In the wide-ranging conversation with Rubenstein, Erdoes said one of the trickiest parts of wealth management—in which bankers help people plan financial moves—is handling conflict among generations or between couples, especially when one spouse is kept in the dark about financial decisions. “If you think about it early enough, it becomes much less emotional,” she said.
Erdoes shared some of her primary rules for investing. She always asks clients to figure out how much they need to maintain their lifestyle. And with the money they have beyond that, she says, they can be more speculative with their investments.
“It would be unfortunate to find yourself where you have stretched so much in your risk/return trade-off that you find yourself, in a downturn, not being able to live the life that you had worked so hard to get to,” she said.
She also warned against thinking that the high-double-digit returns that markets have delivered in the past year are the norm. “Some of these things look very easy to make money in,” she said. “Why? Because there’s so much froth in the markets. There’s so much liquidity that’s been pumped in by governments all around the world. And so what’s seemingly easy may not be.”
Erdoes answered a few lightning round questions from Rubenstein. The interview has been edited and condensed.
What’s the best investment advice you ever got?
If it sounds too good to be true, it probably is.
What is the best investment advice you would give someone about something they shouldn’t invest in?
You should never invest in something that can’t be simplistically explained to you. And one of the problems on Wall Street is that people use lots of acronyms and make it very complicated to explain something. The very, very good investment advisers can take complex matters and make them very simple. And when someone knows how to do that and you can digest it and understand it, then you’re allowed to invest in it.
If somebody called you up tomorrow and said, “I’m not that wealthy relative to all your clients, but I do have $100,000. I’d like to put it somewhere.” Where would you tell that person to invest $100,000?
In a balanced portfolio, well diversified, that they can store away for a long period of time and hopefully it compounds healthily for them.
Do you have any good advice about how to make a lot of money and retire at 40?
Invest every single dime you have, as early and as often as you can. You know there’s a question, “Would I rather have a dollar double every day or get a million dollars?” And a dollar doubling every day over a month would give you more than a million dollars. So investing and compounding.
This article was provided by Bloomberg News.