Kelley Keehn is a financial-literacy advocate and personal-finance educator who has authored nine books on topics ranging from the psychology of money for women to protecting against identity theft. Ms. Keehn also has done hundreds of media interviews, was a member of the National Steering Committee on Financial Literacy and currently serves as the consumer advocate for the Financial Planning Standards Council. According to her website, kelleykeehn.com, she previously worked in the financial industry as an adviser to high-net-worth clients before selling that business in 2005 to take up her current role.
How do you invest your savings?
I invest savings in my current business and individual stocks that I have researched very well and monitor. Right now, the money earmarked for individual stocks is sitting in cash, waiting on opportunities.
A fair amount of money is also put into robo-like portfolios. About the only thing I have to do for these investments is to keep a long-term outlook and not look at day-to-day performance.
To get the robo-portfolios started, I did answer some questions – such as when the money would be needed and how comfortable I was with volatility. The robo-service then used my answers to design portfolios suitable for me.
I ended up with a relatively high allocation to stocks. As an entrepreneur, risk is in my veins. Also, I’m 42 years old and plan to keep working into my 80s, so I have an extremely long-term investment horizon for riding out the downturns.
But my level of risk-taking may not be appropriate for many other businesspersons. As recommended in my books and practice, entrepreneurs with variable income and no pensions generally shouldn’t have a large weight in risky assets.
Unless there’s something like a long investment horizon to make an exception, taking too much risk in a portfolio is not a good idea for entrepreneurs because their career path already has a high degree of risk. Someone with steady income or a pension plan would be in a better position to take on investment risk.
What investments are in your robo-portfolio?
The robo-service didn’t pick individual stocks for my equity allocation. Instead, my money was placed in equity exchange-traded funds, which are baskets of stocks that mirror stock-market indexes. So, they passively track changes in the indexes.
This takes the human bias out of the mix: As research has shown time and time again, active managers who pick stocks rarely beat the market. Over the long run, they tend to end up with the market return less their annual fees. It’s, therefore, better to buy ETFs because they deliver the market return at a lower cost.
How does the robo-adviser manage your robo-portfolio?
It selects the ETFs so a portfolio is diversified across regions, industries and so on. Contributions are also spread across the ETFs to maintain diversification. And periodically, the robo-portfolio will be automatically rebalanced to bring the asset mix back to the target consistent with my risk profile.
How do you control spending to avoid debt and generate savings?
Every six months, my husband and I do the 30-Day Anti-Budget plan that I teach to my readers. This requires sitting down with your spouse at least once a year to write down all expenditures made by category and month. Most people end up surprised, or shocked, at how much is being spent. As awareness kicks in on the extent of the spending, many people become quite motivated about cutting back.
What makes it a challenge for me is that I’m on the road 80 per cent of the time during any given month for my work. Things are ridiculously priced when travelling and I don’t have the option of brown-bagging or cooking for myself. When I am at home, my husband cooks for me nearly 100 per cent of the time to help us not only save money but also to have a healthier diet.
What were your best and worst financial moves?
The worst was being an entrepreneur and self-employed early on. The best is being an entrepreneur and self-employed later on. The hockey-stick curve in the graph has finally started to turn upward.
If you could recommend one thing about finances, what would it be?
Chances are a certified financial planner can show you ways to better manage your finances – to the point where the financial gain more than offsets the cost, especially in the case of fee-only advisers. This applies to not only saving and investing but also other aspects of personal finances such as minimizing taxes and estate planning. A planner is also able to crunch numbers to help you decide between options like contributing to an RRSP versus paying down the mortgage.
The above interview has been edited and condensed.
Larry MacDonald is an economist, author and financial writer.