Tax loss harvest 23 Ways to minimize taxes Investment Seminar for Airbnb
  24. 24. ©2014 Wealthfront Inc. • Invest steadily • Ignore the market • Don't chase returns • Diversify • Rebalance • Minimize fees • Minimize taxes 24 Summary Investment Seminar for Airbnb
  25. 25. ©2014 Wealthfront Inc. 25

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