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TBA Online: News & Features: April 2014

Ask the Captain: Advice for Artists on Investing?

Friday, March 21, 2014   (0 Comments)
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Theatre Bay Area is delighted to announce the genesis of a new series: 
"Ask the Captain," where our financial whiz (whose human alter ego is
Tom Swift, playwright and do-gooder at Financial Avengers® in San Francisco)
answers reader questions about finances for theatre artists. Send us your questions!

Dear Captain,

Do you have any advice for artists on investing? 

Between the gradual dollar-socking and the periodic gig windfall, I occasionally find myself in possession of a few hundred bucks. Is there a smarter option than a savings account to help those with a feast-and-famine income get from a few hundred to a few thousand? 


Windfall Dollar-Socker

The Captain (in hat) and his business partner, The Oracle. Photo: Keith Brauneis

Greetings, Wind-Sock!

I am absolutely thrilled that you asked me this question, because if you asked Suze Orman, she would tell you that you should spend a good portion of your adult life hoarding an obscene amount of cash and sticking it in the bank, all the while assiduously avoiding investing. 

Cue Suze Orman:


(Wagging her finger.)

You should have eight months to one year of your living expenses safely stashed in a bank account, in case of emergency! And don't even think of questioning my conventional wisdom! I'm Suze Orman!!


Shut up! I'm the Captain of the Financial Avengers, and Wind-Sock is a disciplined saver who needs to be supported in her saving habits, not lectured like she's a twelve-year-old! (To Wind-Sock.) Let's say you make $23,000 annually as a gigging artist, which probably comes to about $20K after taxes. According to Suze Orman, you should have $13,000 to $20,000 in the bank before you even think of investing.

But do you have any idea how freakin' hard it is to accumulate $13,000 to $20,000 in bank savings, bouncing from occasional gig to occasional gig, earning $20,000 a year after taxes? Of course you do. You're an artist in the Bay Area. 

Here's my point: the minute "experts" tell people that their immediate financial goal is to achieve the impossible, people get overwhelmed and discouraged. And, when people get overwhelmed and discouraged, bad things happen. Some freak the hell out, and some do nothing (some do both). 

Your approach is the right approach. That you can periodically stash cash, given your occasional-gigging-dollar-socking-feast-and-famining fracas, is spectacular. I applaud it and I want you to keep it up. Well done, Wind-Sock!


(Blushing.) Thanks. 


The only goal that you should have is this:  Save as much as you can, when you can, and do so forever. But you want to know what to do with your Wind-Socked Savings, and that's a good question. 

See, Suze wants your cash to sit in a bank, where it will earn shitty interest, and not work nearly as hard for you as you worked for it. And as it sits there, it poses the other problem that cash always poses as it sits in the bank, staring at you through your online digital account access window: temptation. The urge to splurge "just this once" will never go away. It will only get worse. So what you need to do is put your long-term loot in a place that is entirely separate from your active bank accounts. 

You need a brokerage account. You need to go to Charles Schwab or Fidelity or Vanguard or Dodge and Cox or E*Trade or a mutual fund company—just find their SF branches and walk right in—and open an account [See Footnote One below regarding these institutions]. You need to use your dollar-socking-savings to buy shares in a mutual fund. That mutual fund should be moderately safe, and you should keep adding to it. Over time, you will have far more than three to six months of emergency savings, at which point you can give Suze Orman and everyone else in our industry the middle finger.


 (Trembling in rage, as her spray-on tan begins to melt away from her face.) I HEARD THAT!


(Giving Suze Orman the finger. Then, to Wind-Sock) Let's get one thing straight. If you know that you will need access to a certain chunk of cash in less than one year, then you should not invest that chunk. If, for instance, you have dental surgery planned next week, and you need a chunk of cash to pay for it, keep that in the bank. But if this is long-term cash, then it needs to get to work. So you should invest in a Balanced Fund. 


What's a Balanced Fund?


Balanced Funds are one type of mutual fund. They invest in a "balanced" mixture of stocks and bonds. They're good starter funds, kind of like Goldilocks' porridge: not too hot (aggressive, risky), not too cold (conservative, slower to grow), but just right. Here's a list of four Balanced Funds that you can take a look at:  

  1. Dodge and Cox Balanced (DODBX, they're even local!);
  2. Oakmark Equity Income (OAKBX, another decent option);
  3. Vanguard Balanced Index (VBINX, very low cost)
  4. Pax World Balanced (PAXWX; socially responsible, which is cool, but the other funds tend to earn you more money). 

[Note: the five-letter codes you see above are symbols that stand for the name of each fund. You use those symbols to look up the fund in the newspaper, or on the Interwebs.]


[Another note: see Footnotes below regarding investment performance and recommendations, which these aren't, even though they seem like they are, but I have to say they aren't, even though they kind of are. Or something.]  


Investment recommendations? Goldilocks? Porridge? Investing involves risks, not the least of which is loss of your principal! 


I said, shut up, Suze. (Pause. Then, to Wind-Sock) One of the hardest economic things to do—as an artist, or a human being—is to create and maintain a savings discipline. But you've already conquered that! Now conquer investing!

Investing does involve risks, and yes, you could lose money (over the short term). But we believe that if you're saving, you should be investing. Because the sooner you start investing, the more fun and exciting saving becomes. And when saving becomes fun and exciting (and profitable!), then you are on the way to winning the Ongoing Fight for Financial Freedom. 

Do study up on the risks of investment, too —Investing for Dummies is a great place to start—but c'mon. You're a freakin' artist, Sock. A freakin' theatre artist. So you can handle risk. And once you understand how investing works, the better and more confident you'll be at it. 

And, fuck you, Suze Orman. 

So good luck, Wind-Sock. Keep up the good work. Once you get that "eight months" of investment dollars stashed in a balanced mutual fund, hit me back up here and I'll tell you what to do next.

Carry On!

The Captain


FOOTNOTE ONE – Brokerage Firms and Mutual Fund Companies

This list does not – in any way – constitute an endorsement of these companies. They are used for example only. But, since we assume you are a local, Charles Schwab is also local, and if this is confusing, head down to one of their branches, take this column with you, and ask someone for help. By and large, the people at Schwab are pretty cool.

FOOTNOTE TWO – Relative Performance of Pax World Balanced (PAXWX)

Data regarding Pax World Balanced Fund performance is according to Morningstar, as of 1/31/14, compared to other listed funds over one, three, five, ten and fifteen year periods.  (Investor Class Shares of all funds.)

FOOTNOTE THREE – Balanced Mutual Funds

Oh, God, the minute I start listing actual investments, I have a legal obligation to make so many disclosures that it sounds like speech from an Ionesco Play. So, here's my Ionesco-Play-Disclosure-Speech:


(In rapid-fire voice-over voice.)

This list does not constitute investment advice. My clients may own some, but not all, of the investments outlined above. Nearly all of my clients own at least one of the investments outlined above. This is NOT a recommendation for a specific investment. Past performance may not be an indication of future returns. Investment involves risk, including decline or loss of principle. Read the prospectus. Understand your investment. Eat well. Diet and exercise. Wear a seat belt. And, a condom. Wear a seat belt AND a condom. Be careful. Watch out! Duck! (I own Dodge and Cox Balanced Fund, so if you can't figure out which fund to choose, you might want to try that one, but I'm not supposed to tell you that, and you're not supposed to buy it because I told you that, and I have no understanding of your overall financial situation, therefore I am not qualified to offer you specific investment advice, and I am not being compensated by Dodge and Cox, but they are also a local company, and they've been doing this since 1929, but if you buy it through Schwab they may charge a fee, so you might want to try buying it directly from Dodge and Cox, but they may impose an investment minimum, but that's not a recommendation, and we didn't have this conversation, and you are not reading this sentence, and life is a dream, but I think, therefore I am.)


But, I'm Suze-Fucking-Orman and -

(Black out.)


Tom Swift is a playwright, producer and financial planner. He currently serves as Captain of the Financial Avengers® (which is not new taking clients at this time). TBA members can e-mail financial questions to One member question will be chosen for each installment.