The Women's Guide to Successful Investing by Palgrave Macmillan Professional Business

C on ten ts

List of Illustrations

Foreword

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Preface

Acknowledgments 1

Wealth Accumulation Is an Attitude: Investing for Your Future Requires a Few Goals and Much Less Capital Than You Think

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2 Why Women Make Excellent Investors: Women Inherently Display the Traits Required for Successful Investing

3 In Order to Get There We Need to Know Where We Are Going: Establishing Financial Goals Informs Successful Savings and Investment Plans

4 Developing an Investment Discipline That Will Achieve Our Goals: For the Diligent Student and Practitioner, Investing—Like Any Skill—Can Be Perfected; Matching Our Investment Strategy with Our Goals Is Paramount

5 Developing an Investment Discipline That Will Achieve Our Goals—Continued: The Stock Market Is a Tug-of-War between Fear and Greed; Arm Yourself with the Tools to Succeed

6 Construct Your Portfolio Like a Dinner Party Invitation List: Holdings Should Be Balanced and Behave Well If Things Get Out of Hand

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C on ten ts

List of Illustrations

Foreword

vii

Preface

Acknowledgments 1

Wealth Accumulation Is an Attitude: Investing for Your Future Requires a Few Goals and Much Less Capital Than You Think

xiii

2 Why Women Make Excellent Investors: Women Inherently Display the Traits Required for Successful Investing

3 In Order to Get There We Need to Know Where We Are Going: Establishing Financial Goals Informs Successful Savings and Investment Plans

5 Developing an Investment Discipline That Will Achieve Our Goals—Continued: The Stock Market Is a Tug-of-War between Fear and Greed; Arm Yourself with the Tools to Succeed

6 Construct Your Portfolio Like a Dinner Party Invitation List: Holdings Should Be Balanced and Behave Well If Things Get Out of Hand

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CONTENTS

Meet Your Research Team: A Smartphone and Sirius XM Radio Account—Accessible and Timely Financial Information for Busy Women Apple Computer—A Case Study in How to Select a Core Holding: A Role Model Investment You Will Want to Emulate

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A Case Study of a Stalled Luxury Brand—Coach, Inc.: Whether Coach Bags Fit Your Budget or Style, We Can Learn a Great Deal from This Former Darling

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Stocks to Own for a Lifetime: Identifying Industry Leaders Provides the Conviction Required to Buy Stocks We Are Willing to Hold for Decades

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ETFs to Own for a Lifetime: How Women Investors Can Get Their Groove Back

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12 Five Critical Lessons and Warnings: Don’t Touch a Hot Stove, Don’t Talk to Strangers, and Other Lessons for the Ages 13 14

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Eleven Intelligent Investing Rules—And One More for Good Measure: Rules for Women to Invest By

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If You Are Going to Hire a Professional Investment Advisor, Let’s Make Sure You Hire the Best: You Really Can Do This on Your Own but for Those of You Who Won’t, Consider the Following Guidelines

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Appendix: Investment Websites

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Glossary of Investment Terms: Mastering the Language Will Provide You with Confidence and Will Broaden Your Knowledge Base

185

Notes

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Index

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All rights reserved. First published in 2014 by PALGRAVE MACMILLAN® in the United States— a division of St. Martin’s Press LLC, 175 Fifth Avenue, New York, NY 10010. Where this book is distributed in the UK, Europe and the rest of the world, this is by Palgrave Macmillan, a division of Macmillan Publishers Limited, registered in England, company number 785998, of Houndmills, Basingstoke, Hampshire RG21 6XS. Palgrave Macmillan is the global academic imprint of the above companies and has companies and representatives throughout the world. Palgrave® and Macmillan® are registered trademarks in the United States, the United Kingdom, Europe and other countries. ISBN: 978–1–137–40334–6 Library of Congress Cataloging-in-Publication Data Tengler, Nancy. The women’s guide to successful investing : achieving financial security and realizing your goals / Nancy Tengler. pages cm ISBN 978–1–137–40334–6 (hardback) 1. Women—Finance, Personal. 2. Investments. 3. Stocks—Prices. I. Title. HG179.T4196 2014 332.6082—dc23

2014005402

A catalogue record of the book is available from the British Library. Design by Newgen Knowledge Works (P) Ltd., Chennai, India. First edition: August 2014 10 9 8 7 6 5 4 3 2 1 Printed in the United States of America.

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CH A P T ER

Wealth Accumulation Is an Attitude: Investing for Your Future Requires a Few Goals and Much Less Capital Than You Think

This book is for women. Which is not to say it is not for men. Anyone interested in achieving financial independence for themselves and their family will benefit from reading these pages. But, my focus is women—in particular, women who, for too long, have been left out of the financial dialogue. Or have, perhaps, excused themselves from the conversation altogether. Since many women oversee their family finances, this deficit in our financial education creates at best a lost opportunity for the balance sheets of a majority of American households. And because the research shows that at some point in her life virtually every woman will become responsible for managing her family’s wealth we owe it to ourselves to become more financially savvy. Yet, most of us feel largely unprepared for the task. Three-quarters of women interviewed—no matter their level of education—told researchers they wished they had learned more about financial matters. And they confess to sending their children out largely unprepared as well. Financial independence is achieved through two distinct disciplines: saving and investing. Equally as important and equally elusive, both are necessary ingredients to expand wealth. And that is our objective: to maximize wealth accumulation so you are able to reach your individual and family’s long-term objectives. To that end we will endeavor together to raise your saving and investing Copyrighted material – 9781137403346

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awareness. We will develop an understanding of how to successfully invest in the stock and bond markets through the identification and implementation of eleven Intelligent Investing Rules that will increase confidence in buying and selling stocks. In the end we will inevitably raise our financial IQ and, therefore, our likelihood of achieving financial independence.

Cultivate the Habit of Saving Most of us—whether we engage in the practice or not—understand very clearly how to save money. Whether we do so or not is a matter of discipline or, in some cases, a lack of income. The vast majority of Americans are capable of saving. They simply lack the discipline. For many years my lack of saving discipline placed me at the head of that undisciplined mass of spenders. Having grown up in a home where my single mom worked two jobs, I learned to work, scrimp, and save from a very early age. By the time I hit my late twenties, I was ready to spend. Then the children came and the myriad expenses of growing them up: soccer cleats, baseball gloves, swim goggles, golf clubs, piano lessons, more swim goggles, and then one day: college. Spending had become a habit; any instinct I once had for saving was long ago repressed by the habit (and enjoyment) of spending. I had saving amnesia and, worse, I found myself making excuses about why I didn’t save. What was the point of stashing a few hundred dollars each month? I convinced myself it would make no difference. Then, at some point, I rediscovered the literary classic A Tree Grows in Brooklyn. Francie Nolan’s dirt-poor, immigrant grandmother provided a lesson in saving that shamed me back into the game. She counseled Francie’s mother to save whatever she could manage—even pennies each day, “The money will grow.” Soon, “there will be a small fortune.” The practice of saving begets more saving, becomes a habit, and eventually we find ourselves looking for opportunities not to spend when spending isn’t necessary. I am not offering a draconian alternative to living but rather an attitude that balances the opportunity to set aside a little something for the future against the desire to consume today.

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The study of behavioral economics explores the psychological challenges individuals face when it comes to saving. Numerous studies have been conducted and numerous papers written to explain the problem that many of us have with saving money for our futures. One of the most vocal and prolific researchers in behavioral finance is Dr. Shlomo Benartzi, professor of UCLA Anderson School of Management and chief behavioral economist for Allianz Global Investors Center for Behavioral Finance. His work shows that “only 1 out of 10 Americans are saving enough for their retirement.”1 Dr. Benartzi concludes that one of the three main factors that prevent us from saving is immediate gratification—the desire to spend today. He is right, of course. Many of us spend today because we spend too little time considering future needs. Add to that the magnitude of saving often required to meet future goals is so great we simply choose to ignore the problem. Many years ago when I was juggling family and career a colleague of mine suggested I find ways to solve my logistical problems with money. His argument was that I had more money than time. That is not to say I had an abundance of money but I had almost no free time. Hiring someone to help with house cleaning or yard work released me from the frenetic pace I was keeping and gave me more time with my family. Of course, there will always be times when spending will be the right solution. But had I retained saving as a habit I would have found ways to spend less, to avoid opportunities to spend unnecessarily. If my attitude had been one of saving a predetermined amount I might have then supplemented my penchant for consumer brands with generics. I would have pumped my own gas instead of driving through the full-service lane or had my children clean the house and mow the lawns (as they eventually did) rather than pay to do so. Rooting out wasteful spending—which I did in the office—would have saved hundreds, perhaps thousands, of dollars each month, money I could have tucked away for future investment. Ultimately, after Francie Nolan’s grandmother gave me a figurative slap up side the head—I did just that. Soon I had set aside enough money to invest for a series of goals our family had established.

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Saving, Even a Little, Matters If you are like me (and apparently 90 percent of other Americans) you spend more than you need to. As an intelligent woman you don’t need me to advise you on debt management or how to construct a monthly budget, rather I am simply reminding you of the need to save. And the need to save as much as you possibly can. One of the most common fallacies I encounter comes from women who believe it is too late to save and invest. Whatever your age or stage in life you still have time to save and work toward financial independence. According to a 2010 study conducted by the Boston Consulting Group titled “Leveling the Playing Field,” women tend to be longterm in focus, and very concerned about potential life-stage events (like sending their children to college or saving for their own retirement) that will affect their investment needs.2 Our priorities and goals are clear: We want to provide for our families’ future financial needs. And the only way to do that is to save. Let’s look at a few examples to provide some perspective and increase our saving IQ. Woman #1: 35 years old, two children, married, stay-at-home mom. Expectations are that both children will attend a four-year college. Husband plans to retire in 25 years. Finances are tight but Woman #1 is able to tuck away $100 per month. Because like 70 percent of women, she does not consider herself an investor but a saver, she places her savings in a money market account. Since rates fluctuate and are more likely to rise than decline from this point we are going to calculate her return based on an interest rate of 2.5 percent (money market rates are currently a little less than 0.5 percent but expectations are that rates will continue to rise over the next few years so we will assume 2.5 percent): $41,618. Woman #2: 45 years old, no children, unmarried. She plans to retire at 60 to engage in volunteer work. Currently she is tucking away $500 per month and, again, like 70 percent of women, she does not consider herself an investor. She is a saver. So her savings also go into an interest-bearing account at her bank. In fifteen

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years, assuming a 2.5 percent interest rate, she will have amassed $109,062. Woman #3: 55 years old, adult children, married, and both their spouses are working. She plans to retire (as does her husband) in five years. She and her husband are saving $1,000 per month and believe that because they are close to retirement they should park their money in a savings account. At our assumed rate of 2.5 percent the couple will have accumulated $63,481. Saving, even a little, does matter.

Spending Is the Anti-saving As a professional investor, college professor, and mother I appreciate the importance of repetition when I am interested in driving home a point. So allow me to share with you a spending experience that has haunted me for over twenty-five years. In September 1988, two weeks after my first child was born, I engaged in two major transactions in one week: a purchase and an investment. We will discuss the investment in a moment but for now we are concerned with the purchase. I was scheduled to make a presentation to a new, $100 million client. None of my business suits fit and I was not going to be caught dead in a maternity outfit after the fact—especially the maternity clothes available to working women in the late 1980s (but that is a story for a different book). I gathered up my new baby, stroller, diaper bag, blankets, and pacifier—the whole chaotic collection—and rushed to the mall. I bought almost the first thing I found: a knee-length sweater that draped discreetly over the extra pounds and looked surprisingly professional. When the clerk commented on the soft cashmere material, no bells went off. I didn’t live in a cashmere world, had never worn cashmere, and clearly had no idea of the expense or the impracticality. All I cared about was that it fit. Cradling my now restless baby in one arm, diaper bag slung over one shoulder, my purse over the other, I signed the receipt without examining it, dashed back home, and packed for my flight later that evening. Consumed with home life, I didn’t give the sweater another thought. Dressing for the meeting the

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following afternoon, I removed the tag and saw the price for the first time: $1,099. One thousand ninety-nine dollars! Plus tax. Due at my client’s in 15 minutes with nothing else to wear and despite the overwhelming, choking realization of my stunning stupidity I now owned that reckless decision. Twenty-five years later the sweater still hangs in my closet. It is wrinkled and bally as only cashmere can be and sports a few moth holes. That conspicuous purchase is a reminder of a time when spending rather than saving became a potentially ruinous habit. Buying a $1,099 sweater—as outrageous as it was—represented only part of the expense equation; it is important to understand that there was a real cost and also an opportunity cost of my perilous sweater purchase. To calculate the real, out-of-pocket expense of that poor choice I would have to consider the dollar amount spent ($1,099), plus tax of approximately $80 and credit card interest of close to $220—I didn’t have the heart nor the means to pay it off at once. Perhaps the most important cost, however, was the opportunity cost. Think of opportunity cost in dating parlance as the one who got away. It is the cost of not doing something or at the very least not doing the right thing. In addition to the actual cost of the sweater, the opportunity cost of my decision to purchase the sweater was the foregone accumulation and compounding of interest had I saved the money, or the appreciation potentially earned if I had taken the sweater money and invested it in my second transaction that week—a stock (discussed below). The real and opportunity cost of that foolish and impulsive purchase still echoes.

Saving to Invest Is the Wisest Strategy The second element required to achieve financial independence involves investing. As soon I say, “Nobody gets rich saving—you must invest,” I will receive hundreds of emails disputing my claim and describing Great Aunt Edith who lived in the family home with her cats, took in sewing, and left her nieces and nephews $1 million upon her death at the ripe old age of 98 years. Let’s stipulate for purposes of my illustration that some people really can become wealthy by saving alone—if they live long enough. The

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vast majority, however, become wealthy or retire comfortably or put their five children through college debt-free by a combination of the two activities: saving and investing. Investing is not gambling. Nor is it a scientific mystery inaccessible to average individuals. Investing is a long-term discipline that will generate excellent returns for patient investors. It is no coincidence that all of the great investors, those celebrated by the financial media and professionals, are long-term, disciplined investors who establish and stick with their investing discipline in good markets and bad. My objective is to aid you in determining how to establish an appropriate discipline that you will feel comfortable employing during good markets and difficult markets. Markets like the financial crisis in 2008–2009. To illustrate the value of long-term investing let’s consider my second transaction during that fateful week twenty-five years ago. In a largely symbolic gesture, I purchased one share of IBM stock for our son. I thought it would be fun to hang the certificate on his wall and use it as an object lesson to teach him about things financial. Before I could get the share framed, I misplaced it and so the lesson was, for the most part, lost. But because I lost the share, I forgot all about it and consequently left the investment (correctly) alone. Each quarter for the next twenty-five years the dividend paid by the company was reinvested in an incremental share of IBM stock. That approximately $100 investment returned 1,020 percent or 10.6 percent per year through the end of September 2013. During that period there have been two colossally devastating bear markets that frightened investors mistakenly into cash all the while our little share of IBM plumped and expanded like bread dough. Though market corrections punched down the dough a few times, fueled by the yeast of earnings (which produce stock price growth and dividend payments) our $100 value has grown at a pace far exceeding the rate of inflation and the return on savings or money market accounts. (For all of you stock market skeptics, it is also important to note that the return on the S&P 500 over that same period was a respectable 797 percent or 9.9 percent per year. Simply investing in the stock market index produced enviable returns as well.)

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I chose the time period featured below because it represents my actual experience. But, the passage of time is essential to investing; even if your timing is not perfect and you purchase shares before a market correction or a prolonged period of unimpressive returns (as I unwittingly did: IBM traded sideways, providing almost no appreciation for the first ten years), you will be asking yourself only one question: Why didn’t I buy more? That $100 share of IBM is worth over $1,300 because of the reinvestment of dividends and capital appreciation of the stock over the holding period. Had I contributed $100 per month to my IBM holdings, and assuming our annualized return over the 25-year period of 10.6 percent, my investment would be worth just shy of $150,000. The powerful combination of saving and investing is undeniable. So, there are two important facts to consider when we make financial decisions. The first is that there is an opportunity cost to spending. Think of spending as the anti-saving. Had I invested that $1,099 in, say, IBM stock as I did for my son, my investment would be worth $11,430 twenty-five years later. Instead of a ragged and useless old sweater I would have a nice little nest egg set aside. My opportunity cost is the $11,430 I didn’t earn because I didn’t save and invest that money. The second factor is that while saving alone is immensely better than not saving at all, saving and investing are far superior. Had I simply saved the $100 instead of investing it in IBM stock, that $100 would be worth far less than the approximately $1,300 I have earned from my one share purchase. And had I added to that investment $100 each month over the same twentyfive year period my investment would be valued at an approximately eye-popping $150,000. One more thing about investing in stocks. I understand that the market melt-down of 2008 has placed a number of would-be investors on the sidelines. I understand that our aversion to loss can overpower our desire for return. Market routs like 2008 when stocks in the S&P 500 plunged 37 percent are the reason many people feel investing is like gambling. The losses investors experienced in their portfolios were real and devastating and, to many,

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excessively arbitrary. For some they were much more than paper losses if the money was needed and stocks had to be sold at the bottom. Others simply lost their nerve and sold into the weakness and the breakneck speed of the stock market’s decline wiped out years, even decades, of savings in a matter of months. Worse, in the midst of the crisis the most vocal pundits were telling us that our financial system was broken and had fundamentally changed, adding fuel to the selling blaze. It is easy to see why many investors have stayed on the sidelines over the last five years while the market has about doubled, regaining and surpassing 2008 levels. If we save to provide for our future—a safer future—investing in the stock market can feel a bit too much like spinning a roulette wheel. Is it possible to invest despite the unsettling fear that grips us during declines? Can we develop the discipline to continue investing during markets like 2008—often a once-in-a-lifetime opportunity to buy great companies on sale—while suppressing the urge to bail out? To learn not to zig when we should zag?

Establishing an Investment Discipline That Meets Your Risk Tolerance Is Critical This will be our challenge: To develop an investment discipline that ensures you will generate long-term capital appreciation and that through practice you will develop the investing muscle memory to follow your discipline even when it is hard to do. We will endeavor to develop a base of knowledge (not technical mumbo jumbo) that will provide the courage to follow your plan despite the dissonance of cyclical economic and market trends. By the time you finish this book you will understand your risk tolerance and you will have developed an investing discipline that suits your goals and those you have established for your family. You will, in short, know exactly where you are going and how to get there. We will establish eleven Intelligent Investing Rules that will guide your actions and reinforce your decisions during good markets and bad. Intelligent Investing Rule #1: Having any investment discipline is better than having no discipline at all; once your investment

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strategy is established, never deviate. (But, if you do fall off the wagon, don’t give up, get right back on and stay the course.)

An Example of Staying the Course When the pundits tell you it is different this time. Remember that there is one tried and true investing tenet: Things are rarely different. It is accurate, however, that companies and their products cycle in and out of favor. It is also true that some formerly very good companies have mismanaged their way out of business: Polaroid and Eastman Kodak come to mind. But the majority of the time, good companies—and especially great companies—stumble, get back on their feet, regroup, and power forward. We are interested in buying great companies managed by great management teams, with the talent and financial wherewithal to overcome any inevitable problems. Starbucks (stock ticker: SBUX) is one such company and a growth stock that stumbled dramatically after too rapid growth leading into the financial crisis of 2008. And a company I bought too soon. Buying early is one of the occupational hazards of being an investor. When a growth company disappoints investors, the sentiment quickly changes from love (price appreciation) to hate (price depreciation) to indifference (price stagnation and potential further depreciation). For our purposes we will call these great growth companies that have fallen out of favor Fallen Angel growth stocks. It is important to remember that growth investors can sell out of a holding much faster than value hunters will buy in. In fact, because growth investors are often momentum driven they may exit an entire position in a stock if they so much as sniff trouble. When the earnings miss or a new product or distribution glitch manifests they run—don’t walk—for the exits. At the same sign of trouble that causes growth investors to flee and the stock price to collapse, the value crowd begins to look more closely at whether or not to buy. It takes time to gather data and analyze the company’s business. Time to decide whether or not and when to buy. The intelligent investor’s dilemma is to determine when to get into the stock of a great company that has stumbled. Sometimes we are too eager.

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When I saw a chance to buy Starbucks in April 2007, I did. The stock had declined 30 percent from a recent high of $40. The company had expanded too quickly; same store sales were declining as new stores cannibalized sales from established locations. I waited for the stock price to stabilize around the $31 level and began to accumulate my holdings. In December 2007, celebrated CEO Howard Schultz returned to the company, and the market cheered Schultz’s reengagement with a rally in SBUX stock price. Then the financial crisis of 2008 hit and the market sunk like a stone, dragging Starbucks with it until the stock finally hit bottom under $10 per share. An unmitigated disaster, you might think. Normally my investing discipline would lead me to buy more of the stock in a great company like Starbucks as it declined but I was busy with grad school and two high-school age kids and I, frankly, wasn’t paying close attention to my investments. I did nothing but ride the stock down from $31 to a low of around $8 per share. But here is the compelling fact about buying great companies. You don’t have to know the exact day the stock hits bottom. You don’t have to be right about every detail. You just have to stick to your discipline and let the company management do the heavy lifting. Though I bought SBUX far from where it ultimately bottomed, I still generated a return of 15.64 percent per year since my April 27, 2007 purchase, well in excess of the S&P 500’s return of 5.47 percent over the same period. Had I bottom-picked the stock toward the end of 2008, I would have received an annual return of (gulp) 61.4 percent versus 21.9 percent for the market. A far superior return, indeed. But getting it mostly right and generating a steady return over time is our objective and despite being too early I did just that. The point is that stock investing is about generating consistent, excess returns over time, not necessarily about securing cocktail party bragging rights. Remember Intelligent Investing Rule #1: Having any investment discipline is better than having no discipline at all; once your investment strategy is established, never deviate. Your allocation to stocks might change as you grow older or grow closer to reaching a particular goal but how you buy and

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sell stocks—your investment discipline or strategy—should not be altered.

How Much Do I Need to Save in Order to Invest? Investing requires much less capital than most people imagine. Two thousand dollars is a good start. We can make do with even less. But, if you follow a savings pattern similar to the ones described above and invest in stocks you will generate even more wealth on your road to financial independence. If, for example, assuming the long-term average annual return for the stock market over the last 100 years of 9 percent, we can recalculate the three Woman Investor scenarios discussed earlier in the chapter. Following the same patterns of saving outlined previously, Woman #1 ends up with $112,953 if she invests in stocks versus $41,618 at the end of twenty-five years if she places the money in an interest-bearing bank account. She saves the same $100 per month but the power of subsequently investing the money in stocks results in a far more robust return. The same applies for Woman #2 who now ends up with $190,621 after fifteen years of investing $500 per month versus $109,062 if she simply saves the same amount. And Woman #3 generates wealth of $75,989 after five years of investing vs. $63,481 saving $1,000 per month and depositing it in the bank. The takeaway? Investing generates significantly superior returns over saving. And, again, we note that the length of time invested clearly improves total return, but the critical component in achieving higher returns is investing our savings rather than just tucking those savings in the bank at rates that barely (if at all) keep up with inflation. Wealth generation is achieved through investing what we’ve saved, not simply saving alone. No matter your age or income, my goal is to raise your financial IQ. To increase your awareness of saving and establish a habit of saving for future life-stage events. To remove the fear and confusion you may have developed toward investing by teaching you how to identify great companies. That knowledge will build your confidence to buy those great companies when their stocks are cheap— companies you will want to own for a lifetime. I can’t guarantee

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you’ll always make perfect investments—I don’t know any investor who gets it right every time—but I can guarantee that as you build and diversify your holdings you will generate returns over the long-term that will exceed today’s money market and certificate of deposit rates and ensure the value of your investments exceed the growth of inflation. And because you will be following a welldefined discipline—think: work-out regimen or diet—even if you make the occasional mistake your effort will produce sound results overall and you will avoid avoid the pitfall of falling financially behind. You will be well on your way to financial independence. So let’s dig in and endeavor to raise our financial and investing IQ.

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Inde x

3M Company (MMM), 146, 156 10-k, 127, 186, 193 12 Fundamental Factors model, 101–2 401(k), 31–3, 35, 54, 69–70, 91, 164–5, 188–9 529 College Savings Plan, 27–9, 88, 91 A Tree Grows in Brooklyn (Nolan), 2 Abbott Laboratories (ABT), 145, 156 Abrams, Dan, 18 ABT. See Abbott Laboratories active management, defined, 186 Allianz Global Investors Center for Behavioral Finance, 3 Amazon.com Inc. (AMZN), 44–7, 86, 113–14, 139, 154 American Express (AXP), 145 Ameriprise Financial, 29 Amgen, Inc. (biotech) (AMGN), 62, 145 AMGN. See Amgen, Inc. AMZN. See Amazon.com Inc. annual report, 64, 74, 186 Annual total return for Dow Jones (1987– 2003), 165 anti-saving, spending as, 5–6 Apple Computer (AAPL), 38, 43, 62, 99, 101–15, 121, 125–8, 131–2, 139, 146, 154–5, 167, 189 and competition, 108–9 and ETF core holding options, 112–15 and investment strategy, 102–3 and lowered expectations, 109–10 and news sources, 110–12 price of, 104–7 and valuation, 107–8 “The Arithmetic of Investment Expenses” (Sharpe) (2013), 70 Arnott, Rob, 51, 161 Asness, Clifford S., 161 asset allocation, 31–6, 78–80, 86, 88–91, 186 defined, 186 and financial goals, 32–3 and portfolios, 78–80, 88–90

Astaire, Fred, xiii AT&T, 50, 53 AXP. See American Express Bajtelsmit, Vickie L., xii Bandaids, 141 Bank of America Corp., 113 banking, 81, 84, 88, 145–6, 170, 192 Barber, Brad M., 16–17 Barclays Global Investors, 68 Barron’s, 22, 48–50, 65, 81, 96, 111, 126, 133, 138, 146 bear market, 7, 22, 186 Beebower, Gilbert L., 77 behavioral economics, 3, 18–21, 24, 30, 34, 57, 186, 196 defined, 186 and women as great investors, 19–21 Benartzi, Shlomo, 3, 30 Berkshire Hathaway, 97, 114 Bernasek, Alexandra, xii Bernstein, Peter L., 81 Bespoke Investment Group, 85 bias, 18–20, 23–4 biotech, 62, 81, 154, 162 Black Monday (1987), 163–4 BlackBerry, 108 BlackRock, 68 Bloomberg.com, 45, 59, 62–4, 95–7, 99, 141, 183 blue-chip stocks, 82, 186 The Bob Newhart Show, 175 Bogle, Jack, 32–3, 72 Boston Consulting Group, 4, 175–6 “Boys Will Be Boys: Gender, Overconfidence, and Common Stock Investment” (research paper) (2001), 16 brain wiring, and gender, 79–80 brand dominance, 101, 103, 133–6, 144, 186 Brinson, Gary P., 77–9, 85 Buffett, Warren, 38–9, 58, 67–8, 94, 97, 114, 133, 164 buggy-whip factor, 57–8, 101, 103, 106

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INDEX

bull market, 34, 157, 164, 187 buy-side analyst, 187, 196 capital appreciation, 8–9, 187 CAT. See Caterpillar Tractor Caterpillar Tractor (CAT), 146 Chambers, John, 148–9 Charles Schwab. See Schwab chasing stocks, 163–6 “cheap for good reason,” 101–2, 104, 149 Chevron Corporation (CVX), 146, 156 Chipotle, 43 Cisco Systems (CSCO), 53, 80, 113, 147–50 Citigroup (C), 80–1, 147, 149 the cloud, 137–9, 149 CNBC, 98–9 Coach, Inc. (COH), 62, 86, 99, 117–29 and dividends, 126–7 and ETF options, 127–9 history of, 118–20 and news sources, 125–6 and qualitative factors, 120 and valuation metrics, 120–5 Coca Cola Company (KO), 62, 111, 113, 119, 122, 126, 132–6, 146, 149, 156 college savings, 2, 4, 6–7, 25–9, 91, 102–3, 114, 124 See 529 College Savings Plan Comcast Corp., 62, 113–14 compensation structure, advisor’s, 180–1 Consumer Discretionary sector, 85–6 Cook, Tim, 103–4, 107 core holding, 101–15 correlation, 82–3, 117, 187 correlation coefficient, 187 COST. See Costco Costco (COST), 43, 136 critical lessons, 159–68 and chasing stocks, 163–6 and discipline, 166–7 and the dividend, 159–61 and getting burned, 167–8 and talking to strangers, 161–3 CVX. See Chevron Corporation “cyclical trend,” 117 DCA. See dollar-cost averaging De Long, J. Bradford, 58 defined-benefit plan, 31, 187–8 defined-contribution plans, 31, 188 “Determinants of Portfolio Performance” (Brinson, Hood, and Beebower), 77 diligence, 49, 147–50, 170 Dillard, Annie, 131 dinner parties, and investments, 27, 77–8, 82–3

DIS. See Walt Disney Company discipline. See investment discipline Disney (Walt Disney Company), 62, 80, 86, 95, 112, 132 diversification, 12–13, 69, 73–4, 81–3, 88, 112–14, 127–9, 132, 134, 144–6, 149, 152–4, 157–8, 171–2, 190 and ETFs, 73–4, 158 and Intelligent Investment Rule #6, 88, 171 and portfolios, 82–3 “dividend paying culture,” 49–51, 61, 68, 188 dividend payout ratio, 188 dividends, 7–8, 27, 48–56, 59–61, 63–5, 67–8, 73–5, 88, 96, 105, 110–12, 126–7, 131–9, 144–6, 148–50, 156, 159–61, 165, 170, 173, 186, 188–9 and goals, 49–51 and payout, 49–51, 61, 68, 160, 188 and payout ratio, 188 and return, 187 and yield, 188–9 “Dividends: A Review of Historical Returns” (Heartland Funds) (white paper), 51 “Dividends and The Three Dwarfs” (Arnott) (editorial) (2003), 51 DJIA. See Dow Jones Industrial Average DNA. See Genentech “Does Asset Allocation Policy Explain 40, 90, or 100 Percent of Performance?” (Ibbotson and Kaplan), 32 “The Dogs of the Dow,” 53–4, 75, 136 See Dow Jones Industrial Average DOL. See US Department of Labor dollar-cost averaging (DCA), 35–6, 46, 53–4, 189 defined, 189 Donna Karan cashmere sweater, 194 Dooney & Burke, 120 DOW. See Dow Jones Industrial Average Dow, Charles H., 189 Dow Jones Industrial Average (DJIA or DOW), 53–4, 75, 113, 136, 163–5, 186, 189 and “The Dogs of the Dow,” 53–4, 75, 136 See MarketWatch Dow Jones US Large-Cap Growth Total Stock Market Index, 113 Dunn, Pattie, 68 DuPont, 53 early adapter, 37–8 earnings estimates, 189

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Eastman Kodak, 10, 55, 106 economic sectors, 42–4, 52, 55–6, 62, 68–9, 81, 84–5, 88–9, 104–7, 112–14, 132, 137–46, 149, 154, 162, 170–2, 189–92 and banking, 81, 84, 88, 145–6, 170, 192 and biotech, 62, 81, 154, 162 and entertainment, 81 and health care industry, 68–9, 84, 112–13, 140–5, 189–90 and industrials, 68–9, 81, 84, 88, 146, 189–90 and intelligent investing rule #6, 88–9 and pharmaceuticals, 88, 140–5, 190 and technology. See technology education investment account See 529 College Savings Plan eleven Intelligent Investing Rules, 2, 169–73 See Intelligent Investing Rules Ellis, Charles, 70, 156 Ellison, Larry, 137–9 EMC Corporation (EMC), 139 Employee Benefit Research Institute, 32 ETFs, exchange-traded funds Evans, Bob, 139 exchange-traded funds (ETFs), 68–75, 77–8, 81–2, 85–6, 88–90, 92, 94, 99, 112–15, 127–9, 132, 141, 144, 146, 151–8, 172, 187, 190, 192 as antidote, 68–9 and diversification, 73–4 and fees, 69–71, 155–6 lifetime, 151–8 and pricing, 71–2 as tax efficient, 72–3 warning about, 74–5 Exxon Mobil, 104, 113 Facebook, 38, 113, 189 FACTSET Dividend Quarterly, 160 Fallen Angel growth stocks, 10, 59–60, 62–7, 74, 103, 105, 108–9, 112, 114, 119, 124, 134, 171, 190–1, 195 Fama, Eugene F., 40–1, 51, 54, 146, 153, 157 Fama-French capital-asset pricing model, 146, 153 “fast crowds,” avoiding, 24, 169 favorableness, 19–20, 23 FDIC, 16 “fear of success,” 40 Federal Reserve, 87 fees, 69–71, 155–6, 172–3 Fidelity Investments, 29 Fidelity Magellan Fund, 38

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Fidelity Research, 85 Financial Advisor Magazine, 176 Financial Analysts Journal, 51, 70, 77 financial data, 45, 50–1, 60, 63–5, 75, 93–9, 111, 171, 183 and Internet research, 95–8 and the news media, 98–9 as plentiful, 93–4 and Stock Rover, 94–5 See financial websites financial goals, establishing, 25–36 and asset allocation, 32–3 and dollar-cost average, 35–6 and life-cycle funds, 33–4 and mental accounting, 26–9 and retirement, 29–31 financial IQ, xi–xiii, 1–13, 175 Financial Times, 17 financial websites, 45, 50–1, 59, 62–5, 75, 93–9, 111, 141, 171, 183 See Bloomberg.com; Seeking Alpha five stock portfolio returns (April 11, 2003– April 12, 2013), 80 fixed income security (bond), 190 Forbes, 139 Fox Business News, 99 “franchise value,” 101–3 free cash flow, 137–9 French, Kenneth R., 40–1, 51–2, 54, 146, 153, 157 futures, 98–9, 190–1 gambling, 7–8, 16–17, 162–3, 168, 185 GARP. See growth stocks at a reasonable price Gates, Bill, 94 GE. See General Electric gender, and brain wiring, 79–80 Genentech (DNA), 80 General Electric (GE), 53, 80, 147, 149 GILD. See Gilead Sciences Inc. Gilead Sciences Inc. (GILD), 113, 145 goals, financial, 36, 37–56, 170 and busy women, 46 and dividends, 49–51 and the Dow, 53–4 and growth stock investing, 38–48 and Intelligent Investment Rule #3, 36, 170 and investment style, 39–40 and personality biases, 37–9 and price-to-sales ratio, 44–5 and total returns, 51–3 and value stock investing, 39–41, 47–9 Goldman, 192 golf, 2, 151–2, 156, 158

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GOOGL. See Google Google (GOOGL), 104–5, 108–11, 113, 126, 139, 154, 168 Google Maps, 104–5, 168 Gorsky, Alex, 142–3 great companies, 9–12, 36, 38–9, 47, 55–9, 63, 67–8, 102–3, 106–7, 109, 112, 131–50, 168, 172, 185 See lifetime stocks growth assets, 34, 191 growth stock investing, 10, 38–48, 55–6, 58–9, 62–9, 74–5, 82, 87–8, 90, 97, 101–15, 119, 134, 148, 153, 171, 190–5, 198 growth stocks at a reasonable price (GARP), 41–2, 58–9, 66–8, 74–5, 82, 90, 190–2 GuruFocus, 97, 106, 183 Haugen, 41 health care industry, 68–9, 84, 112–13, 140–5, 189–90 See Johnson & Johnson Heartland Funds, 51–2, 160 hedge fund, 18, 140, 191 heuristic, 18–19, 192 Hewlett-Packard, 53, 108 Home Depot Inc., 62 Honeywell International, 50 Hood, L. Randolph, 77 Horner, Matina, 40 Hough, Jack, 138 Ibbotson, Roger G., 32–3 Ibbotson Associates, 41 IBM, 7–8, 52, 132, 139, 148–9, 194 Icahn, Carl, 106 IJR. See iShares Core S&P Small Cap (ETF) index fund, 192 individual retirement account (IR A), 27, 91, 162 industrials, 68–9, 81, 84, 88, 146, 189–90 Industries in the Consumer Discretionary sector, 85 information technology, 84, 104, 112–14, 137, 154, 189–90 INTC. See Intel Corporation initial public offering (IPO), 43, 129, 192, 197 Intel Corporation (INTC), 53, 113, 132, 139 Intelligent Investing rules, 2, 9–11, 24, 36, 40, 49, 66–7, 88, 99, 112, 129, 145, 147, 156, 159, 169–73 Rule #1 (discipline), 9–12, 40, 147, 169

Rule #2 (avoiding fast crowds), 24, 169 Rule #3 (life goals), 36, 170 Rule #4 (diligence), 49, 170 Rule #5 (research), 66–7, 170–1 Rule #6 (diversification), 88, 171 Rule #7 (financial websites), 99, 171 Rule #8 (valuation), 112, 171–2 Rule #9 (iteration), 129, 172 Rule #10 (great companies), 145, 172 Rule #11 (fees), 156, 172–3 last rule (price and yield), 173 “Investing for a Distant Goal: Optimal Asset Allocation and Attitudes toward Risk” (TIAA-CREF) (study) (1998), 32 Investment Company Institute, 32 investment discipline, 1–13, 16, 18–19, 22–4, 28–9, 37–75, 101, 129, 147, 166–8, 169–70, 176–7 and advisors, 176–7 and attitude, 1–13 and biases, 23 and goals, 37–56 and Intelligent Investment Rule #1, 9–12, 40, 147, 169 and market forces, 18–19 and objectives, 24 and saving, 9–10, 28–9 and staying the course, 10–12, 166–7 and stock market, 57–75 investment IQ, xi–xiii, 1–13, 175 “Investment Management Fees Are (Much) Higher Than You Think” (Ellis) (2012) (paper), 70, 156 investment strategy, 1–13, 18–19, 23–4, 26–7, 32–6, 37–56, 65, 77–8, 85, 89–90, 92, 97–9, 102–4, 107, 110, 127, 134, 137–9, 164, 166, 169, 172, 177, 192 and acquisitions, 110, 137 defined, 192 and external factors, 18–19 and goals, 37–56 and intelligent investing rules, 169, 172 and mental accounting, 26 in real time, 102–4 and saving, 1–13 and stock allocations, 32 See diversification investment terms (glossary), 185–98 investment websites (list), 183 See financial websites iOS software release, 104 iPad, 37, 103, 111, 149 iPhone, 37–8, 103–7, 111, 149 iPhone 5, 104–7, 111

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IPO. See initial public offering iPod, 106 IR A. See individual retirement account iShares, 68, 74, 112–13, 127–8, 157–8 iShares Core S&P Small Cap ETF (IJR), 157–8 i-Shares Global Consumer Discretionary Stock ETF (R XI), 127–8 iShares S&P 500 Growth ETF (IVW), 113–14 iteration, 129, 172 IVW. See iShares S&P 500 Growth ETF Jahanshad, Neda, 79 JNJ. See Johnson & Johnson Jobs, Steve, 103–4 Johnson & Johnson (JNJ), 53, 114, 140–4, 146, 149, 190 Journal of Portfolio Management, 81 JPM. See JPMorgan Chase JPMorgan Chase (JPM), 145, 192 “Judgment under Uncertainty: Heuristics and Biases” (Tversky and Kahneman) (1974), 18–19 JWN. See Nordstrom Kahneman, Daniel, 18, 30 Kaplan, Paul D., 32 Kate Spade, 120 Kilbride, Don, 48 Kinnel, Russel, 71, 156 KO. See Coca Cola Company KORS. See Michael Kors Koski Research, 29 Lakonishok, Josef, 41 “Leveling the Playing Field” (study) (2010), 4 life goals, 26, 36, 42, 124, 129, 136, 170 life-cycle funds, 33–4 lifetime ETFs, 151–8 and diversification, 158 and fees, 155–6 and the IJR, 157–8 and the QQQs, 154–5 and the VIG, 156–7 and the VOO, 152–4 lifetime stocks, 131–50 and being diligent, 147–50 and brand dominance, 133–6 and free cash flow, 137–9 and iconic brands, 140–5 and information technology, 137 and research, 145–6 and soft drink industry, 132–3

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See blue-chip stocks; lifetime ETFs Listerine, 141 long positions, 191–2 Lopez, Nancy, 156 Lusardi, Annamaria, xii Lynch, Peter, 38, 56, 58, 67, 105–6 MA. See MasterCard Macy’s, 63, 86 Madoff, Bernie, 181 Malkiel, Burton, 32–3 Man Down (Abrams), 18 market capitalization (“market cap”), 41, 104, 126, 192–4 MarketWatch, 96–7 Massachusetts Institute of Technology Sloan School of Management, 40 MasterCard (MA), 145 Mather, Celia, 17 MCD. See McDonald’s McDonald’s (MCD), 50, 53, 62, 136, 156 Annual Report (2012), 50 McGraw Hill Financial, 84 McKinsey and Company, 152 Mensa, 175 mental accounting, 26–9 Merck & Co. (MRK), 53, 145 Michael Kors (KORS), 86, 119–20, 122, 126 Microsoft, 53, 113, 132, 154 middle class, 135 Mitchell, Olivia S., xii MKTG. See Responsys Inc. MMM. See 3M Company momentum, 10, 38, 46, 104, 124, 126, 134, 192–3 momentum investors, 192–3 Money magazine, 104 Morningstar, 69, 71, 83, 156 Morningstar FundInvestor, 71 Morningstar Principia Pro, 83 Motrin, 141 MP3 player, 106 MRK. See Merck & Co. multiple expansion, 107–8, 193 mutual fund, 68–73, 83, 152, 155–7, 179, 187, 190–3 NASDAQ. See National Association of Securities Dealers National Association of Securities Dealers (NASDAQ), 68, 74, 88, 113, 148, 154, 156, 186, 193–4, 197 Nasdaq-100 Index, 113 National Council for Research on Women, 17

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National Council on Economic Education, xii NAV, 190 NFLX. See Netflix “negative success imagery,” 40 Netflix (NFLX), 43–4 New York Stock Exchange (NYSE), 193–4, 197 The New York Times, 142 news media, 98–9 See financial data Nike, 43, 62, 86, 112, 132 Nobel Prize in Economic Sciences, 70, 156 Nolan, Francie, 2–3 Nordstrom (JWN), 43, 62–5, 86, 112, 121–2, 138 Nordstrom Rack, 63, 65 NYSE. See New York Stock Exchange Odean, Terrance, 16–17 O’Higgins, Michael, 53 One Up on Wall Street (Lynch), 38 opportunity cost, 6, 8, 34, 194 Oracle (ORCL), 137–9, 149 ORCL. See Oracle overconfidence, 15–18, 42, 57 p/e. See price-to-earnings ratio p/s. See price-to-sales ratio Palmer, Russell E., 22 Patton, Jr., George S., 166–7 payout ratio, 160–1, 188 PEG. See price/earnings-to-growth ratio pension, 31, 77, 187–8 Pepsico, 114, 156 PFE. See Pfizer, Inc. Pfizer, Inc. (PFE), 53, 145 PG. See Proctor & Gamble pharmaceuticals, 88, 140–5, 190 Polaroid, 10, 106 “portfolio alpha,” 117 portfolio turnover, 17, 152–3, 157, 179, 194 portfolios, 17, 77–92, 117, 152–3, 157, 179, 194 and asset allocation, 78–80, 89–90 and diversification, 82–3 and ETF-only portfolio, 88–9 and guidelines, 83–6 and tax strategy, 90–2 and time horizon, 86–8 Post-it Notes, 146 PowerShares QQQ, 74, 112–13, 154–7 price and yield, 173 price appreciation, 10, 39, 48, 55, 103 price/earnings-to-growth ratio (PEG), 61–2, 64, 109, 131

price-to-earnings ratio (p/e), 59–62, 64, 96, 107–9, 121, 126, 131, 136, 138, 144, 189, 193–5, 198 price-to-sales ratio (p/s), 44–6, 64, 108–9, 122, 131, 195 Proctor & Gamble (PG), 136, 156 product liability, 140–5 professional investment advisor, 16–17, 155–6, 175–82 and compensation structure, 180–1 and fees, 155–6 and investment discipline, 176–7 and strategy and stocks, 177–9 and style and risk parameters, 179–80 and track record, 180 and trust, 181–2 women’s relationships with, 16–17 protection assets, 195 protection-seeking investments, 34 proxy statement, 195 Prudential research survey “Financial Experience & Behaviors Among Women,” 15–16, 18, 29 PSR. See price-to-sales ratio QQQ. See PowerShares QQQ quadrants of measurement (Brinson’s), 78 QUALCOMM Inc., 113 Quinn, Jane Bryant, 32–3 recency effect, 20–1, 23, 44, 104, 177, 196 recommended stock allocations for future goals (table), 32 regression to the mean, 195 research, 66–7, 93–9, 161–2, 170–1 and portfolio management tool, 94–5 See financial data; financial websites Responsys Inc. (MKTG), 138 retirement, 3–5, 21, 25–34, 69–70, 86, 88–9, 102–3, 115, 124, 150, 155–6, 187–8 and financial goals, 29–31 and investment account, 88–9 plan, 187–8 reversion (or regression) to the mean, 20–1, 23, 55, 111, 147, 177, 195 Richards, Ann, xiii risk tolerance, 9–10, 89, 125 “risk-on” hedge fund, 18 Roche Holdings, 80 Rogers, Ginger, xiii R XI. See i-Shares Global Consumer Discretionary Stock ETF S&P 500. See Standard & Poors 500 Index sampling size, 19–21, 23, 163–4

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Samsung, 103, 111 Sarofim, Fayez, 133 saving, 1–13, 28–9 savings investment account, 89 SBUX. See Starbucks Corp. SCHG. See Schwab US Large-Cap Growth ETF Schultz, Howard, 11 Schwab, 27, 74, 112–14 Schwab US Large-Cap Growth ETF (SCHG), 113–14 Schwert data, 51 Scotch tape, 146 SEC. See Securities and Exchange Commission “secular trend,” 117 Securities and Exchange Commission (SEC), 186, 195 Seeking Alpha, 64–5, 96–7 sell-side analyst, 96, 189, 196 “sell-side” firms, 187 share repurchase programs, 105, 196 Sharpe, William F., 70, 156 short position, 197 Siebert, Muriel, 67, 168 Siegel, Jeremy, 22–3, 51, 153 Sirius XM, 99 “Six Stocks That Could Double in Five Years” (Hough), 138 smart money, 125, 154, 197 SmartTalk, 162 Social Security, 25 Soe, Aye, 155 soft drink industry, 132–3 Southwest Airlines, 138 SPDR (the “Spider”) (ETF), 68 spending as anti-saving, 5–6 Splenda, 141 “sport” of investing, 16–17 Squawk Box (CNBC), 98 Standard & Poors 500 Index (S&P 500), 7–8, 11, 35–6, 43, 59–61, 60–1, 64, 68, 71, 73, 80, 84–5, 88, 90, 96, 103, 105, 108, 110–11, 113, 118, 121, 128, 133, 136–44, 152–7, 160–1, 163, 167, 186, 192, 194, 196 between 1926 and 2010, 35–6 in 2008, 8 defined, 196 Dow Jones Index website, 84 and IVW, 113 p/e of, 60–1, 64, 96, 108 performance of (2003–2013), 80 and sector weightings (2013), 84 and soft drink industry, 136

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and the SPDR, 68 and the VOO, 152–7 Stanford University, 70 Starbucks Corp. (SBUX), 10–11, 38, 62, 66, 112, 132, 136 stock (equity), 197 stock market, 57–75, 131–50 and brand dominance, 133–6 and diligence, 147–50 and exchange-traded funds (ETFs), 68–75 and Fallen Angel growth stock, 62–7 and free cash flow, 137–9 and futures, 98–9 and information technology, 137 and lifetime stocks, 131–50 and long-term performance, 67–71 and methods, 59–60 and P/E example, 60–1 and the PEG, 61–2 and product liability, 140–5 and research, 145–6 and soft drink industry, 132–3 and timing, 146–7 See lifetime stocks Stock Rover, 94–5 stock tickers, 10, 43–4, 80, 103, 108, 114, 118–19, 121, 132, 136–40, 145–6, 162, 197 Stocks for the Long Run (Siegel), 22 Stone, Glenda, 17 “Surprise! Higher Dividends = Higher Earnings Growth” (Arnott and Asness) (article) (2003), 161 sustainable earnings growth, 48–50, 135, 160, 188 tax efficiency, 53, 72–3, 133 tax loss harvesting, 198 tax lots, 92, 197–8 tax strategy, 90–2 technology, 42–4, 55–6, 81, 84–5, 88, 104–7, 112–14, 137–41, 149, 154, 189–90 See Apple; Oracle Tesla Motors, 38 TIAA-CREF, 32–3 Tiffany & Co., 62, 74, 84–6, 112, 121–2, 192 total return, 12, 24, 33–4, 48–53, 55–6, 66, 69–71, 74, 77–8, 81, 90–1, 112, 115, 118, 149, 155–60, 165, 169, 172, 179–80, 187, 194, 197 and dividends, 51–3 for Dow Jones (1987–2013), 165

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“Trading Deck” (MarketWatch), 96 “Trading is Hazardous to Your Wealth” (Barber and Odean) (article), 17 trailing twelve months (TTM), 59, 122, 161 TTM. See trailing twelve months Tversky, Amos, 18–19, 23, 30 Twitter, 38 Tylenol, 141–2, 144 UK Women’s Enterprise Taskforce, 17 Under Armor, 86 University of California, Los Angeles (UCLA), 3, 30, 79 Anderson School of Management, 3 University of Chicago Graduate School of Business, 40 University of Southern California, 79 US companies, 50, 53, 73, 196 See Standard & Poors 500 Index US Department of Labor (DOL), 69 US Dividend Achievers Select Index, 156 US Naval Academy at Annapolis, 28 V. See Visa valuation, 20, 36, 44–5, 49–52, 55, 58–67, 82, 86, 90, 95, 101–4, 107–12, 115, 120–3, 125, 129, 132, 154, 159–61, 170–2, 191, 195 and competition, 108–11 and dividends, 49–51, 159–61 and Intelligent Investment Rule #8, 112, 171–2 and investor expectations, 107–8 and p/s ratio, 44–5 “value equation,” 67–8 value stock investing, 37–41, 47–51, 55–6, 59, 67, 74, 134, 161, 164, 166, 198 defined, 198 and dividends, 49–51 and great companies, 47–9 versus growth stock investing, 40–1 and personality bias, 37–9 warning for, 55 and Warren Buffett, 67 value traps, 101–2 “Value versus Growth: The International Evidence” (study) (Fama and French) (1998), 40–1 Vanguard, 48, 74, 112–14, 127–8, 152–7 Vanguard Consumer Discretionary ETF (VCR), 127–8 Vanguard Dividend Appreciation ETF (VIG), 156–7 Vanguard Dividend Growth fund, 48 Vanguard Growth ETF (VUG), 114

Vanguard S&P 500 ETF (VOO), 152–7 VCR. See Vanguard Consumer Discretionary ETF Verizon Communications, 53 VHT, 144 VIG. See Vanguard Dividend Appreciation ETF Visa (V), 145 Visine, 141 volatility, 43–4, 46, 53, 56, 67, 74, 77, 113–15, 128, 142, 150–7, 180, 186, 198 VOO. See Vanguard S&P 500 ETF VUG. See Vanguard Growth ETF Wall Street, 104, 106–7, 166–7, 187, 197 The Wall Street Journal, 29, 79, 93, 96, 111, 152 The Wall Street Transcript, 80 WalMart (WMT), 38, 43, 62, 114, 136, 156 Walt Disney Company (DIS). See Disney wealth accumulation, 1–13 and habit of saving, 2–3 and investment discipline, 9–10 and risk tolerance, 9–10 and saving, 4–9, 12–13 and staying the course, 10–12 web-based stock research, 95–8 See financial websites Weiss, Geraldine, 49 Wells Fargo (WFC), 68, 145–6 Wells Fargo Investment Advisors, 68 WFC. See Wells Fargo “Why Fund Management Suits the HighAchieving Women of Financial Services” (Mather), 17 WMT. See WalMart women and investing, 15–24 and behavioral economics, 19–21 and bias, 23–4 and long-term investments, 22–3 and market forces, 18–19 and natural expertise, 24 and overconfidence, 16–18 “Women in Fund Management” (study) (2009), 17 The Writing Life (Dillard), 131 WYNN. See Wynn Resorts Wynn Resorts (WYNN), 162–3 Xerox, 106 Yahoo! Finance, 45, 62, 95–7, 107–9, 114–15, 122, 123, 141–3, 183 Yale University, 94