As investors' focus zones in on the Federal Reserve's FOMC meeting this Wednesday, the market momentum has shifted, pushing many to pivot their portfolios. Ellevest CEO Sallie Krawcheck — whose investment and management firm recently crossed over the $2 billion mark of client Assets Under Management (AUM) — joins Yahoo Finance to give insight into how investors may position themselves during these developing market conditions.
Krawcheck affirms why investors need to focus on long-term investment strategies: "Active trading tends to be a losing strategy for non-professional investors... You think you can know more than the markets do, know more than all of the portfolio managers out there do, know more than all the traders out there do, and that somehow you're going to... read up on something and just have an insight that everybody else missed so you can outperform the market, is a fool's game."
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
BRAD SMITH: Investors shifting focus this week to the Fed decision. That is on tap to come Wednesday after their two day meeting concludes. So what does this mean for your portfolio? Investment and wealth management company Ellevest recently crossed $2 billion in client assets under management, the AUM. And CEO Sallie Krawcheck joins us now. Great to have you here with us. So going into this critical Fed decision to perhaps set up what the tenor may be for the rest of the year, what most notably would you be listening for and advising other investors out there to pay closest attention to?
SALLIE KRAWCHECK: Yeah, well, first of all, thank you for having me. It's great to be here. And at Ellevest, we are not traders. We don't tend to look at these short-term moves and construct portfolios off of that.
We tend to look towards what the longer-term returns of the equity markets, the bond markets, et cetera, are projected to be and have been and advise clients to let us set that asset allocation for them, let us rebalance for them when it makes sense, and in particular, make sure to have, if you can, a recurring deposit into your investment account so that as the market tends to be very dramatic, very focused on short-term things, can show volatility, our clients will be investing in the market in good times and tougher times and averaging out to returns that, historically, have been pretty terrific.
SEANA SMITH: I'm curious, just given the fact that we are at record highs, given the fact that we have had so much talk about AI and what exactly that is going to do in terms of changing that long-term dynamic, not only for the market but obviously for the economy as well, how has that conversation then changed amongst your clients and what you are hearing from them in terms of what they want to see and how they want to be positioned at this point?
SALLIE KRAWCHECK: Yeah, there is a lot of curiosity around AI and the opportunity to transform the economy and to get the returns from it. But also recognizing that a lot of these big waves have made people a lot of money and have lost people a lot of money, you could have perfectly foreseen the railroad-- the railroad being built across this country and lost a lot of money by investing in the wrong companies. You could have perfectly foreseen the automobile industry becoming so strong and lost a lot of money doing it. Crypto, you could have lost a lot of money there.
And so that's why diversification is important. Getting access to investing in places that are hot, but also those contrarian investments as well and having the balance of those things and having the diversification is what folks look like. To be honest, amongst our clients, what they tend to be interested in is a financial return as well, but something that's a bit out of fashion, but not for women today, is investing for positive impact. And there continues to be just a real interest in not only what will my money earn, but what types of things is my money being invested in and what type of impact I can have. And I know that's a little bit contrarian these days.
BRAD SMITH: And what are then the themes that are emerging in that type of trade, in that theme of impact as well?
SALLIE KRAWCHECK: But again, we're not trading. So we are investing there for the long-term, which, by the way, every individual investor should. Act of trading tends to be a losing strategy for non-professional investors. I mean, how in the world you think you can know more than the markets do, know more than all of the portfolio managers out there do, know more than all the traders out there do, and that somehow you're going to watch-- you know, you're going to read up on something and just have an insight that everybody else missed so you can outperform the market is a fool's game. And so having that diversified investment portfolio really has been the winning strategy for individual investors for a long period of time.
BRAD SMITH: I think there's one significant, perhaps, years long event that you've been tracking and anticipating-- the Great Wealth Transfer. What do our viewers need to know about the Great Wealth Transfer, the type of impact that that's anticipated to have?
SALLIE KRAWCHECK: It's the most-- most of your viewers don't see it coming, that the Great Wealth Transfer will occur as the boomers begin to pass away, as they begin to hit 80, 79, 80 this year, that money is going to go to millennials, it's going to go to Gen Z's. It's also going to go to women. And that's in part because women live six to eight years longer than men do.
When you ask men who's going to benefit from the Great Wealth Transfer, only a teens percent say it's women. And the massive change here really cannot be underestimated as we have the feminization of wealth. As women have more money in their hands, they become more confident. They use their money differently, they invest their money differently, they spend their money differently than men. They give their money away to a greater rate and tend to give it more to organizations that support women and girls.
So we could see a massive shift here as the women's longevity does what lean in and the other movements did not, which is get the majority of wealth in this country into the hands of women. And that is a trend worth betting on.
BRAD SMITH: Sally, just lastly while we have you, is there one major theme or one major, perhaps, campaign item or policy that we could hear leading up to the election that could shape and securitize that Great Wealth Transfer?
SALLIE KRAWCHECK: Well, look, I think, finding ways for individuals to save more and invest more for retirement, finding ways for women to have more of a social safety net, particularly as women have more money in their pockets. And it won't be this presidential election but in presidential elections to come, giving money to and supporting politicians who support policies that support women and their families.
If I could have one, it would be mandated paid parental leave, which pays for itself immediately. That's not on the horizon any time soon. But think about as women get more money and therefore donate more money to politicians, give more money, you could see this thing shift really dramatically over the years to come.
BRAD SMITH: Sallie Krawcheck, Ellevest CEO, thank you so much for taking the time today.