Appendix: Investment Websites

● Bespoke Investment Group: http://www.bespokeinvest. com/thinkbig ● Bloomberg: www.bloomberg.com ● Charles Schwab: https://www.schwab.com ● CNBC.com: http://www.cnbc.com ● .com: http://www.dividend.com ● and Income Daily: http://www.dividendsandin- comedaily.com/ ● Dividend Channel: http://www.dividendchannel.com/ ● Fidelity: https://www.fidelity.com/ ● GuruFocus: http://www.gurufocus.com ● Investopedia: http://www.investopedia.com/ ● MarketWatch: http://www.marketwatch.com ● McGraw Hill Financial: http://us.spindices.com ● The Motley Fool: http://www.fool.com/ ● Seeking : http://seekingalpha.com/ ● S&P Dow Jones Indices: http://us.spindices.com/ ● Rover: http://www.stockrover.com/ ● Yahoo! Finance: http://finance.yahoo.com/ ● YCharts: http://ycharts.com/ ● Vanguard: https://investor.vanguard.com/home/

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

I suppose one of the most off-putting things for most new is understanding the jargon. Whether it serves as a form of clari- fication or segregation, language can alienate and overwhelm new investors. But as is often the case, the special language, the acro- nyms, the catch phrases are simply one way of saying something else. For example, take the word equity. Most of us understand equity in terms of our home. If the value of our home today is more than we owe we understand the difference to be our equity. But investors also refer to shares of as equities. And in this case the term represents an ownership interest. So the terms stock or equity convey the same meaning and are often used interchange- ably and both mean ownership. That is not so different from the term equity when applied to your home. The difference between the home’s value and what you owe is your true ownership; a share of a stock—an equity interest—represents your ownership in a com- pany. In , with modest effort, investing terms are accessible. Our objective is not to master every investing idiom but to develop a keen understanding of foundational investment prin- ciples. We want to control the variables we can control and the foremost is knowledge. Knowing what we are buying and why we are buying it reduces our risk and the sense that investing is gam- bling. Investing is akin to building equity—to buying a portion of a corporation and waiting for it to appreciate. Building equity in our homes is desirable but buying equity in really great companies is how we generate wealth. 186 GLOSSARY

● Active management: Investors who practice active manage- ment assume that the stock market is not efficient and through superior research and stock selection they can identify mispriced stocks and in doing so perform better than the overall market (often measured by the major stock market indices: the Dow Jones Industrial Average, the S&P 500, or the NASDAQ). ● Annual report or 10-k: All publicly traded companies are required by the Securities and Exchange Commission (SEC) to file a 10-k or annual report providing a comprehensive over- view of the firm’s business activities. The annual report is stud- ied by securities analysts and investors to better understand the firm’s financial condition and earnings growth expectations. ● Asset allocation: Any investment plan employs an allocation to stocks and bonds or cash equivalents among other things. Depending on our investment time horizon and ultimate goal, our willingness to trade-off potential for investment return will influence how our assets are allocated. ● Bear market: A bear market is defined as a sustained decline of 20 percent or more as measured by the stock market indices. The period usually extends over a period of multiple months or even years. A one-day decline—like Black Monday’s precipitous fall of over 20 percent—would be characterized as a correction versus a bear market because of its short duration. ● Behavioral economics: Behavioral economics challenge the basic assumption that forms the foundation of economics: that individuals act rationally when making financial deci- sions. Behavioral economics studies our biases, emotions, and faulty assumptions—the psychology—that influence financial decisions made under uncertainty. (The condition, one might argue, under which every financial decision is ultimately made.) Understanding the underlying theories of behavioral econom- ics can enhance our understanding of our investing selves. ● Blue-chip stocks: The blue-chip is a large-cap, industry leader with the kind of brand dominance that makes it a household name. The kind of stocks we want to consider to own for a life- time. Dividends are usually (though not always) paid by blue- chip companies. GLOSSARY 187

● Bull market: A bull market then is a market where stocks are rising, a market characterized by optimism. It is possible to experience declines in a bull market period (in fact, many inves- tors are pleased by a small correction to let the market settle and regroup) but the extended trend is positive. ● Buy-side analyst: A buy-side analyst works for an investment management firm that manages the assets of clients via sepa- rate accounts, mutual funds, or ETFs. The term refers to the fact that investment management firms tend to “buy” research from Wall Street or “ sell-side” firms. Buy-side analysts are typ- ically assigned to broad industry groups or entire sectors and are charged with the task of supporting the firm’s portfolio managers in selecting stocks for their client portfolios. ● Capital appreciation and total return: Capital appreciation is the growth, or appreciation, of your investment in excess of the price you paid for that investment. Capital equals money so capital appreciation measures the growth of the money you invested. Separate from capital appreciation is the dividend return . It is similar to the interest you receive from your bank but, and this is a big but, dividend payments often grow as the company’s earnings grow. Total return includes capital appreciation, the compounding of dividend payments, and the growth in those dividend payments. ● Correlation: In financial terms, correlation measures how two investments move together. The measurement ranges from -1 to +1 (the correlation coefficient). If two securities are perfectly correlated (think: rise and fall at the same time or in lock- step) their correlation coefficient equals +1. If two securities are, conversely, perfectly negatively correlated (coefficient of -1) one security will rise while the other falls. If two securities are determined to have zero correlation we expect that they will act entirely independent of each other, with no expected simi- larity of pattern. ● Defined-benefit plan: A defined-benefit plan is a retirement plan (or pension) sponsored by the company. The benefits to the employee are calculated according to length of service and salary and provide a guaranteed monthly payout at the time of 188 GLOSSARY

retirement. Of course, each plan carries different restrictions unique to each company but the primary, defining character- istic of a defined-benefit plan is that the company takes on the responsibility of funding and managing retirement assets for their employees. These plans are primarily offered by govern- ment agencies and are rarely offered in the private sector any longer. ● Defined-contribution plan: Defined-contribution plans are most typically characterized by the 401(k). In these plans the employee contributes directly to her company-sponsored plan and is responsible for selecting from a company-designed and managed menu of investment products. While many corpora- tions match some portion of the employee’s contribution most of the responsibility for the savings rate and investment selec- tion falls on the individual. ● Dividend: Not all companies pay a dividend but those that do determine the amount of the dividend based on a portion of earnings. The dividend is set by the board of directors (which often includes company management) and is quoted to share- holders as a dollar amount per share per year. In my experience larger companies tend to have a “dividend paying culture,” one that endeavors to pay investors (via the dividend) a portion of -term sustainable earnings power. At these companies div- idends grow in line with earnings, which results in not only a reliable, but also a growing income stream. ● : The payout ratio is calculated by dividing the company’s dividend per share by the . The payout ratio is important because it tells investors how much of the company’s earnings are being committed to the dividend. Determining the payout ratio helps investors determine if the dividend is safe. ● Dividend : The of a stock is calculated by dividing the annual dividend per share by the price of the stock per share. For example, if a stock pays an annual dividend per share of $1 and the price of the stock is $40 then the dividend yield is 2.5 percent. 1/40 = 2.5 percent. Obviously as the price of the stock moves up or down the dividend yield will change GLOSSARY 189 accordingly. Similarly if the dividend is increased or decreased the dividend yield will adjust. ● Dollar-cost averaging: Our most relevant real-life experience in dollar-cost averaging is our 401(k) account. Each month we invest a pre-specified amount into our 401(k) plan investments. By scheduling our investment into the market, no matter cur- rent levels, we dollar-cost average our investment. ● Dow Jones Industrial Average (DJIA or DOW): Charles H. Dow developed the Dow Jones Industrial Average index in the late 1800s. He unveiled his twelve-stock industrial index in the spring of 1896; in 1916 the average was expanded to twenty stocks and in 1928 to thirty stocks. The average has remained at thirty stocks, though the underlying companies have changed over the years to remain representative of the overall US economy. The index is price-weighted, which means that the stocks with the highest price influence the performance of the index more. (Recall that price does not necessarily mean a stock is expensive. For example: Apple with a share price of approximately $550 is trading at around 11x earnings and is actually inexpensive compared to Facebook at approximately $55, which is trading at 52x earnings. Despite its higher per share price, Apple is less “expensive” than Facebook but would have a much larger influence on the performance of the Dow Jones.) ● Earnings estimates: Estimating future earnings is one of the most important jobs of a sell-side analyst . These analysts employ guidance from company management, develop forecast- ing models, and conduct primary research to determine sales and earnings growth trends. These estimates form the most important input for valuing the company’s stock price using the forward price-to-earnings ratio (p/e). The p/e depends largely on analyst earnings estimates, which in turn aids the analyst in establishing a price target for the stock. ● Economic sector: Economic sectors are comprised of indus- tries. There are ten economic sectors (some breakdowns include only eight depending on the criteria employed): consumer dis- cretionary, consumer staples, energy, financials, health care, 190 GLOSSARY

industrials, information technology, materials, telecommu- nications services, and utilities. Arguably some companies’ businesses straddle sectors like Johnson & Johnson, with a broad reach into pharmaceuticals as well as consumer staples. A diversified portfolio will include exposure across all or most sectors because companies within the same industries tend to be relatively positively correlated (and will often rise and fall together); therefore, investors should own stocks in all or most sectors to smooth out portfolio performance. ● Exchange-traded funds (ETFs): An ETF is actually a secu- rity that tracks an index (sector, geography, commodity, etc.) and trades like a stock. The primary differentiation between an ETF and a mutual fund is that an ETF can be traded through- out the day since it is priced like a stock, in real time, and a mutual fund is only priced at the end of the day when the or NAV is calculated. ETFs, therefore, are more liq- uid and flexible investments when compared to mutual funds. ● Fallen Angel growth stocks: A Fallen Angel is a former growth stock that has fallen from favor. The question facing investors is whether the fall is a temporary stumble or a permanent transition for the company from growth to value. Fallen Angels are sometimes also referred to as growth stocks trading at a reasonable price and can provide investors with exceptional returns if and when the company management returns the stock to growth stock status. ● Fixed income security (bond): A fixed income security or bond is one that guarantees a fixed payment of income over a pre-specified period of time. At the end of the duration of the term the original investment is returned. If an buys a $1,000 ten-year at 3 percent, she will earn $30 per year on her $1,000 investment for ten years and then receive repayment of her $1,000 at the end of the term. Because the return is guaranteed it is lower than that potentially earned investing in riskier securities like stocks. ● Futures: Futures contracts can be obtained on just about any liquid investment available and are an agreement to buy or sell a set amount of a financial instrument (a stock or stock index, for GLOSSARY 191 example) or a commodity. Buying and selling futures contracts involves a higher level of risk and I am not advocating purchase of future contracts, well, ever. But I do watch the index futures traded each morning to inform me how the market is trading prior to the open each day. ● Growth assets: The term growth assets typically refers to stocks. The value of your capital investment may fluctuate but over time is expected to grow at a pace in excess of inflation. ● Growth stocks: Growth stocks are those whose earnings are expected to grow faster than the average growth in the stocks that comprise the overall market averages. Growth stocks tend not to pay a dividend since investors expect management to invest excess prof its in future growth initiatives such as research and development or acquisitions, for example. Historically, some investors have referred to growth stocks as glamor stocks because of the cachet associated with owning some high-pro- file growth stocks. ● Growth at a reasonable price (GARP): GARP investing seeks to purchase stocks with above-market earnings growth opportunities that are trading at or below-market valuations. Our Fallen Angel growth stocks fall into the GARP category, though not all GARP stocks are Fallen Angels. One of the objectives of GARP investing is said to be the avoidance of either extreme of growth or but from a practi- cal standpoint it simply makes good sense to buy the fastest growing companies you can at the cheapest valuation. ● Hedge fund: A hedge fund is usually offered via a private partnership to investors who meet certain net-worth require- ments. The funds tend to require large initial investments and are relatively illiquid—usually requiring advanced notice if a withdrawal is required. Unlike mutual funds, hedge funds for the most part are unregulated since they serve sophisticated investors who presumably do not require the protection of regulators. The funds employ riskier and varied strategies than the typical mutual fund, often using leverage and taking short as well as long positions in stocks. Hedge funds also charge much higher fees. 192 GLOSSARY

● Heuristic: Heuristic is from the Greek: to discover. We use the term today to mean problem solving via trial-and-error methods. ● Index fund: An index fund is a mutual fund that tracks a spe- cific index like the S&P 500, seeking only to perform in line with the index. The advantage of index funds is that they carry much lower fees than those of actively managed funds and over time tend to perform as well as or better than many mutual funds. ETFs also track indices (including the S&P 500) but the term typically refers to mutual funds. ● Initial (IPO): An IPO is the first sale of stock by a company to the public. IPOs are underwritten by investment banking firms (like Goldman, JPMorgan Chase, and others) to determine the price of the offering, timing, and number of shares to be offered. Often, these shares are offered to big clients of the investment banking firm and are difficult for individual investors to acquire. They are also, for the most part, risky investments. ● : We have identified three investment strategies for stock investing. There are certainly more but our focus is on growth, value, and growth at a reasonable price (a variation on both the value and growth strategies). These strat- egies can be employed in any size category of company. Size is measured by (see below). ● Long : A long position, for our purposes, is simply when an investor owns shares of a company’s stock. If I own shares in Tiffany & Co., I am long Tiffany. ● Market capitalization or market cap: The market capitaliza- tion of a company is simply the value of all the shares outstand- ing (held by investors) multiplied by the current stock price. This measure tells investors how big the company is in a way that is more measurable against other companies than sales or earnings. Investors segment stocks into capitalization groups such as micro, small, mid, and large capitalization for purposes of allocating investing dollars. ● : Momentum investors watch the rate of accelera- tion of a stock’s price movement (either up or down). The belief GLOSSARY 193 is that the stock price is more likely to continue moving in the same direction rather than change directions (though we might argue this point) and so they make buy and sell deci- sions based on that expectation. Momentum investors almost always invest in growth stocks that tend to demonstrate the most dramatic price movements. ● Multiple expansion: Multiple expansion refers to the increase in the p/e ratio or, as it is sometimes called, p/e multiple. As investor confidence increases or earnings accelerate, inves- tors are often willing to pay more for future earnings growth, thereby increasing the p/e. The p/e, remember, has two vari- ables: price and earnings. The p/e will increase if either one or both variables increase. Consequently, multiple expansion should be analyzed as to whether the price alone is expanding (which might argue that the stock/market is overvalued) or if earnings are expanding as well. Multiple expansion is nei- ther good or bad without understanding the underlying earn- ings fundamentals for an individual stock or the market as a whole. ● Mutual fund: A mutual fund pools the money of many inves- tors for the purpose of investing that money for capital gains. Mutual funds provide small, individual investors with the opportunity to obtain the services of professional money man- agers, often available only to those investors with large sums of money. Because the assets are pooled, the fund calculates a net asset value at the close of the market each day. This sets a price for investors buying or selling the fund and is the means by which performance is calculated for the fund and, there- fore, for the participants in the fund. Mutual funds are regu- lated and are required to produce a prospectus for investors, which serves a similar purpose as the 10-k and proxy statement offered to investors by individual companies. ● NASDAQ/The National Association of Securities Dealers: The NASDAQ is an electronic market of 5,000 stocks. Unlike the New York (NYSE) that uses designated market makers or specialists assigned to each stock and who are charged with an “orderly market” in the 194 GLOSSARY

trading of a specific security, the NASDAQ is an automated and centralized quotation and trading system. ● New York Stock Exchange (NYSE): Often referred to as the Big Board, the NYSE is the largest stock exchange in the world as measured by market capitalization. The value of the compa- nies trading on the Big Board was over $16 trillion in 2013. Average daily trading volume was approximately $169 billion in 2013. ● Opportunity cost: The opportunity cost is represented by the difference between the appreciation of an investment made compared to the return you could earn in an investment not made. Purchasing the Donna Karan cashmere sweater discussed in chapter 1 cost me $1,099, but my opportunity cost was $11,430 in lost appreciation had I, instead, invested the $1,099 in IBM (the alternative transaction discussed in chapter 1). ● Portfolio turnover: Portfolio turnover measures how quickly the assets in a particular account are “turned over” or bought and sold by the fund or account manager. The measurement period is one year. Turnover is important to investors because trading costs are subtracted from the total return they receive and because long-term and short-term stock gains come with a corresponding tax bill. Consequently, if a manager generates a 10 percent total return with 25 percent turnover and another manager generates a 10 percent total return with 100 percent turnover, the after-tax return to the client/investor is likely to be much higher with the first manager who achieved the same total return with fewer taxable transactions. ● Price-to-earnings ratio (p/e): The p/e is a ratio that measures the price investors are willing to pay per share of stock for the corresponding earnings per share produced by the company. This ratio is also calculated for a collection of stocks like those represented in the stock indices like the S&P 500. Often inves- tors compare the p/e of a particular stock against the p/e of the S&P 500 to determine a stock’s relative attractiveness. Because the p/e is a ratio, changes in the underlying variables—price and earnings—will obviously cause the p/e to rise or fall. The GLOSSARY 195 p/e is one of the most widely quoted stock statistics and is cal- culated on a trailing and twelve-month estimated basis. ● Price-to-sales ratio (p/s): The p/s ratio or PSR measures the price investors are paying for a company’s trailing sales. This is an important measure when a company’s earnings may be depressed because of special items or reinvestment in growth. Most common as a valuation measure for growth stocks (those companies who are reinvesting earnings in future growth) the p/s ratio can also be helpful in valuing Fallen Angel growth stocks whose earnings have suffered a short-term decline. ● Protection assets: Protection assets are usually bonds or cash. These vehicles protect the capital invested. In the case of cash, the capital is liquid and does not fluctuate in value. In the case of bonds, the value of the bond may fluctuate somewhat dur- ing the term of investment but the entire capital investment is returned to the investor at the end of the prespecified term. While protection assets may preserve capital they do not ensure that the investor is compensated for the erosion of inflation on the value of her underlying capital investment. ● Proxy statement: All publicly traded companies are required by the SEC to provide investors with a proxy statement, with information on shareholder initiatives, election of the board of directors, and proposals for senior executive compensation (among other things) that will be voted on at the company’s annual meeting. Shareholders do not need to attend the annual meeting to cast a vote; they can vote their proxy by mail. The proxy statement is the “voter’s guide” to the issues and direc- tors under consideration at the company’s annual meeting. ● Reversion to the mean: Reversion to the mean or regression to the mean as it is also known argues: the greater the devia- tion from the mean, the greater the probability that the next measured event will deviate from the mean far less. The mean stock market return, for example, is approximately 9 percent for the last 100 years so we could extrapolate: extreme stock outperformance relative to the mean (9 percent in our exam- ple) is more likely to be followed by a less extreme performance (say 1 percent). 196 GLOSSARY

● Recency effect: Recency effect is the tendency of individuals to remember a more recent experience better than a previous experience. For example, when given a long list of words, most people can most easily remember the words at the end of the list. In behavioral economics this is also referred to as “avail- ability.” For investors, recency effect can serve to bias investing decisions based on recent market performance. Whether up or down we tend to extrapolate the recent event into the future. If the market is going up investor behavior is more likely to act on expectations of a rising market. The converse is also true. Both tendencies are dangerous. ● Standard & Poors 500 Index (S&P 500): The S&P 500 is an index of 500 US companies selected by a team of analysts and economists at Standard and Poors. The companies are selected based on size and industry grouping, among other factors. The stocks in the S&P 500 represent approximately 75 percent of the value of all US stocks traded. In other words, the S&P 500 index serves as a benchmark of the performance of the major US stocks. Over $5 trillion dollars is benchmarked or invested in index funds that track the S&P 500. ● Sell-side analyst: Sell-side analysts can work for large invest- ment banks and brokerages or small, independent research firms. What differentiates them from buy-side analysts is their focus on specific industries and responsibility for generating earnings forecasting models and buy and sell recommenda- tions. Sell-side analysts produce reports and earnings models purchased by buy-side firms (hence the names buy and sell- side) that use the data to inform their portfolio decisions for the assets they manage. ● program: Share repurchase programs are initiated by the company to buy back shares of their stock from the marketplace. Doing so reduces the number of shares out- standing and consequently increases the earnings per share. Additionally, share buybacks are often perceived by the mar- ket as an indication that the management believes the stock is undervalued. However, it can also mean (as it has in recent years) that management has plenty of free cash f low or access to GLOSSARY 197 cash at cheap rates and has not identified a better place (such as acquisitions or earnings growth initiatives) to deploy the cash. ● Short position: When an investor takes a short position in a stock he is expecting the stock to decline. The investor bor- rows shares of the stock from a third party, usually a broker, and sells them in the open market. He is expecting to be able to buy the shares back cheaper at a later date and return them to the original owner, thus securing a large profit. Of course, the investor must pay a fee to borrow the shares and is making, in essence, a bet that the shares will decline by taking a short position. This is not a strategy recommended for readers of The Women’s Guide to Successful Investing who are interested in investing for the long-term. ● Smart money: This term is used to represent the experienced, “in-the know” Wall Street crowd. Their investment decisions are assumed to be better and more insightful than those of the individual investor. Perhaps it is true, but no empirical research exists (that I have found) to prove it. ● Stock (equity): A share of stock represents an ownership or equity stake in a company that has issued stock in an (IPO). If you are a stockholder (also referred to as shareholder), you own a proportionate share in the com- pany’s assets, which include the company’s earnings. You may be paid a share of the company’s earnings in the form of divi- dends, which contribute to a portion of your total return. Share price increases form the remainder of your return. ● Stock tickers are established so stocks can be traded by your broker or discount broker on the floor of the New York Stock Exchange (NYSE) or the NASDAQ in a company you desire to own. The unique symbol is selected by the company to facilitate trading of their securities. Think of it is a Twitter handle—an identifier unique to one individual or, in this case, one company. Tickers can be found on any financial or invest- ing website by typing in the company name. ● Tax lots: Tax lot accounting is provided by your broker or investment manager. These lots represent each trade completed for each security in your portfolio. The benefit is that you 198 GLOSSARY

know exactly what you’ve paid for each share over time and the accounting provides the necessary information when it is time to tax loss harvest. ● Tax loss harvesting: Investors who are conscious of the tax implications of selling stocks engage in tax loss harvesting. By reviewing tax lots the investor can take short-term or long-term gains or losses to offset other transactions in their portfolio, thus minimizing taxable gains. Tax loss harvesting is typically executed near the end of the year and requires the investor to wait thirty days before re-purchasing any shares that were sold specifically for tax purposes (but that the investor still may want to own for the long-term). ● Value stocks: Value stocks are typically characterized by low p/e’s and/or high dividend yields. These stocks are considered to be undervalued based on the price paid for future earn- ings and future earnings growth. Value stocks tend to exhibit lower volatility than growth stocks and, according to multiple research studies conducted over the years, tend to outperform growth stocks over the long-term. ● Volatility measures the variance of the return of a particular stock compared to the stock index. The greater the variance or volatility, the riskier the stock is generally considered to be.

Notes

Preface 1 . Lusardi, Annamaria and Mitchell, Olivia S. (2006) “Financial Literacy and Retirement Preparedness: Evidence and Implications for Financial Education.” University of Michigan Retirement Research Center, working paper. 2 . Bajtelsmit, Vickie L. and Bernasek, Alexandra. (1996) “Why Do Women Invest Differently Than Men?” Financial Counseling and Planning, 7, 1–10.

 Wealth Accumulation Is an Attitude: Investing for Your Future Requires a Few Goals and Much Less Capital Than You Think 1 . Benartzi, Shlomo Benartzi. “Do You Know Why You Aren’t Saving Enough for Your Future?” Allianz Global Investors, http://www .allianzusa.com/investments/investing-insights/behavioral -finance/.html . 2 . Damisch, Peter, Monish Kumar, Anna Zakrzewski, and Natalia Zhiglinskaya (July 2010) “Leveling the Playing Field, Upgrading the Wealth Management Experience for Women.” The Boston Consulting Group, www.bcg.perspectives.com.

 Why Women Make Excellent Investors: Women Inherently Display the Traits Required for Successful Investing 1 . Prudential. (2012–2013) “Financial Experience & Behaviors Among Women.” 2 . Barber, Brad M. and Odean, Terrance. (February 2001) “Boys Will Be Boys: Gender, Overconfidence, and Investment.” The Quarterly Journal of Economics, 261–292. 3 . Barber, Brad M. and Odean, Terrance. (April 2000) “Trading Is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors.” The Journal of Finance, 55(2), 773–806. 4 . National Council for Research on Women. (June 2009) “Women in Fund Management.” New York, pp. 1–40. 5 . Abrams, Dan. (2011) Man Down: Proof Beyond a Reasonable Doubt That Women Are Better Cops, Drivers, Gamblers, Spies, World Leaders, Beer Tasters, Hedge Fund Managers and Just About Everything Else. New York: Abrams Image. 200 NOTES

6 . Tversky, Amos and Kahneman, Daniel. (September 1974) “Judgment under Uncertainty: Heuristics and Biases.” Science, 185, 1124–1131. 7 . Epstein, Gene. (May 13, 2013) “We Were Right.” Barron’s.

 In Order to Get There We Need to Know Where We Are Going: Establishing Financial Goals Informs Successful Savings and Investment Plans 1 . Prudential. (2012–2013) “Financial Experience & Behaviors Among Women.” www.prudential.com/women 2 . Ruffenach, Glenn. (October 28, 2013) “The So-You-Think-You’re-Ready -for-Retirement Quiz.” . 3 . Benartzi, Shlomo. (2012) “Part 2—Overcoming Investor Paralysis: Invest More Tomorrow.” Allianz Global Investors, http://befi.allianzgi.com/en /Publications/Documents/Part%202-%20Investor%20Paralysis.pdf 4 . Kahneman, Daniel and Tversky, Amos. (March 1979) “Prospect Theory: An Analysis of Decision Under Risk.” Econometrica, 47(2), 263–291. 5 . Ibbotson, Roger G. and Kaplan, Paul D. (January/February 2000) “Does Asset Allocation Policy Explain 40, 90, or 100 Percent of Performance?” Financial Analysts Journal, 56(1), 26–33. 6 . TIAA-CREF. (July 1998) “Investing for a Distant Goal: Optimal Asset Allocation and Attitudes toward Risk.” Research Dialogues Issue Number 56, pp. 1–11.

 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 1 . Horner, M. S. (1968) “Sex Differences in Achievement Motivation and Performance in Competitive and Noncompetitive Situations.” Unpublished doctoral dissertation, University of Michigan. 2 . Fama, Eugene F. and French, Kenneth R. (December 1998) “Value ver- sus Growth: The International Evidence.” The Journal of Finance, 53(6), 1975–1999. 3 . Lakonishok, Josef, Shleifer, Andrei and Vishny, Robert W. (1994) “Contrarian investment, extrapolation, and risk.” Journal of Finance, 49, 1541–1578. 4 . Haugen, Robert. (1995) The New Finance: The Case against Efficient Markets (Englewood Cliffs, NJ: Prentice Hall). 5 . Barad, Michael W. (November 2003) “Ibbotson Style Indices: A Comprehensive Set of Growth and Value Data.” A Working White Paper (6th draft). 6 . Kapadia, Reshma. (November 2, 2013) “Good Things Come to . . . ” Barron’s. 7 . Bary, Andrew. (October 19, 2013) “AT&T’s High-Yield Attraction.” Barron’s. 8 . Lazo, Shirley A. (October 26, 2013) “Honeywell Revs Up Dividend.” Barron’s. 9 . Arnott, Robert D. (March–April 2003) “Dividends and the Three Dwarfs.” Financial Analysts Journal, 59(2), 4–6. 10 . Schwert, William G. (1990) “Indexes of U.S. Stock Prices from 1802 to 1987.” Journal of Business, 63(3), 399–442. NOTES 201

11 . Heartland Funds. (2012) “Dividends: A Review of Historical Returns.” www.heartlandfunds.com

 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 1 . De Long, J. Bradford, et al. (1990) “Noise Trader Risk in Financial Markets.” University of Chicago Press. 2 . Sharpe, William F. (March–April 2013) “The Arithmetic of Investment Expenses.” Financial Analysts Journal, 69(2), 34–41. 3 . Ellis, Charles D., CFA. (May–June 2012) “Investment Management Fees Are (Much) Higher Than You Think.” Financial Analysts Journal, 68(3), 4–6. 4 . Kinnel, Russel. (August 2010) “How Expense Ratios and Star Ratings Predict Success.” Morningstar FundInvestor, 18(12), 1–5.

 Construct Your Portfolio Like a Dinner Party Invitation List: Holdings Should Be Balanced and Behave Well If Things Get Out of Hand 1 . Brinson, Gary P., et al. (January–February 1995) “Determinants of Portfolio Performance.” Financial Analysts Journal, 133–138. 2 . Hotz, Robert Lee. (December 10, 2013) “Brain Wiring in Men Versus Women.” The Wall Street Journal.

 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 1 . Williams, Christopher C. (December 7, 2013) “Coach’s New Bag of Tricks.” Barron’s.

 Stocks to Own for a Lifetime: Identifying Industry Leaders Provides the Conviction Required to Buy Stocks We Are Willing to Hold for Decades 1 . Dillard, Annie. (1989) The Writing Life (New York: HarperCollins). 2 . Bary, Andrew. (December 28, 2013) “A Lion in Winter.” Barron’s. 3 . Hough, Jack. (June 2013) “Six Stocks That Could Double in Five Years,” Barron’s. 4 . Evans, Bob. (October 9, 2012) “Larry Ellison Doesn’t Get the Cloud: The Dumbest Idea of 2013.” Forbes. 5 . Rehak, Judith. (March 23, 2002) “Tylenol Made a Hero of Johnson & Johnson: The Recall that Started Them All.” . 6 . Goodman, Beverly. (January 6, 2014) “Back To School: Fama, French Discuss Their Work.” Barron’s.

 ETFs to Own for a Lifetime: How women investors can get their groove back 1 . McKinsey and Company. (2011) “The Second Act Begins for ETFs.” White paper. 202 NOTES

2 . Soe, Aye M., CFA. (Mid-year 2013) “S&P Indices Versus Active Funds (SPIVA) Scorecard.” McGraw Hill Financial, pp. 1–27, http:// www.spindices.com/documents/spiva/spiva-us-mid-year-2013.pdf

 Five Critical Lessons and Warnings: Don’t Touch a Hot Stove, Don’t Talk to Strangers, and Other Lessons for the Ages 1 . Amenta, Michael, CFA. (December 2013) FACTSET Dividend Quarterly, pp. 1–14. 2 . Arnott, Robert D., and Asness, Clifford S. (January–February2003) “Surprise! Higher Dividends = Higher Earnings Growth.” Financial Analysts Journal, 70–87.

 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 1 . Silverstein, Michael J., Kato, Kosuke, and Tischhauser, Pia. (October 2009) “Women Want More (in Financial Services).” The Boston Consulting Group, www.bcg.perspectives.com 2 . Longo, Tracey. (August 2001) “The Emerging Profile of Women Investors.” Financial Advisor.

Index

3M Company (MMM), 146, 156 Astaire, Fred, xiii 10-k, 127, 186, 193 AT&T, 50, 53 12 Fundamental Factors model, 101–2 AXP. See 401(k), 31–3, 35, 54, 69–70, 91, 164–5, 188–9 Bajtelsmit, Vickie L., xii 529 College Savings Plan, 27–9, 88, 91 Bandaids, 141 Bank of America Corp., 113 A Tree Grows in Brooklyn (Nolan), 2 banking, 81, 84, 88, 145–6, 170, 192 Abbott Laboratories (ABT), 145, 156 Barber, Brad M., 16–17 Abrams, Dan, 18 Barclays Global Investors, 68 ABT. See Abbott Laboratories Barron’s, 22, 48–50, 65, 81, 96, 111, 126, active management, defined, 186 133, 138, 146 Allianz Global Investors Center for bear market, 7, 22, 186 Behavioral Finance, 3 Beebower, Gilbert L., 77 Amazon.com Inc. (AMZN), 44–7, 86, behavioral economics, 3, 18–21, 24, 30, 113–14, 139, 154 34, 57, 186, 196 American Express (AXP), 145 defined, 186 Ameriprise Financial, 29 and women as great investors, 19–21 Amgen, Inc. (biotech) (AMGN), 62, 145 Benartzi, Shlomo, 3, 30 AMGN. See Amgen, Inc. Berkshire Hathaway, 97, 114 AMZN. See Amazon.com Inc. Bernasek, Alexandra, xii annual report, 64, 74, 186 Bernstein, Peter L., 81 Annual total return for Dow Jones (1987– Bespoke Investment Group, 85 2003), 165 bias, 18–20, 23–4 anti-saving, spending as, 5–6 biotech, 62, 81, 154, 162 Apple Computer (AAPL), 38, 43, 62, 99, Black Monday (1987), 163–4 101–15, 121, 125–8, 131–2, 139, 146, BlackBerry, 108 154–5, 167, 189 BlackRock, 68 and competition, 108–9 Bloomberg.com, 45, 59, 62–4, 95–7, 99, and ETF core holding options, 112–15 141, 183 and investment strategy, 102–3 blue-chip stocks, 82, 186 and lowered expectations, 109–10 The Bob Newhart Show, 175 and news sources, 110–12 Bogle, Jack, 32–3, 72 price of, 104–7 Boston Consulting Group, 4, 175–6 and valuation, 107–8 “Boys Will Be Boys: Gender, “The Arithmetic of Investment Expenses” Overconfidence, and Common Stock (Sharpe) (2013), 70 Investment” (research paper) Arnott, Rob, 51, 161 (2001), 16 Asness, Clifford S., 161 brain wiring, and gender, 79–80 asset allocation, 31–6, 78–80, 86, brand dominance, 101, 103, 133–6, 144, 186 88–91, 186 Brinson, Gary P., 77–9, 85 defined, 186 Buffett, Warren, 38–9, 58, 67–8, 94, 97, and financial goals, 32–3 114, 133, 164 and portfolios, 78–80, 88–90 buggy-whip factor, 57–8, 101, 103, 106 204 INDEX bull market, 34, 157, 164, 187 DIS. See Walt Disney Company buy-side analyst, 187, 196 discipline. See investment discipline Disney (Walt Disney Company), 62, 80, 86, capital appreciation, 8–9, 187 95, 112, 132 CAT. See Caterpillar Tractor diversification, 12–13, 69, 73–4, 81–3, 88, Caterpillar Tractor (CAT), 146 112–14, 127–9, 132, 134, 144–6, 149, Chambers, John, 148–9 152–4, 157–8, 171–2, 190 Charles Schwab. See Schwab and ETFs, 73–4, 158 chasing stocks, 163–6 and Intelligent Investment Rule #6, “cheap for good reason,” 101–2, 104, 149 88, 171 Chevron Corporation (CVX), 146, 156 and portfolios, 82–3 Chipotle, 43 “dividend paying culture,” 49–51, 61, Cisco Systems (CSCO), 53, 80, 113, 147–50 68, 188 Citigroup (C), 80–1, 147, 149 dividend payout ratio, 188 the cloud, 137–9, 149 dividends, 7–8, 27, 48–56, 59–61, 63–5, CNBC, 98–9 67–8, 73–5, 88, 96, 105, 110–12, Coach, Inc. (COH), 62, 86, 99, 117–29 126–7, 131–9, 144–6, 148–50, 156, and dividends, 126–7 159–61, 165, 170, 173, 186, 188–9 and ETF options, 127–9 and goals, 49–51 history of, 118–20 and payout, 49–51, 61, 68, 160, 188 and news sources, 125–6 and payout ratio, 188 and qualitative factors, 120 and return, 187 and valuation metrics, 120–5 and yield, 188–9 Coca Cola Company (KO), 62, 111, 113, “Dividends: A Review of Historical 119, 122, 126, 132–6, 146, 149, 156 Returns” (Heartland Funds) (white college savings, 2, 4, 6–7, 25–9, 91, 102–3, paper), 51 114, 124 “Dividends and The Three Dwarfs” See 529 College Savings Plan (Arnott) (editorial) (2003), 51 Comcast Corp., 62, 113–14 DJIA. See Dow Jones Industrial Average compensation structure, advisor’s, 180–1 DNA. See Genentech Consumer Discretionary sector, 85–6 “Does Asset Allocation Policy Explain 40, Cook, Tim, 103–4, 107 90, or 100 Percent of Performance?” core holding, 101–15 (Ibbotson and Kaplan), 32 correlation, 82–3, 117, 187 “The Dogs of the Dow,” 53–4, 75, 136 correlation coefficient, 187 See Dow Jones Industrial Average COST. See Costco DOL. See US Department of Labor Costco (COST), 43, 136 dollar-cost averaging (DCA), 35–6, 46, critical lessons, 159–68 53–4, 189 and chasing stocks, 163–6 defined, 189 and discipline, 166–7 Donna Karan cashmere sweater, 194 and the dividend, 159–61 Dooney & Burke, 120 and getting burned, 167–8 DOW. See Dow Jones Industrial Average and talking to strangers, 161–3 Dow, Charles H., 189 CVX. See Chevron Corporation Dow Jones Industrial Average (DJIA or “cyclical trend,” 117 DOW), 53–4, 75, 113, 136, 163–5, 186, 189 DCA. See dollar-cost averaging and “The Dogs of the Dow,” 53–4, De Long, J. Bradford, 58 75, 136 defined-benefit plan, 31, 187–8 See MarketWatch defined-contribution plans, 31, 188 Dow Jones US Large-Cap Growth Total “Determinants of Portfolio Performance” , 113 (Brinson, Hood, and Beebower), 77 Dunn, Pattie, 68 diligence, 49, 147–50, 170 DuPont, 53 Dillard, Annie, 131 dinner parties, and investments, 27, 77–8, early adapter, 37–8 82–3 earnings estimates, 189 INDEX 205

Eastman Kodak, 10, 55, 106 Fidelity Research, 85 economic sectors, 42–4, 52, 55–6, 62, Financial Advisor Magazine, 176 68–9, 81, 84–5, 88–9, 104–7, 112–14, Financial Analysts Journal, 51, 70, 77 132, 137–46, 149, 154, 162, 170–2, financial data, 45, 50–1, 60, 63–5, 75, 189–92 93–9, 111, 171, 183 and banking, 81, 84, 88, 145–6, 170, 192 and Internet research, 95–8 and biotech, 62, 81, 154, 162 and the news media, 98–9 and entertainment, 81 as plentiful, 93–4 and health care industry, 68–9, 84, and Stock Rover, 94–5 112–13, 140–5, 189–90 See financial websites and industrials, 68–9, 81, 84, 88, 146, financial goals, establishing, 25–36 189–90 and asset allocation, 32–3 and intelligent investing rule #6, 88–9 and dollar-cost average, 35–6 and pharmaceuticals, 88, 140–5, 190 and life-cycle funds, 33–4 and technology. See technology and mental accounting, 26–9 education investment account and retirement, 29–31 See 529 College Savings Plan financial IQ, xi–xiii, 1–13, 175 eleven Intelligent Investing Rules, 2, Financial Times, 17 169–73 financial websites, 45, 50–1, 59, 62–5, 75, See Intelligent Investing Rules 93–9, 111, 141, 171, 183 Ellis, Charles, 70, 156 See Bloomberg.com; Seeking Alpha Ellison, Larry, 137–9 five stock portfolio returns (April 11, 2003– EMC Corporation (EMC), 139 April 12, 2013), 80 Employee Benefit Research Institute, 32 fixed income security (bond), 190 ETFs, exchange-traded funds Forbes, 139 Evans, Bob, 139 Fox Business News, 99 exchange-traded funds (ETFs), 68–75, “franchise value,” 101–3 77–8, 81–2, 85–6, 88–90, 92, 94, 99, free cash flow, 137–9 112–15, 127–9, 132, 141, 144, 146, French, Kenneth R., 40–1, 51–2, 54, 146, 151–8, 172, 187, 190, 192 153, 157 as antidote, 68–9 futures, 98–9, 190–1 and diversification, 73–4 and fees, 69–71, 155–6 gambling, 7–8, 16–17, 162–3, 168, 185 lifetime, 151–8 GARP. See growth stocks at a reasonable and pricing, 71–2 price as tax efficient, 72–3 Gates, Bill, 94 warning about, 74–5 GE. See General Electric Exxon Mobil, 104, 113 gender, and brain wiring, 79–80 Genentech (DNA), 80 Facebook, 38, 113, 189 General Electric (GE), 53, 80, 147, 149 FACTSET Dividend Quarterly, 160 GILD. See Gilead Sciences Inc. Fallen Angel growth stocks, 10, 59–60, Gilead Sciences Inc. (GILD), 113, 145 62–7, 74, 103, 105, 108–9, 112, 114, goals, financial, 36, 37–56, 170 119, 124, 134, 171, 190–1, 195 and busy women, 46 Fama, Eugene F., 40–1, 51, 54, 146, and dividends, 49–51 153, 157 and the Dow, 53–4 Fama-French capital-asset pricing model, and growth stock investing, 38–48 146, 153 and Intelligent Investment Rule #3, “fast crowds,” avoiding, 24, 169 36, 170 favorableness, 19–20, 23 and investment style, 39–40 FDIC, 16 and personality biases, 37–9 “fear of success,” 40 and price-to-sales ratio, 44–5 Federal Reserve, 87 and total returns, 51–3 fees, 69–71, 155–6, 172–3 and value stock investing, 39–41, 47–9 Fidelity Investments, 29 Goldman, 192 Fidelity Magellan Fund, 38 golf, 2, 151–2, 156, 158 206 INDEX

GOOGL. See Rule #2 (avoiding fast crowds), 24, 169 Google (GOOGL), 104–5, 108–11, 113, Rule #3 (life goals), 36, 170 126, 139, 154, 168 Rule #4 (diligence), 49, 170 Google Maps, 104–5, 168 Rule #5 (research), 66–7, 170–1 Gorsky, Alex, 142–3 Rule #6 (diversification), 88, 171 great companies, 9–12, 36, 38–9, 47, 55–9, Rule #7 (financial websites), 99, 171 63, 67–8, 102–3, 106–7, 109, 112, Rule #8 (valuation), 112, 171–2 131–50, 168, 172, 185 Rule #9 (iteration), 129, 172 See lifetime stocks Rule #10 (great companies), 145, 172 growth assets, 34, 191 Rule #11 (fees), 156, 172–3 growth stock investing, 10, 38–48, 55–6, last rule (price and yield), 173 58–9, 62–9, 74–5, 82, 87–8, 90, 97, “Investing for a Distant Goal: Optimal Asset 101–15, 119, 134, 148, 153, 171, Allocation and Attitudes toward Risk” 190–5, 198 (TIAA-CREF) (study) (1998), 32 growth stocks at a reasonable price (GARP), Investment Company Institute, 32 41–2, 58–9, 66–8, 74–5, 82, 90, investment discipline, 1–13, 16, 18–19, 190–2 22–4, 28–9, 37–75, 101, 129, 147, GuruFocus, 97, 106, 183 166–8, 169–70, 176–7 and advisors, 176–7 Haugen, 41 and attitude, 1–13 health care industry, 68–9, 84, 112–13, and biases, 23 140–5, 189–90 and goals, 37–56 See Johnson & Johnson and Intelligent Investment Rule #1, 9–12, Heartland Funds, 51–2, 160 40, 147, 169 hedge fund, 18, 140, 191 and market forces, 18–19 heuristic, 18–19, 192 and objectives, 24 Hewlett-Packard, 53, 108 and saving, 9–10, 28–9 Home Depot Inc., 62 and staying the course, 10–12, 166–7 Honeywell International, 50 and stock market, 57–75 Hood, L. Randolph, 77 investment IQ, xi–xiii, 1–13, 175 Horner, Matina, 40 “Investment Management Fees Are (Much) Hough, Jack, 138 Higher Than You Think” (Ellis) (2012) (paper), 70, 156 Ibbotson, Roger G., 32–3 investment strategy, 1–13, 18–19, 23–4, Ibbotson Associates, 41 26–7, 32–6, 37–56, 65, 77–8, 85, IBM, 7–8, 52, 132, 139, 148–9, 194 89–90, 92, 97–9, 102–4, 107, 110, Icahn, Carl, 106 127, 134, 137–9, 164, 166, 169, 172, IJR. See iShares Core S&P Small Cap (ETF) 177, 192 index fund, 192 and acquisitions, 110, 137 individual retirement account (IRA), 27, defined, 192 91, 162 and external factors, 18–19 industrials, 68–9, 81, 84, 88, 146, 189–90 and goals, 37–56 Industries in the Consumer Discretionary and intelligent investing rules, 169, 172 sector, 85 and mental accounting, 26 information technology, 84, 104, 112–14, in real time, 102–4 137, 154, 189–90 and saving, 1–13 INTC. See Intel Corporation and stock allocations, 32 initial public offering (IPO), 43, 129, See diversification 192, 197 investment terms (glossary), 185–98 Intel Corporation (INTC), 53, 113, investment websites (list), 183 132, 139 See financial websites Intelligent Investing rules, 2, 9–11, 24, 36, iOS software release, 104 40, 49, 66–7, 88, 99, 112, 129, 145, iPad, 37, 103, 111, 149 147, 156, 159, 169–73 iPhone, 37–8, 103–7, 111, 149 Rule #1 (discipline), 9–12, 40, 147, 169 iPhone 5, 104–7, 111 INDEX 207

IPO. See initial public offering See blue-chip stocks; lifetime ETFs iPod, 106 Listerine, 141 IRA. See individual retirement account long positions, 191–2 iShares, 68, 74, 112–13, 127–8, 157–8 Lopez, , 156 iShares Core S&P Small Cap ETF (IJR), Lusardi, Annamaria, xii 157–8 Lynch, Peter, 38, 56, 58, 67, 105–6 i-Shares Global Consumer Discretionary Stock ETF (RXI), 127–8 MA. See MasterCard iShares S&P 500 Growth ETF (IVW), Macy’s, 63, 86 113–14 Madoff, Bernie, 181 iteration, 129, 172 Malkiel, Burton, 32–3 IVW. See iShares S&P 500 Growth ETF Man Down (Abrams), 18 market capitalization (“market cap”), 41, Jahanshad, Neda, 79 104, 126, 192–4 JNJ. See Johnson & Johnson MarketWatch, 96–7 Jobs, Steve, 103–4 Massachusetts Institute of Technology Sloan Johnson & Johnson (JNJ), 53, 114, 140–4, School of Management, 40 146, 149, 190 MasterCard (MA), 145 Journal of Portfolio Management, 81 Mather, Celia, 17 JPM. See JPMorgan Chase MCD. See McDonald’s JPMorgan Chase (JPM), 145, 192 McDonald’s (MCD), 50, 53, 62, 136, 156 “Judgment under Uncertainty: Heuristics Annual Report (2012), 50 and Biases” (Tversky and Kahneman) McGraw Hill Financial, 84 (1974), 18–19 McKinsey and Company, 152 JWN. See Nordstrom Mensa, 175 mental accounting, 26–9 Kahneman, Daniel, 18, 30 Merck & Co. (MRK), 53, 145 Kaplan, Paul D., 32 Michael Kors (KORS), 86, 119–20, Kate Spade, 120 122, 126 Kilbride, Don, 48 Microsoft, 53, 113, 132, 154 Kinnel, Russel, 71, 156 middle class, 135 KO. See Coca Cola Company Mitchell, Olivia S., xii KORS. See Michael Kors MKTG. See Responsys Inc. Koski Research, 29 MMM. See 3M Company momentum, 10, 38, 46, 104, 124, 126, Lakonishok, Josef, 41 134, 192–3 “Leveling the Playing Field” (study) momentum investors, 192–3 (2010), 4 Money magazine, 104 life goals, 26, 36, 42, 124, 129, 136, 170 Morningstar, 69, 71, 83, 156 life-cycle funds, 33–4 Morningstar FundInvestor, 71 lifetime ETFs, 151–8 Morningstar Principia Pro, 83 and diversification, 158 Motrin, 141 and fees, 155–6 MP3 player, 106 and the IJR, 157–8 MRK. See Merck & Co. and the QQQs, 154–5 multiple expansion, 107–8, 193 and the VIG, 156–7 mutual fund, 68–73, 83, 152, 155–7, 179, and the VOO, 152–4 187, 190–3 lifetime stocks, 131–50 and being diligent, 147–50 NASDAQ. See National Association of and brand dominance, 133–6 Securities Dealers and free cash flow, 137–9 National Association of Securities Dealers and iconic brands, 140–5 (NASDAQ), 68, 74, 88, 113, 148, 154, and information technology, 137 156, 186, 193–4, 197 and research, 145–6 Nasdaq-100 Index, 113 and soft drink industry, 132–3 National Council for Research on Women, 17 208 INDEX

National Council on Economic price-to-earnings ratio (p/e), 59–62, 64, 96, Education, xii 107–9, 121, 126, 131, 136, 138, 144, NAV, 190 189, 193–5, 198 NFLX. See price-to-sales ratio (p/s), 44–6, 64, 108–9, “negative success imagery,” 40 122, 131, 195 Netflix (NFLX), 43–4 Proctor & Gamble (PG), 136, 156 New York Stock Exchange (NYSE), 193–4, 197 product liability, 140–5 The New York Times, 142 professional investment advisor, 16–17, news media, 98–9 155–6, 175–82 See financial data and compensation structure, 180–1 Nike, 43, 62, 86, 112, 132 and fees, 155–6 Nobel Prize in Economic Sciences, 70, 156 and investment discipline, 176–7 Nolan, Francie, 2–3 and strategy and stocks, 177–9 Nordstrom (JWN), 43, 62–5, 86, 112, and style and risk parameters, 179–80 121–2, 138 and track record, 180 Nordstrom Rack, 63, 65 and trust, 181–2 NYSE. See New York Stock Exchange women’s relationships with, 16–17 protection assets, 195 Odean, Terrance, 16–17 protection-seeking investments, 34 O’Higgins, Michael, 53 proxy statement, 195 One Up on Wall Street (Lynch), 38 Prudential research survey “Financial opportunity cost, 6, 8, 34, 194 Experience & Behaviors Among Oracle (ORCL), 137–9, 149 Women,” 15–16, 18, 29 ORCL. See Oracle PSR. See price-to-sales ratio overconfidence, 15–18, 42, 57 QQQ. See PowerShares QQQ p/e. See price-to-earnings ratio quadrants of measurement (Brinson’s), 78 p/s. See price-to-sales ratio QUALCOMM Inc., 113 Palmer, Russell E., 22 Quinn, Jane Bryant, 32–3 Patton, Jr., George S., 166–7 payout ratio, 160–1, 188 recency effect, 20–1, 23, 44, 104, 177, 196 PEG. See price/earnings-to-growth ratio recommended stock allocations for future pension, 31, 77, 187–8 goals (table), 32 Pepsico, 114, 156 regression to the mean, 195 PFE. See , Inc. research, 66–7, 93–9, 161–2, 170–1 Pfizer, Inc. (PFE), 53, 145 and portfolio management tool, 94–5 PG. See Proctor & Gamble See financial data; financial websites pharmaceuticals, 88, 140–5, 190 Responsys Inc. (MKTG), 138 Polaroid, 10, 106 retirement, 3–5, 21, 25–34, 69–70, 86, 88–9, “portfolio alpha,” 117 102–3, 115, 124, 150, 155–6, 187–8 portfolio turnover, 17, 152–3, 157, 179, 194 and financial goals, 29–31 portfolios, 17, 77–92, 117, 152–3, 157, and investment account, 88–9 179, 194 plan, 187–8 and asset allocation, 78–80, 89–90 reversion (or regression) to the mean, 20–1, and diversification, 82–3 23, 55, 111, 147, 177, 195 and ETF-only portfolio, 88–9 Richards, Ann, xiii and guidelines, 83–6 risk tolerance, 9–10, 89, 125 and tax strategy, 90–2 “risk-on” hedge fund, 18 and time horizon, 86–8 Roche Holdings, 80 Post-it Notes, 146 Rogers, Ginger, xiii PowerShares QQQ, 74, 112–13, 154–7 RXI. See i-Shares Global Consumer price and yield, 173 Discretionary Stock ETF price appreciation, 10, 39, 48, 55, 103 price/earnings-to-growth ratio (PEG), S&P 500. See Standard & Poors 500 Index 61–2, 64, 109, 131 sampling size, 19–21, 23, 163–4 INDEX 209

Samsung, 103, 111 and the SPDR, 68 Sarofim, Fayez, 133 and the VOO, 152–7 saving, 1–13, 28–9 Stanford University, 70 savings investment account, 89 Corp. (SBUX), 10–11, 38, 62, 66, SBUX. See Starbucks Corp. 112, 132, 136 SCHG. See Schwab US Large-Cap Growth stock (equity), 197 ETF stock market, 57–75, 131–50 Schultz, Howard, 11 and brand dominance, 133–6 Schwab, 27, 74, 112–14 and diligence, 147–50 Schwab US Large-Cap Growth ETF and exchange-traded funds (ETFs), (SCHG), 113–14 68–75 Schwert data, 51 and Fallen Angel growth stock, 62–7 Scotch tape, 146 and free cash flow, 137–9 SEC. See Securities and Exchange and futures, 98–9 Commission and information technology, 137 “secular trend,” 117 and lifetime stocks, 131–50 Securities and Exchange Commission and long-term performance, 67–71 (SEC), 186, 195 and methods, 59–60 Seeking Alpha, 64–5, 96–7 and P/E example, 60–1 sell-side analyst, 96, 189, 196 and the PEG, 61–2 “sell-side” firms, 187 and product liability, 140–5 share repurchase programs, 105, 196 and research, 145–6 Sharpe, William F., 70, 156 and soft drink industry, 132–3 short position, 197 and timing, 146–7 Siebert, Muriel, 67, 168 See lifetime stocks Siegel, Jeremy, 22–3, 51, 153 Stock Rover, 94–5 Sirius XM, 99 stock tickers, 10, 43–4, 80, 103, 108, 114, “Six Stocks That Could Double in Five 118–19, 121, 132, 136–40, 145–6, Years” (Hough), 138 162, 197 smart money, 125, 154, 197 Stocks for the Long Run (Siegel), 22 SmartTalk, 162 Stone, Glenda, 17 Social Security, 25 “Surprise! Higher Dividends = Higher Soe, Aye, 155 Earnings Growth” (Arnott and Asness) soft drink industry, 132–3 (article) (2003), 161 Southwest Airlines, 138 sustainable earnings growth, 48–50, 135, SPDR (the “Spider”) (ETF), 68 160, 188 spending as anti-saving, 5–6 Splenda, 141 tax efficiency, 53, 72–3, 133 “sport” of investing, 16–17 tax loss harvesting, 198 Squawk Box (CNBC), 98 tax lots, 92, 197–8 Standard & Poors 500 Index (S&P 500), tax strategy, 90–2 7–8, 11, 35–6, 43, 59–61, 60–1, 64, technology, 42–4, 55–6, 81, 84–5, 88, 68, 71, 73, 80, 84–5, 88, 90, 96, 103, 104–7, 112–14, 137–41, 149, 154, 105, 108, 110–11, 113, 118, 121, 128, 189–90 133, 136–44, 152–7, 160–1, 163, 167, See Apple; Oracle 186, 192, 194, 196 Tesla Motors, 38 between 1926 and 2010, 35–6 TIAA-CREF, 32–3 in 2008, 8 Tiffany & Co., 62, 74, 84–6, 112, defined, 196 121–2, 192 Dow Jones Index website, 84 total return, 12, 24, 33–4, 48–53, 55–6, and IVW, 113 66, 69–71, 74, 77–8, 81, 90–1, 112, p/e of, 60–1, 64, 96, 108 115, 118, 149, 155–60, 165, 169, 172, performance of (2003–2013), 80 179–80, 187, 194, 197 and sector weightings (2013), 84 and dividends, 51–3 and soft drink industry, 136 for Dow Jones (1987–2013), 165 210 INDEX

“Trading Deck” (MarketWatch), 96 Vanguard S&P 500 ETF (VOO), 152–7 “Trading is Hazardous to Your Wealth” VCR. See Vanguard Consumer Discretionary (Barber and Odean) (article), 17 ETF trailing twelve months (TTM), 59, 122, 161 Verizon Communications, 53 TTM. See trailing twelve months VHT, 144 Tversky, Amos, 18–19, 23, 30 VIG. See Vanguard Dividend Twitter, 38 Appreciation ETF Tylenol, 141–2, 144 Visa (V), 145 Visine, 141 UK Women’s Enterprise Taskforce, 17 volatility, 43–4, 46, 53, 56, 67, 74, 77, Under Armor, 86 113–15, 128, 142, 150–7, 180, University of California, Los Angeles 186, 198 (UCLA), 3, 30, 79 VOO. See Vanguard S&P 500 ETF Anderson School of Management, 3 VUG. See Vanguard Growth ETF University of Chicago Graduate School of Business, 40 Wall Street, 104, 106–7, 166–7, 187, 197 University of Southern California, 79 The Wall Street Journal, 29, 79, 93, 96, US companies, 50, 53, 73, 196 111, 152 See Standard & Poors 500 Index The Wall Street Transcript, 80 US Department of Labor (DOL), 69 WalMart (WMT), 38, 43, 62, 114, 136, 156 US Dividend Achievers Select Index, 156 Walt Disney Company (DIS). See Disney US Naval Academy at Annapolis, 28 wealth accumulation, 1–13 and habit of saving, 2–3 V. See Visa and investment discipline, 9–10 valuation, 20, 36, 44–5, 49–52, 55, 58–67, and risk tolerance, 9–10 82, 86, 90, 95, 101–4, 107–12, 115, and saving, 4–9, 12–13 120–3, 125, 129, 132, 154, 159–61, and staying the course, 10–12 170–2, 191, 195 web-based stock research, 95–8 and competition, 108–11 See financial websites and dividends, 49–51, 159–61 Weiss, Geraldine, 49 and Intelligent Investment Rule #8, 112, Wells Fargo (WFC), 68, 145–6 171–2 Wells Fargo Investment Advisors, 68 and investor expectations, 107–8 WFC. See Wells Fargo and p/s ratio, 44–5 “Why Fund Management Suits the High- “value equation,” 67–8 Achieving Women of Financial value stock investing, 37–41, 47–51, 55–6, Services” (Mather), 17 59, 67, 74, 134, 161, 164, 166, 198 WMT. See WalMart defined, 198 women and investing, 15–24 and dividends, 49–51 and behavioral economics, 19–21 and great companies, 47–9 and bias, 23–4 versus growth stock investing, 40–1 and long-term investments, 22–3 and personality bias, 37–9 and market forces, 18–19 warning for, 55 and natural expertise, 24 and , 67 and overconfidence, 16–18 value traps, 101–2 “Women in Fund Management” (study) “Value versus Growth: The International (2009), 17 Evidence” (study) (Fama and French) The Writing Life (Dillard), 131 (1998), 40–1 WYNN. See Wynn Resorts Vanguard, 48, 74, 112–14, 127–8, 152–7 Wynn Resorts (WYNN), 162–3 Vanguard Consumer Discretionary ETF (VCR), 127–8 Xerox, 106 Vanguard Dividend Appreciation ETF (VIG), 156–7 Yahoo! Finance, 45, 62, 95–7, 107–9, Vanguard Dividend Growth fund, 48 114–15, 122, 123, 141–3, 183 Vanguard Growth ETF (VUG), 114 Yale University, 94