Embracing winter + when to use a robo-advisor
Plus: How creating friction can help your finances.
Hi everyone,
Greetings from Florida. I’m here with my mom and sister, enjoying the warm weather and trying not to get sunburnt.
In this week’s issue:
The necessity of embracing ‘winter’
What’s up with robo-advisors?
Creating friction
Links
Embracing ‘wintering’
The second story in my ambition series is out, and it’s about embracing your down cycles—or “winter”—instead of running from it in the opposite direction. (Yes, I appreciate the irony that I am writing this when it’s 81 degrees and sunny outside where I am.)
I really wanted to further explore an aspect of my first piece: That it’s okay to slow down, take a break—in fact, more than okay, it’s natural. In the U.S., so much is built on always going up, up, up and to the right—always progressing, never faltering, never resting. But that’s just not how anything in nature works; why would we think we’re the exception?
I don’t want to posit that resting/wintering/embracing your down cycle is good because it’s another way to be more productive in the future, as if that’s the only reason to do it. But progress of any kind does require maintenance.
I really appreciated the book Wintering by author Katherine May. She also has a newsletter that touches on these themes that I’ve been loving.
In our productivity-obsessed society, “the times when we fall out of sync with everyday life are still taboo,” May writes. We see wintering as a “humiliation,” to be avoided at all costs, lest we be seen as lacking willpower. But wintering is natural. It “brings about some of the most profound and insightful moments of our human experience.” Rather than deferring it all costs, we’d do better to “invite the winter in.”
Of course, for most of us, truly “wintering”—taking a break, unplugging, resting—just isn’t possible. We all have bills to pay. I loved talking with artist and author Austin Kleon (truly one of the most productive people I follow) about what he does when he’s just not feeling ambitious.
Kleon’s advice is a good reminder for me: You just keep showing up and doing the work. As I write in the story:
Every day Kleon heads to his workspace—a studio he built in his backyard—locks the door, and sits down. Pretty soon, something clicks; the work gets done.
Assigning artificial deadlines and signing up for obligations like speaking gigs he doesn’t necessarily want to do at the moment helps. Two of his books, Steal Like an Artist and Keep Going, stem from talks he gave at conferences. There’s nothing like the pressure of a keynote presentation to really get the creative juices flowing, he says.
It’s not about hustling, per se; but those external deadlines light a fire and force him to focus. He tricks himself into being ambitious.
It’s not a revolutionary thought but it is something I needed to hear. You keep going—just not at the same pace. “Ambition comes in waves. When you’re younger in particular, you want to make your place in the world and you have the drive to get there,” Kleon says. “When you get there, you have to stop and look around and figure out where you are and where you want to go next.”
Anyway, give it a read and let me know your thoughts.
What’s up with investing apps like Acorns or Betterment?
A reader asks:
“Have you ever written anything about those investing apps like Acorns or Betterment? I’ve been stocking away $10-$20 bucks a week in them since COVID started and I’m wondering if they’re worth a damn.”
Great question! It’s been a minute, but I used to cover these companies much more closely. I think everything in this article is still pretty accurate. But let’s take a closer look.
Let’s start with a quick overview of what these are. Apps like Acorns, Betterment, and Wealthfront are automated investment platforms, also known as robo-advisors. (Full disclosure: CNBC had a relationship with Acorns when I worked there, but I’m no longer affiliated with either company.) Basically, this means instead of hiring a human financial advisor, you pay for a computer algorithm to pick your investments for you.
You can typically open an individual retirement account (traditional or Roth) or a taxable account for non-retirement investing. They’ve also increasingly been entering the high-yield savings account game (although you should be careful with that—these companies are not technically banks). Usually, you input some information on what your goals are as well as your risk tolerance, and the robo creates a stock/bond portfolio for you.
The short answer to your question is: There’s nothing necessarily wrong with them. If they help you to start investing like you have been, then that’s great. They make things seamless, and there’s a lot to be said for simplifying investing/finances generally. Most of us don’t really want to spend the time researching and picking our own investments; it can be overwhelming. Often, half the battle is just getting your investments up and going, and robos make that easier to do.
That said, they come at a cost. Betterment, for example, charges a management fee of $4 a month for an account, or 0.25% annually if you have a balance over $20,000 or make qualifying recurring deposits (so if you have a $10,000 account balance, you're essentially paying a 0.48% fee). On top of that, you will pay for the fees that index funds or other investments themselves charge. That’s pretty standard for a robo-advisor, and 0.25% is less than what you will pay for a human advisor.
Now, the consideration becomes, what do you get for that extra fee? Like I said, ease. It’s simple to invest with them, and they make a lot of the decisions for you. If you really don’t want to be hands on, then these apps can be a good option.
You won’t get much human advice or hand-holding without paying an additional fee. You also won’t get as much customization or personalized advice/investments. A human advisor can also help you with a more holistic approach to your finances, advising you on other aspects of your finances, like budgeting, goal setting, accounts like 529s, etc.
And if you’re simply investing for retirement, my advice is always to open an account with Vanguard of Fidelity, because I’m old school. But it’s true that they can be clunkier and harder to use than a robo, and the investments aren’t made automatically. That said, you can pick the investments you want.
So for a beginner investment strategy, I think robos can be useful tools. FWIW, I hold most of my investments—IRA, Roth—with Fidelity. But I also have a “house” fund with Ellevest, another robo-advisor. This is not a recommendation, I just want to be transparent.
I’m happy to answer questions as best I can. If you have one, leave a comment/message me on Twitter/shoot me an email!
Creating friction
A classic piece of personal finance advice is to automate what you can: Savings, bill pay, retirement contributions (I mean, that’s the appeal of the investment strategy outlined above!). This way, you’re taking care of the basics without having to think about it; you run into fewer opportunities to do the “wrong” thing, e.g., spend your money instead of save it.
There’s also a lot to be said for the opposite of this, though: How creating some friction can help your finances.
Our culture has made it easy as possible for us to spend money: One-click pay, links in bio, 2-day shipping, Apple Pay. A lot of us can buy as much as we want of anything we want at any time we want, with next to no barriers (aside from our bank account balances, although even these aren’t deterrents for many of us, given current consumer debt figures).
Creating friction pushes back against this. It makes it harder to part with your money. It’s adding something you want to buy to a list you check once a week instead of pulling the trigger right away; it’s imposing a low buy month or strict monthly budget. It’s keeping your savings in a separate bank from your checking so it’s slightly harder to tap into for non-emergencies.
Mainly it’s about slowing down, about not letting the algorithm or technology dictate your budget. I’m adding friction where I can.
Links
Everyone’s more burnt out than ever. Maybe because none of us take vacations anymore?
Why are layoffs contagious? You can probably guess… Speaking of, here’s how to prepare for a layoff if you’re worried, and here’s a guide to what to do if you do lose your job (gift link).
A man had $200,000 frozen in a crypto account when the lender filed bankruptcy—and now he has to pay an $8,000 tax bill on the interest, despite not being able to access his money.
Poor, busy millennials are can’t even afford to have a midlife crisis: “They feel trapped, and they’re not happy with that, but they don’t really have a huge number of options. They can’t just write a check and walk away.”
I attended Michigan State University for a year and a half before transferring, and I’m utterly heartbroken by the violence that unfolded there this week. I wish we didn’t live like this.
That’s it for now. Have a great week,
A
P.S. If you know someone who would like this newsletter, please forward it along!
P.S.S. Thanks Christopher Skinner for the illustrations!