Updated: May 9
Kriti: [00:00:00] Hey guys, welcome to WhyFI Matters!
I feel like since the pandemic started last year hearing about investing in the news has become pretty prevalent in our lives. So, I invest and it's through a FinTech app that's for teenagers and kids and young investors. And sometimes the thing is, I feel like I'm investing blindly.
So, I really want to start expanding my investing knowledge so I can start making better and informed decisions in my own investments. So a few weekends ago I was reading up on some articles related to the boom in investing and I came across a recent popular article in money.com and it's called the "new investor survival guide, how to make money and stay sane and today's wild markets".
So, I invited one of the authors from money.com Mallika Mitra on the podcast, to talk about her article and some simple investing terminology for young investors. Mallika covers investing trends, retirement and debt, and she previously covered municipal finance at Bloomberg news and personal finance and retail at CNBC.
I hope you enjoy the interview.
Hi, Mallika. Thank you so much for coming on WhyFI matters today. I read your article and I loved what you wrote. I think it's really important for young people like me to learn about these investing terms. And I also like how the graphics were in the article.
Kriti: [00:01:50] So, for those who are listening to this right now. You can go check out her article. It will be in the episode description. I'm super excited to have you on the show today and to talk a little bit more about investing. So thank you so much for coming.
Mallika: [00:02:03] Yeah, thank you for having me. I'm really excited to be here and talk about this story with you.
Kriti: [00:02:08] Yeah. So, first of all, wanted to talk a little bit about your career path as a journalist and also about yourself in high school. So can you give us a little bit of a brief sort of story about your life as a teenager, and also when did you sort of get interested in money specifically personal finances?
Mallika: [00:02:30] Sure. Yeah. So as a teenager in high school, I had no idea what I wanted to do at all. I just knew that I liked to read and write. And so when I went to college, I majored in English. and I took some journalism classes. I took some creative non-fiction writing classes, but I also did a lot of like literature.
I didn't really know that I wanted to be a reporter until I joined my college newspaper. And they're there for a few years. And then I was an editor for our feature section and then I was a, I'm an editor in chief. And I think that is where I really saw how much I like reporting because you can learn about a different topic every day.
And you're always getting to be a student, which I think is really cool. And then of course you get to write, which is something I love to do.
Kriti: [00:03:12] I really like how you said I can be a student all the time. And, I really liked that analogy when it comes to journalism.
Mallika: [00:03:19] Yeah, and it's something that I'm sure a lot of people can find it in a lot of different careers, but as a journalist, your job is literally just ask questions all the time. So that's been great, but I actually didn't go into journalism right after college. I grew up in New York. I went to college in Michigan, but then I moved out to San Francisco and worked in public relations. So kind of the other side. I was doing communications for tech companies. But I always knew I wanted to get back into journalism. So I ended up moving back to New York and doing a master's program.
And then I did a few internships, CNBC, Bloomberg news. And then I, I started at money about almost a year ago. Now it was may, so right when the pandemic started, basically.
Kriti: [00:03:59] So, when did you sort of get interested in personal finances?
Mallika: [00:04:04] Yeah, so I knew that I wanted to write about business and money. When I went to grad school, I did my kind of concentration in business and economics reporting.
And that was just from my job, that I was doing out in San Francisco and kind of my interests at the time. But I didn't know, I wanted to do personal finance until I interned at CNBC. And then I went there and covered a breaking news, retail and media, a lot of different things, but I wrote for the personal finance team and really enjoyed it.
It's important for people to understand their finances. And it's something that a lot of people just have so many questions about. And I think people are often afraid to ask their questions. They think, you know, this is my money. I should know what's going on with it. But we're not taught this type of thing in high school.
And so I really like that I'm able to just kind of ask questions that I have in my everyday life and talk to experts and help people kind of figure out how they can like set themselves up for, for a healthy and happy future.
Kriti: [00:04:57] Yeah, I think you bring up something kind of interesting. Even the word personal finances. The word personal makes it seem like "Oh, I have to shield it". It's not something that can be openly talked about. A lot of young people, we don't really have a good relationship with money. For example, before I started doing this, I was very much a spender. Sometimes, we save a little bit in our piggy banks and maybe some of us have a bank account even. Um, but I read an article on bank rate.com that only 18% of people between the ages of 18 and 25 are investing.
So investing is a completely, a whole another part of the sort of personal finances. But, so I feel like this is such a small number. So what are some of the roadblocks that are implemented that prevent, um, many teens or young adults from investing?
Mallika: [00:05:57] Yeah. You bring up a lot of really good points there. It's true that like lack of funds may be a problem. You know, when you're a teenager, you are probably not also working a full-time job while you go to school.
Some do, but you you're probably not. And so the money that you do make, maybe you want to save that for like nights out with your friends, saving for gifts for your friends and family , buying a car or saving for college. So there are a lot of other things that are kind of on your plate at that age. so that's one thing, but I do think it's important for people to realize that investing doesn't have to be this huge, scary thing where you're putting all your money away. When I was , in high school, I worked at a, an assisted living home kind of just helping , at the desk. I could have just put a little bit of my paycheck every time and into investing and I didn't know to do that. But I wish that I did at the time. And also you brought up a good point that age limits and, you know, there are of course restrictions to investing, but a lot of financial services companies have options for like your parents to help you out. Another roadblock is lack of education. I didn't know anything about investing in high school and I think a lot of high schoolers don't. And you know, we're just not taught that kind of thing and , high school and in college. I think people just don't realize what a huge benefit you'll have, and how much you're helping your future self. If you put a little bit of money away now.
Kriti: [00:07:16] Right. And so what is the benefit of investing and what are the implications of not investing?
Mallika: [00:07:25] Yeah. So when you're in investing, that means that the money that you are working so hard for , is also working for you. So the consequences of not investing is that money that you've worked for hard for, or maybe, you know, you've been gifted by parents or grandparents. That money is just kind of sitting around, not doing anything.
If you invest it, though, it will grow over time. There's also inflation. So, over time prices of goods and services, you know, everything from like a carton of milk at the grocery store to like clothing, we buy. Prices will go up and then the purchasing power of your money goes down. So a hundred dollars that you have now , will be worth , a little less in the future.
So by investing that, you know, money's going increasing.
It's important to remember that when you're a teenager time is on your side.
You have a long time for your money to grow. You're not going to be taking out money right now to buy a house most likely. You might have some time on your side before you have children and you want to contribute to their college accounts and things like that.
So, putting in money now and letting it sit, is a really good idea. If you can.
Kriti: [00:08:31] So I really liked your article that you co- wrote in money. And, I'm going to read a paragraph from the article. I think it's kind of like a hook and basically "The Dow just raced past 30,000 and hasn't looked back. Bitcoin is blowing up. Money Experts on FinTok are giving questionable tips to millions of viewers. Forget short sellers. Share prices are now at the mercy of Reddit, trolls and whatever. Elon Musk wakes up and decides to tweet. Oh, and have you heard about game stop?"
I thought it was really fun comedic kind of. So give us just a little bit of a brief overview about personal finance, but really investing news that sort of occurred over the past few years.
Mallika: [00:09:19] Sure. Yeah, so since COVID hit the US last March, millions of people lost their jobs and, and are still unemployed and are struggling to pay their bills and businesses have suffered. But during all this time, the stock market seems to just keep going up. Some of the major, major indexes, like the S and P 500 in Dow, which you mentioned have hit record highs. And so it's a really interesting time to be looking at investing and especially now, there are a lot of newer things that we're seeing. So, as that paragraph that you read mentioned , game stop, the video game retailer, like soared recently. And that was basically a bunch of everyday investors like you or me, not big firms on wall street buying up shares. And it's a somewhat long complicated story, but it basically shows the power of like everyday people investing in the stock market. And it looks like a lot of those people were first-time investors we're seeing. Experts kind of caution people from investing in individual stocks and we can talk about that more. Also Bitcoin, which you mentioned has been taking off recently. So that's a type of cryptocurrency stored in digital wallet. if you bought, I think it's like a hundred dollars of Bitcoin in 2011, you could be sitting on closer to a million now.
Kriti: [00:10:27] that's crazy.
Mallika: [00:10:30] Yeah. And that's been getting a lot of attention, Bitcoin, game stock, these kinds of things on, um, we called it FinTok , in there. But like young people, I don't know if you're on TicTok, but I see it all the time, um, on TikTok um, teenagers talking about investing and all that.
Kriti: [00:10:45] Right. I think it's really genius that you dubbed it FinTok because I would just calling it "Oh, the financial community on TikTok ". There's just a whole personal finance community on Tik TOK, like a bunch of people giving you advice and stuff. But it's funny to see like kids my age, just start talking about all these investing things.
Mallika: [00:11:03] Yeah, definitely. I don't think we can take credit for FinTok, unfortunately. I think people have been using that, but, it is interesting. And I mean, on all sorts of social media, even Instagram, Twitter, and Reddit was where this whole game stop situation soared. Yeah.
Kriti: [00:11:18] So, why has investing become a favorite pastime of millions of Americans and people all around the world actually this past year? Obviously, people are in the house and they're bored. And, but why has investing sort of become what they've started to do?
Mallika: [00:11:39] Yeah, you bring up a good point. People are stuck inside. And so a lot of first time investors, it looks like I've gotten into the market. But, also stimulus checks came out and people had some more money that for some people that of course needed to go to essentials. For others , who still had their jobs and all that, they had a little bit of extra money to invest. It's also become very easy to invest their investment apps like Robinhood , where you can just be , sitting in your house and open up an account and trading stocks. And so , there's definitely dangers to that but for one thing, it has opened up the world of investing a bit.
Kriti: [00:12:14] I use stockpile when I'm investing and it's just, you know, little amounts of money. I'm really thankful and grateful that there are opportunities for young people to be investing. So what are your thoughts on this democratization of investing? And do you think that it is needed and it is important for the future.
Mallika: [00:12:36] Yeah. So, that's great to hear that you are having such a positive experience with that. It's definitely a good thing that more people are being able to invest and hopefully get good and responsible advice on investing. I think it is important though, to also note that a lot of these apps kind of make trading a bit of a game. You can buy and sell so quickly. And experts that I talked to just are constantly advising people you know, don't invest in things because of FOMO. Just cause you're afraid of missing out because everyone's doing it. And don't do it if you're just trying to like get rich quick. It's a really good way to kind of build wealth over time and if you do it responsibly.
Kriti: [00:13:17] I think that's an interesting point because I feel like people don't usually associate investing and FOMO together. It's usually like partying or like going outside with your friends. It's really interesting to see the shift in this mindset when it comes to investing.
But, I am having a positive experience using stockpile. But I'd say I've had this since maybe like 2018. And sometimes I feel like I don't really understand what I'm doing when it comes to investing. Like I'm just buying the stocks that I think are cool or trendy or the stocks that are very popular and have been stable for a very long time. And I don't really know what I'm doing with my money some of the times. And I feel like if I start to actually purposely invest, like what the intent behind what I'm investing in, maybe I can gain a little more. And also just being able to sort of understand what's happening, cause I have the charts and everything, but sometimes it's hard for me to understand all the statistics.
So, I want to talk about your article basically has 9 important pieces of advice for young investors. So, I wanted to understand a little bit more about some of them.
So the first, what percent of our money should be invested? And I feel like this is for maybe kids, people who are a little bit older than me, like when they're in college cause I don't have a paycheck or anything.
Mallika: [00:14:50] Yeah. So this is really dependent on your specific situation. So it depends on your age and how far away you are from retirement. It depends on your financial situation, how much money you have in savings and all of that. And also your goals.
So, some people are investing because they want to have enough money to buy a house. Some people are investing because they want to be able to travel a lot in their retirement or whatever it may be . You definitely want to figure that out first and then also make sure that you have an emergency fund set aside. Experts say about three to six months of funds that you could use if you lost your job, for example. But I would say for someone around your age , I did a story a few months ago, actually on teenagers who are saving for retirement.
And one of the experts for that, told me that, of course like concert tickets and college tuition. They're going to take priority over saving for retirement right now. And so it can be hard to determine exactly how much you should save, especially because someone at your age, the future is so uncertain.
You don't know exactly what career you're going to have, what your expenses will be. But you're doing it right. You know, putting away a little bit and what you're comfortable putting away for now is a good way to go about it.
Kriti: [00:16:07] I haven't really heard of kids who are investing money for their retirement. I'm fully support, you know, financial independence retire early for young people, but teenagers I've just been educating them. I never expected. I never really realized that there are teens out there who are actually actively saving for retirement. That's really cool!
Also, could you help us understand the difference between individual stocks and bonds and then mutual funds and then there's also exchange traded funds.
Mallika: [00:16:44] Yeah, sure. So, when you're buying individual stocks, you're essentially buying like a small amount of ownership in that company. So tons of companies that we know, like Netflix or McDonald's, Nike and no issue stocks, so that they can raise money for their company.
And then a bond, is more like a loan that you're making to a company or the government, if it's a government bond. And, you get interest paid back she regularly on that. And then when it matures, you get the full amount back.
So, mutual funds and ETFs are basically ways to invest in like a larger basket of securities , as opposed to individual ones. So they can include stocks, bonds, or other assets like gold. But, it's more of like a pool of assets. And then as far as like the difference between mutual funds and ETFs, there are a few, one of them is that mutual funds are often actively managed. So there's a person whose job it is to try to beat the market overall by making the right choices in terms of what to buy and sell in that fund. And then ETFs are often not always more passively managed. So they're often kind of just tracking bigger indexes, like the S&P 500, for example.
Kriti: [00:17:55] Okay. So the S&P 500 and the DOW are those ETFs then?
Mallika: [00:18:02] S&P 500 and Dow are indexes. So they're kind of gaging , how some of the bigger companies in the stock market are doing.
Kriti: [00:18:14] Okay. I see. Okay.
So can we invest between multiple of them? And which one would you say for like a beginner investor, like where should we put our money in?
Mallika: [00:18:27] Yeah. So it really depends on your situation, like I mentioned . We just actually published a story at money.com on "How to invest with less than a thousand dollars".
So, I would definitely advise that people had to money.com and read that one. And that says that the simplest way to do it is through mutual funds. And then experts often are saying, you know, if you don't really know what you're doing, if you're new to investing and even if you do know what you're doing, It's not wise often to be investing in individual stocks.
Kriti: [00:18:55] So, looks like I been investing in individual stocks on through stockpile?
Mallika: [00:18:59] Yeah, a lot of the experts I've talked about have mentioned, you know, if you're , this is more in the context of like parents who are investing with their kids or something like that, but often it can, help to show them how to invest in stocks of companies that they care about. So like, you know, if you're like a huge Disney fan or something like that, I don't know. That's kind of a good way to teach people how to like how stocks work and things like that. So I would say it's dependent on your situation and, and how much you're investing and what's right for you.
Kriti: [00:19:30] So, investing in like companies that really has shared the same ethics as you and moral values as you, I guess, can be a reason to do individual stocks, I guess.
Mallika: [00:19:42] Well, there's actually a lot of ways in the story we point to to do ESG investing. So that's what you're talking about like basically ," environmental, social and governance" investing. And, so there are mutual fund, different kinds of funds that we'll actually have them companies that yeah. Do do ESG investing. So like, and they'll avoid companies that like make fossil fuels or guns or whatever.
Kriti: [00:20:03] That makes sense. That's that's interesting. Yeah.
So can we talk about an "expense ratio" and basically you're saying, are you paying too much or too little? Can you expand more upon that?
Mallika: [00:20:17] Sure. Yeah. So that's basically what you pay an annual fees on a fund. So it costs money to run these types of funds. But it's just important to keep in mind that when you're paying those fees, you're missing out on, on those returns. It's a balance. And so our story mentions a "fund analyzers". So people can go there and check the numbers and see how much they're paying in fees. But it's more just, you know, keep it in mind.
Kriti: [00:20:43] Okay. So, also you write about the stock market bubble. So can you expand more upon this?
Mallika: [00:20:51] Sure. So this is basically when stock prices are driven up, you know, above their value. And so there are a few ways that, um, are you things that you want to be thinking about to prepare your portfolio for the stock market bubble? But the biggest thing is to be diversified. So that means having different kinds of assets. Having stocks and bonds. So stocks often actually do well when bonds aren't doing well and vice versa. So you want to make sure that, if you have. That you have different kinds of assets in your portfolio. So that, when something does well, the other doesn't, you're still making money. And that means not just between stocks and bonds, but also even if you're just looking at stocks, you want big companies and small companies, US stocks and international stocks. Yeah.
Kriti: [00:21:36] So don't put all your eggs in one basket, basically.
Mallika: [00:21:39] Exactly. Yeah. That's what they always say.
Kriti: [00:21:42] Okay. So, can we talk a little bit more about retirement fund and like 401ks, because you're considering that as a type of investment, right?
Mallika: [00:21:54] Sure. So a 401k is a great way to save for retirement, but they're often sponsored by your employer. So it's probably something that you'd be thinking about after you graduate college, when you start your first job. Maybe your company offers a 401k. And if they do, experts and financial advisors definitely recommend that you take advantage of that, especially if your employer matches your contribution. So, you know, say you contribute 3% and your employer says, okay, we'll match that 3%. That's basically free money. So you definitely want to do that. But, there are other ways to say invest in retirement when you are a teenager. There are things like Roth IRAs and those actually you can invest that money. There's no penalty to take it out early. With 401ks there is a tax penalty, if you want to take it out early. So, in that story, I wrote about, teenagers saving for retirement one of the financial advisors told me that's a really good way for teenagers to save.
Kriti: [00:22:49] So, roth IRAs?
Mallika: [00:22:51] Roth IRA. Yep.
Kriti: [00:22:52] Okay. This was very, very helpful. I haven't really gotten into the nitty gritty of investing really, and the sort of terms and everything. So I think it was really helpful to learn about that today. I really loved her article and again, for anyone who wants to learn a little bit more and just dive a little deeper, you can visit the article which is at money.com.
Thank you so much, Mallika, for coming on the podcast today. It was great to have you on.
Mallika: [00:23:19] Yeah, of course it was a lot of fun. Thanks for having me.
Kriti: [00:23:22] So that's the end of the interview and it was great to have Mallika on the podcast.
For more information, and if you have any more questions for her, I've put her Twitter handle and the episode description.
I also hope that you learned a little bit about what is going on in investing news. And why it's becoming easier for us to invest in how young people can take advantage of the resources and tools around them to invest wisely. We will be delving deeper for sure into investing later on in future episodes. So stay tuned for that.
Also, if you have any of your own questions related to personal finance, Entrepreneurship economics and even investing, you can get your questions answered, hopefully via the podcast. And you can just let us know what topics you want to learn more about.
You can do this by going to our website at www.WhyFImatters.com and to the contact button and shoot us an email, and we can hopefully enter your questions on the podcast. Thanks for listening. And I can't wait to talk to you next time.
Link for the episode
Mallika's twitter handle : https://twitter.com/mitra_mallika
Link to the article : https://money.com/how-to-invest-in-2021/