Income&’s Brad Walker on building a better mousetrap for retirement investing using marketplace lending

income& and retirement investing

Brad Walker is CEO of Income&

What is Income& and where did the inspiration to create the company come from?

Brad Walker, Income&
Brad Walker, Income&

Income& is a marketplace investing platform for PRIMOs, a new fixed-income product backed by high quality, prime-rated mortgages.

The idea behind Income& began when Ben Strub and I were working for a large alternative asset custodian where one of the most popular asset classes was hard money lending, both secured and unsecured. We realized that hard money lending seemed to be more understandable to investors regardless of their level of sophistication.

It was about this time that Lending Club and Prosper were experiencing explosive growth. They were scaling unsecured lending to an unimaginable level. We loved what they were doing in the unsecured space but realized, while they were offering a really great yield proposition, that unsecured consumer debt would not fit the risk characteristics of the largest yield-seeking population: retired people.

That was when we decided to create Income& and to offer hard asset-backed notes that outperform the safer end of the spectrum in traditional fixed-income options from a yield standpoint but also maintain similar risk characteristics to those same options. It was critical for us to create a product that our parents needed and, just as importantly, one that we would be comfortable selling to them. Soon after, we put together the core team of founders, including Keith Meyer to run marketing and Vincent Phillips to run technology, and we hit the ground running

Why is investing for retirement so hard for most people?

The extended low rate environment that we have been experiencing for the last decade has made it difficult for Baby Boomer investors to find decent returns with yields at historical lows. A majority of retirees and pre-retirees are looking for investments that are safe, outpace inflation, and return enough after inflation that they can have a comfortable life without eating into their principle.

What’s the PRIMO and how is it a better alternative than other options out there for fixed income investors?

A PRIMO is a note backed by an individual high credit quality prime-rated mortgage. As an investor, you have a great deal of transparency into the borrower’s credit statistics, the geography of the collateral property, and more. Using our technology platform, investors will easily be able to buy across our inventory of PRIMOs or customize a portfolio that fits their exact needs. We believe PRIMOs are better than other fixed-income investments through a combination of higher yields, lower risk, transparency and no on-going management fee.

Is this a dual-sided marketplace? Where does your supply of mortgages come from? Are there challenges in creating a vibrant marketplace that you see for Income&?

We are a two-sided marketplace. However, unlike other peer-to-peer platforms and marketplace lenders, we are not involved in the origination of loans. Instead, we work with well-established mortgage lenders by providing a place to sell their high credit, high quality prime-rated mortgages and through that liquidity, expand their lending operations. We then take those mortgages and create PRIMOs.

Our biggest challenge is really an educational one. The residential mortgage market still has a bit of a black eye after the downturn. We need to help people to understand that fixed-rate prime mortgages have historically been very safe and that we are working very hard to use the residential mortgage debt market responsibly to create a product that people need and that they can trust.

How do you intend to go to market with an electronic product for baby boomers? Are there challenges there?

Selling to an older demographic through a technology platform can be a challenge, although we have found that many Baby Boomers are comfortable interacting with their finances online and more will continue to gain comfort. Early on, we will largely be selling through Registered Investment Advisors (RIAs) partially as a way to get over the technology adoption hurdle but also more as a way for early adopters to gain comfort with PRIMOs as a new product, by having a trusted professional vet the product.

FeeX: The Robin Hood of (Investment) Fees

upstart lending

Investment fees can literally suck hundreds of thousands of dollars out of your retirement accounts over your lifetime.

What makes this even more aggravating is that as investors, we aren’t even aware of some of the fees we pay because fund managers have gone through such lengths to obfuscate them.

FeeX bills itself as the “Robin Hood of Fees” and Erik Laurence, the company’s VP of Marketing and Business Development, joins us to talk about why minimizing fees is so important for investors and what we can do about it long term to improve our investing returns. Thanks to Molly O’Brien, FeeX USA’s Marketing and Community Manager who joined us as well for this interview.

About Erik

FeeX's Erik LaurenceErik Laurence is the Vice President of Marketing and Business Development for FeeX.

Listen to the FULL episode

Resources mentioned in the podcast

Even more resources

Photo credit: Kurayba / / CC BY-SA

Successful investment advice for retirement assets — with Brian Murphy

retirement investing

Getting good investment advice for your retirement portfolios isn’t easy and the industry doesn’t make an investor’s work any easier in this respect.

Brian Murphy, CEO and Co-founder of Kivalia, has found a better way. Through an innovative use of crowdsourcing, he’s able to determine the investment universe within any given retirement plan. From there, investors receive periodic retirement advice from Kivalia.

And the results speak for themselves. Brian joins us on Tradestreaming Radio to discuss the struggles investors face when investing for retirement, how the market is changing, and the resources people can use to improve their investing results.

Listen to the FULL interview

About Brian Murphy

CEO and cofounder of KivaliaBrian is the CEO and Co-founder of Kivalia. He also runs Registered Investment Advisory firm, Pariveda.

Learn more

Even More Resources

Lifecycle investing – with Ian Ayres

permanent portfolio

Sometimes big ideas attract a lot of Ian Ayres

Such is the central idea behind Ian Ayres’ book: Lifecycle Investing: A New, Safe, and Audacious Way to Improve the Value of your Retirement Portfolio.

Built upon a central idea of Paul Samuelson, the book was ultimately spurned by Samuelson.

Even Ayres’ colleague, leading economist Robert Shiller lent his approbation only to come onto Amazon later to clarify his views.

Listen to the FULL program

About Ian Ayres

author and professorIan is a professor at the Yale School of law and is a prolific writer.  He’s also the founder of Stickk, a community to help people create and stick to goals.

Read the transcript

transcribed at Speechpad

Announcer: You’re listening to Tradestreaming Radio, with your host, Zack Miller. Expand your mind. Become a better investor with tools, tips and technology from the smartest investors on the planet.

Zack: Hey, welcome to Tradestreaming Radio, I am your host, Zack Miller. This is the place where investors learn directly from experts.

Today’s guest is Ian Ayres. He is a professor at the Yale School of Law, also the Yale School of Management. He is also a prolific writer. He wrote a book last year called “Lifecycle Investing: A New, Safe, and Audacious Way to Improve the Performance of Your Retirement Portfolio.”

I invited Ian onto the show to talk about lifecycle investing and why it is audacious. I will give you a hint; just as we talk about diversifying across assets, this book talks about diversifying throughout time. The upshot of that would be; a young investor would be told to borrow money, to actually go into debt, to invest in the stock market earlier in his career. We are talking about with his retirement funds.

It created this backlash of, I’m not going to call it hate, but there was a lot of misunderstanding in the market. Paul Samuelson, who was really the pro-generator of this book, who had written a seminal paper in the ’60s, disavowed himself from it. If you go onto Amazon, Professor Schiller, who is a colleague of Ian Ayres, had originally given the book an approbation, and then came onto Amazon to actually explain why the book was attracting flack. It is a very interesting idea. It is a basic idea which really gets us to think about our lifetime earnings, and how to plan looking at those earnings as an earnings stream.

I thought it was a great conversation. I will turn it over to Ian. Again, this is Zack Miller. This is Tradestreaming Radio. You can get our archives at the website You can also find the archives on iTunes. If you are there, please give us a rating or a ranking, we would much appreciate, as would other people, to know if you are finding value with this show.

You can also come back to the website, we have got other stuff there as well, including show notes, some downloads depending upon the author or the interview of the day, and hope to have more free goodies there as well. We are also producing mini- courses, so if you want to learn a little bit more about some of these concepts, come back to the site, interface or interact with some of the other people in the community. We appreciate your time, and hope you enjoy the show.

Ian: Hi. My name is Ian Ayres. I am a Professor at Yale Law School, and I have an interest in corporate finance, which I have taught for years here at Yale.

Zack: It is interesting. There are quite a few people in law schools writing financial books. I am trying to think, there is a guy at the University of Chicago as well, Cass Sunstein?

Ian: That is interesting. I did not know that. “Nudge” is a very good book on cognitive psychology that has some applications to how you set up default investments in 401(k)s, so there is some finance in there, but I would not think of it as dominantly a finance book.

Zack: Oh, it is just interesting to see the overlap there. Do you want to tell us the big idea about lifecycle investing?

Ian: Sure. People understand that diversification is kind of a free lunch, that you can reduce risk without hurting your return, if you go from an under-diversified portfolio to a diversified one. Sophisticated investors often do a pretty good job, they know what they should do to diversify across assets, but many investors don’t do a very good job of diversifying across time. It is a simple idea.

You would not be very well diversified across time if you only invested in the stock market one year of your life. If that year turned out to be 2008, you would be in a world of hurt. It would be better to spread your exposure to the stock market across several years. The big problem is that people do a pretty bad job of that, because they don’t have much money when they are young, and many people end up with 50 times as much money in the stock market when they are close to retirement as when they are in their 20s.

Zack: How do you suggest that . . . there is a problem there. People early in their careers don’t necessarily have the cash to invest, so how do you counsel them?

Ian: We counsel, taking into account several caveats, some investors, in order to diversify better, should actually go out and borrow money in order to invest in the stock market. To a limited extent, they should try to buy stock on margin, or possibly through some derivative alternatives. This is the audacious or scary, crazy proposal that we have.

We know that you would be better diversified if you could have $10,000 in the market for three years, than to have $5,000 in the market the first year, $10,000 the next year and $15,000 the year after that. It is better to spread over time, and we take that view across a larger time period, across decades. People just get it wrong when they say, “I’d like to diversify better across time” but you cannot invest what you don’t have and people do that all the time. They invest what they don’t have in their home, by taking out a loan. They invest what they don’t have in their education, by taking out a student loan.

And, you can invest what you don’t have in the stock market, by buying stock on margin. You do need some start-up capital. You need to have as retirement savings, $3,000 or $4,000 to start playing this. But we say when you have $4,000, you should borrow another $4,000 and expose $8,000 to the market when you are young.

Stepping back, this isn’t saying leverage throughout your life; this is a leveraged lifecycle strategy. You expose yourself to more stock when you are young, investing 200%, and you ramp down to a much lower percentage, to an unleveraged percentage, let’s say, 50% as you near retirement.

Zack: I think what is so interesting is your approach to looking at lifetime income. I don’t think that investors tend to think of their income that way. We do not necessarily see it as an income stream on a bond. I do not even know how we envision it. The way you describe it seems to make a lot of sense, but then there is this visceral reaction against it.

I read some of the reviews on Amazon, we will talk about that a little bit later on, but why are people amenable to this strategy buying a home, where they would say, ‘Fine, that is just the way we do it’ as opposed to what you’re describing here with retirement savings, and we are specifically talking about retirement savings. Why do they think it’s such a crazy idea?

Ian: We have been climatized to thinking about leverage as a strategy that only speculators do for short-term speculation. We put borrowing a home with 80%, 90% borrowed funds in a very different category. That is a long-term investment. We are actually counseling, no, it’s possible to do, to mortgage your retirement in the same way that people used to mortgage their house. In a way that starts with 50% debt, but that ramps down as you age.

Zack: It is almost like an amortizing loan on a mortgage, right? As you are aging, you are reducing that leverage through time?

Ian: That is right. Some people shouldn’t treat their income very much like a bond. There is a really simple test. If you have been working for a few years and your salary has been fluctuating a tremendous amount over the last few years, let us say you are on commissioned sales, this strategy is probably not for you. But if you are a professor, like I am, my salary has not fluctuated very much over the last years, for me, somebody with tenure, my salary is much, much more like a bond. The University has $16 billion endowment. It is not going away tomorrow, and I have a very secure salary.

One of the big pictures, my mom used to teach me not to count my chickens before they hatch. Most people just completely ignore their future salary when it comes to investment. We say that that’s not quite right. It is not that you should count your chickens before they hatch, but you should discount your chickens before they hatch. The idea, you shouldn’t say, “It is a bond and therefore, it has a dollar-for-dollar value.” But there is some present value, that your future income, that your future savings has. If you are at a more uncertain position in your life, discount it more. But, to attribute $0 to your future savings is crazy for many, many people.

Zack: I wonder, I don’t know if it is necessarily germane to this conversation, but I wonder if people negative reaction to what you are saying, has to do with the changing nature of work as well? A lot of people are doing gigs, the tenure that you have is specific to your industry and nobody can, outside of academia, even in academia you can’t expect lifetime employment anymore. Working feels riskier nowadays. Do you think that has anything to do with it?

Ian: Yeah, I think so. In fact, Jacob Hacker, one of my colleagues here at Yale, has shown that empirically that, yes, people have more fluctuation on average in their jobs, but some professions are more secure than others. We have had a pretty good experiment the last several years and like I say, for people whose income is moving around, this might not be the strategy for them. For those that are on a fairly secure income path, it’s more likely.

Our strategy, even for people in their 20s who just have a few thousand dollars, it is very, very likely that their future savings, even if it is uncertain, is likely to make it that they should be 200% in the stock market. And our strategy keeps people at 200% into their early 30s, and then actually it varies. Some people stay a few years longer; some people ramp down faster and usually, people know a lot more about their future when they hit their mid-30s.

For many, many people, if they believe what we are arguing, they would have enough information by the time they hit their 30s to tailor this.

There is just a deeper psychology, I had a high school friend, he did not have to worry about his income directly, he had a rich grandmother who just loved him and was going to just drop millions of dollars on him when she died. She had all that money in bonds. This guy did not need to treat his income like a bond, he had a bequest that was in bonds and he was begging his grandmother, “Please expose some of this money to the stock market. Don’t keep it all in bonds year after year.” She refused and he kept putting pressure on her and it was not good for their relationship.

But he had something else he could have done. He could have, instead of putting pressure on her, he was saving money himself during this time, and he could have exposed some of that bequest to the stock market before he got it. He could have taken some of his current savings and bought some stock on margin because he actually had bonds that were millions of dollars of bonds that were coming to him as soon as his grandmother died.

Zack: So to be specific, we are talking about money that is earmarked for retirement and for people that have a relatively clear income path throughout time, right?

Ian: That’s right. If you have less clarity about your income path, you should discount the future more severely. There still will be many people that should do this a little bit, if you are not sure, “Gosh, I just got a law degree, but I am not sure it is really in me to practice long term.” Cut your estimate in half.

Zack: Okay.

Ian: For any law graduate, you do a guesstimate about what the present value of their future savings contribution; it is very hard not to get a present value of $400,000. But if you are somebody who doesn’t know, maybe you want to give it up and grow flowers in India, cut it to $200,000, $100,000. The question you should then ask yourself, how much of that $100,000 present value do you want to expose to the stock market? If you say $0, that is not a very rational approach. Better to expose some of that today and spread the risk over time.

Zack: Can we walk through the steps you would take? Assuming you buy into this idea, you have read the book; you say actually I am one of those people that can afford to take this leverage on. How do you go about figuring out, and I know the format with audio and video is not necessarily the best way to present this, but could you walk us through at a high level, how to figure out the next steps in that process?

Ian: Sure. Well, one thing you might do is go over to There are a few little calculators to try to have you develop some of the precursors to doing this investment. One of things you want to do is figure out how risk- adverse you are, and put it into a number. One of the metrics that finance economists use is something they call “relative risk aversion” and there are series of questions that you can answer and at the end of answering these questions, it will produce a number, your risk aversion number.

If you are not risk averse at all, it would be a strange person, the number would be zero. If you are a normal and have an average level risk aversion, it might be two or three. If you are more risk averse, it might be four or five. Answering some questions, there is an algorithm to get your risk aversion number. If you say, ‘I don’t know’, you might just start off with a risk aversion number of three, which people going through this process, three or four, is something like average.

Zack: Is that typically the only personalization in this calculation?

Ian: There are different degrees of personalization, but no is the answer.

The second thing you are going to want to come up with is your estimate of what the present value of your future savings is going to be. There, it is helpful to know what your last few years of income have been, and you can plug that into another worksheet, and add to that what your expected savings rate is from that.

For example, “I’ve been earning $60,000 for the last couple years, and I am 28 years old and I have been saving 5% per year.” If you can provide those pieces of information . . . we have a sense of people who are making $50,000 at age 28, you can make some guesses over what their future earnings will be, and if they continue to save at a 5% rate, you can make very quickly, a first stab, at least, at what the present value of future savings is going to be.

Then you can reflect on that and think, “Oh, but I am special, I have more uncertainty, I have less uncertainty. I know I am going to take this break for family reasons or to care for a parent.” Make some adjustments to that, but you are going to want to come up with a present value of future savings, and you are going to want to add to that what your current savings are.

So if you are a very young person and you have $10,000 in current savings, that is what is in your retirement account, you have calculated that you have $300,000 of present value of future savings, and then you have $400,000 that you want to think about. And to that $400,000 number, you are then going to want to come up with what proportion of that you want to expose to risky assets.

Zack: Is that what you call the Samuelson Share?

Ian: That’s the Samuelson Share. The Samuelson Share is the function of a few basic ideas. What you expect the risk and return to be on the market, plus this earlier concept of how risk averse you are.

As far as expectations of market return and market risk, you can use market measures for that, you can rely on historical measures for that. But as far as risk aversion, you have to inspect your own soul to know how aggressive or not you are.

Zack: That is a personal reckoning, huh?

Ian: That is exactly right.

Zack: So you have that discounted value of lifetime savings, and then you apply the Samuelson Share to that, that is going to give you what? How much should be in equities?

Ian: Yeah, that is exactly right. Really, in the book, we are focused on people that are the proportion in equities. Some people very reasonably say, “Oh, but I want to have more than just equities as my risky asset.” And really, I would say, “Go for it!” We are all about having good diversification, and we want people to have good asset diversification. We focus in the book on equities as the risky asset, because there is such good data that when we do our historical simulations, we can see what happens if people were invested in a mixture of stock and bonds shifting over time, what happens to them.

Zack: You are not looking at Greek Sovereign bonds?

Ian: Exactly right. Even though, just today, we are getting close to resubmitting an academic version of this, where we run the strategy on the Fritzy, and we run it on the Nike, and it does very well abroad as well.

Zack: Looking at historical performance, how much more would an investor eek out of their portfolio, on average obviously, if they were to use this lifecycle approach?

Ian: The biggest thing that I would emphasize is you can reduce your risk by about 20%.

Zack: What does that mean in practical terms, to reduce your risk by 20%?

Ian: The standard deviation on your retirement accumulation drops by about 20% if you pursue this strategy. I will give you a particular example; using stock market data, going back to 1871 thru 2009, we did the following experiment. We did a lot of experiments, but I will just focus on one here. We had compared two different strategies. One was 75% in stock, 25% in bonds every year of your working life.

The other one was a strategy where you started off 200% in stock, by buying on margin, and ramped down as you got close to retirement, down to 50% in stock. It just so happens that historically, those two strategies have, on average, exactly the same retirement accumulation. The leverage strategy starts out as more aggressive at 200%, but it ramps down and ends up less aggressive at 50%, when you have actually more money in your bank account. On average, these two strategies have produced exactly the same retirement accumulation.

The difference between them, and this is what most people would never believe, would be true until they actually see the numbers, is the leverage strategy that starts at 200% and then ramps down, is much less volatile. It is 20% below our standard deviation than the more traditional strategy of just every year having 75% in stock and 25% in bonds.

Zack: So when you say ‘less volatile’ meaning the ups and downs in somebody’s portfolio, there will be a tighter range?

Ian: That’s right.

Zack: Okay.

Ian: The minimum is higher and the maximum is lower. You may say, “Oh my gosh, but I’m giving up the maximum.” This is not a strategy that is designed to, in the first case, increase your return. It’s about better diversification. It’s about reversing your risk.

A second thing that you can do, once you have a tool that allows you to manage risk better, it actually can allow you to take on some more risk. It is not what would be, and just like it would be risky to just invest all of your money in one stock and people did not want to do it. But once you learned how to diversify across assets, people then were willing to take on some more equity risk. Once you learn how to diversify across time, some investors will respond, not by using all of the benefits just to reduce risk, but to trade off and to get some more return as well.

Zack: The upshot of this really is, and the thesis gets lost in the ‘how’, but the what is really that investors are really under exposed to stocks over their lifetime?

Ian: Well, I’m actually agnostic to that.

Zack: Okay.

Ian: They are just not well distributed. Your basic investor has multiple more exposure to the stock market in his or her 60s than in his or her 20s. Most people, from a time diversification perspective, they are only exposed to the market for 10 or 15 years, and it is the 10 or 15 years just before retirement. The extra years when they don’t have very much, if you only have $5,000 in the market in your 20s, and you have $1 million in the market in your 60s, you are not going to get very much diversification benefit out of your 20s. It is as if they’re not there.

And so, this is actually a strategy that is particularly important now, for people that are just getting close to retirement or have just retired, and their dominant years of investing in the stock market were from 2000 to 2011, that wasn’t a very great decade. Instead of having the current strategies, have people exposed to the market dominantly for one decade of their life, and we’re trying to expand their exposure across more decades. You just don’t know which decades are going to be relatively poor and which ones are going to be the go-go years. Get yourself exposure to multiple decades.

By the way, there is some bad news here, if you are aging, you cannot go back in time. There are still some benefits in your 40s, 50s from taking advantage of this strategy, but the benefits decline as you age. You can’t get this back. You can, however, give your next generation the gift of diversification, and that is something we talk about in the book as well.

Zack: You touched on something, I was actually thinking, is it possible to borrow on margin in a 401(k) or IRA?

Ian: No. There is one strange loophole; it is possible to buy call options.

Zack: Mm-hmm.

Ian: One can replicate a margin, a leveraged position through a call option purchase, but there are substantial legal obstacles at the moment, to doing this. There are also law reform issues out there. If people came to believe this, we might want to make it easier for them to invest in a leveraged lifecycle mutual fund that would do most of the work for them, and ramp them down.

Zack: I think you can own leveraged ETFs in a retirement account, is that true?

Ian: Yes, but I think the ETF is a very . . .

Zack: It is not a long-term thing.

Ian: It is a limited amount of leverage, that’s right.

Zack: OK. Robert Schiller is a colleague at Yale, right?

Ian: Yes.

Zack: As I was researching the book, I thought it was very interesting, he gave an approbation on the book, really in an unprecedented move, I have never seen it happen before, and he left a comment on the book on Amazon, clarifying what he had said. What is that all about?

Ian: Well, it didn’t surprise us that lots of people, who, like myself, I was taught in high school history class buying stock on margin caused the Great Depression. Anybody that would do this is inherently risky. How could this thesis that doing it in a disciplined way reduces risk be true? So there were lots of people who were flaming us on Amazon. Schiller came to our defense, and I don’t want to put words in his mouth, but saying that, of course, exposing yourself to the stock market across time as a theoretical matter has got to have some diversifying effects. Anyway, I commend people to read that.

One of the things that we also discovered is actually a quotation from Paul Samuelson.

Zack: Yeah, that was going to be my next question. Can we talk about the genesis of that? A lot this work was based on his original paper, right?

Ian: Exactly. 1969, Samuelson and Merton made these seminal, Nobel prize worthy contributions to finance, and a lot of finance economists take the results, ‘Look the optimal thing for you to do, is to invest a constant percentage of your wealth in the stock market, year after year, not this ramp down stuff. But the interesting thing about Samuelson, who is really a seminal and interesting model, assumed explicitly that we had an investor who had all their wealth, all their savings, up front in their pocket. If you have all of your savings on the day that you’re born, in your pocket, yes, you should put 50% in the stock market every year of your life.

What his model did not take on, and that is really ours is, what if you are like most people and you do not have all of your savings in your pocket the day you’re born. But you save over time, what should you do then? I blogged about this over at the New York Times, we actually found…

Zack: This is on the Freakonomics blog, right?

Ian: The Freakanomics blog, that’s right. We found a citation, where Samuelson, in 1969, said, ‘The businessman can look forward to a high salary in the future, and with so high, a present discounted value of wealth, it is only prudent for him, to put more into common stock compared to his present tangible wealth, borrowing if necessary for the purpose. This point doesn’t justify leveraging an investment financed by borrowing against future earnings, but it does not really involve any increase in relative risk taking, once we have related, what is at risk to the proper larger bases.’

This quotation, the 1969 Samuelson understood that somebody who actually does have substantial income coming in the future should want to expose some of it to the stock market today.

Something though that’s tragic, as an author, I am so inspired by Samuelson, he is one of the heroes of the book. We sent him a draft of our initial research on this, in just his last months on this earth, his last year and a half. We had a little bit of correspondence with him, and we were trying to convince him, he was quite resistant to us. In fact, you can find an event that he spoke at BU, where he criticizes this very approach.

My co-author Barry Nalebuff and I, we were scheduled to go up and physically meet Samuelson, he was our teacher and a hero of ours. We tried to meet him in person, we were scheduled to do that. At the last minute, the meeting was canceled because of his failing health, and he passed away now, after just a stupendous life. We’ll never be able to have that conversation or try to convert him back.

Zack: I know this is just conjecture, but do you understand why he distanced himself from it?

Ian: There are many people that have made a technical mistake about understanding the advantages of lifecycle investments. He thought, I think, that we were making the freshman mistake that you should take on more risk when you are young. I believe that we aren’t making that mistake in a sense. One way to minimize our contribution in this book is that we are really just expounding on those few sentences that I quoted to you from a 1969 Samuelson.

He said that the business man with future income, might borrow to invest in stock today, and we are just applying how exactly that should be done, and showing what are the benefits from following that strategy.

Zack: You mentioned your co-author, professor Nalebuff and you talked about the differences in lifetime income. One question for you, how come you’re not a shareholder at Honest Tea? How come you get that gig?

Ian: I only could wish. Barry might have thought he was doing me a benefit from not putting me into the start-up, but this is one thing, that our paths have diverged majorly since he sold his company to Coca-Cola.

Zack: Yeah, I guess that tends to happen when that happens.

Ian: There you go.

Zack: I guess I have two more questions as we are wrapping it up Tell us a little bit about Stickk, your website. I thought that was quite interesting. I know it’s not necessarily related to what we are talking about now. Can you talk about the idea behind that?

Ian: Sure. It is taking a very old and well-regarded gain theory idea of commitment, being able to help people put their money where their mouth is, and we have brought it to the internet, along with two other co-founders, Jordan Goldberg and Dean Carlin. I helped co-found this internet commitment store, and by the way, for some of your listeners there, you can make a credible commitment to save money, and we will nag you to save money, if you want.

We will use reputational stuff, you can give us friends and we will tell them whether or not you succeeded. You can choose to have a referee. Most importantly, you can put money at risk. So you can make a commitment to save $100 a month and if you don’t save the $100, you will forfeit an amount that you choose. This has been an effective way that people prefer to save money than to lose it.

Indeed, in your initial contract with us, you can even choose to give that money to a friend, to a charity, but some people choose to give it to an anti-charity, a charity they don’t like, as a way to really make sure that they save their money.

Zack: Oh, that is interesting. So that is Stickk with two K’s, and I just realized now, that is the other side of the karat, right?

Ian: Exactly right.

Zack: Not the sharpest tool in the shed. One thing we ask all guests on this program is their opinion on resources to learn more about this subject. Obviously, your book is a great resource, the website,, has a ton of information, has those calculators to help people actually calculate some of this stuff. Are there other resources, online or off, that you could point people to learn more?

Ian: Yes, for those people that know what beta and a sharp ratio is, they might gnaw on the academic version of the article. There is an early draft of that which you can find at if you look for co-authorships with Barry Nalebuff, and within a week or two, there will be a new version up.

Zack: Cool. What about other ancillary or overlapping type materials?

Ian: Well, I think we cite most of the important ones, both on the website and in the book. Starting by reading some of the great work by Robert Schiller is a wonderful place to pick up on something. On another dimension on which we talk a little bit, and that’s whether you want to have your strategy vary at all, to time it either to make it contingent on the price-earnings ratio. And increasingly, I’m finding some evidence that people might have their strategy depend a little bit more on the VIC, this volatility index. Reading about Schiller and P-E ratios is something else that you might look to do.

Zack: You mentioned in the course of the call, the idea of a lifecycle investing fund. Is that something you are working on that you can talk about?

Ian: We have been in conversations, so yes, but sadly, I can’t announce an imminent rollout.

Zack: That would be great. It seems like the type of thing like a self- contained fund where it just does it for you.

Ian: Exactly. The monthly rebalancing is actually something that very few humans are going to do and if you are going to do it outside of a fund, you are going to have to think, “Well, could I bring myself to do this quarterly or at least once a year?” The good news is, you can get partly there, and by the way, let us start, if you were young and see there is some value in this but you are crazed about, “There is no way I could ever buy stock on margin.” Well, at least, go up to 100% in stock when you are young. You don’t have to borrow. If you’re still at 70% in stock and 30% in bonds when you are 28 years old, you’re making a mistake.

Zack: Ian, thanks so much for your time. It was a great conversation.

Ian: Likewise, thank you.

More resources

Even more resources

Photo credit: CJS*64 A man with a camera / Visual hunt / CC BY-ND

Better retirement planning and investing – with Mike Egan

retirement investing with Income&

Mike Egan has heard numerous investment myths bandied about for decades.mike egan

In his new book, Your Stronger Financial Future: The Essential 8 Strategies for Making Profitable Investments sets out to correct those misunderstandings.

In our interview, Egan addresses:

  • social security and how it should fit into a retirement plan
  • how unprepared most of us are for retirement
  • the role of financial professionals in the investing process
  • why debt makes success harder

Continue reading “Better retirement planning and investing – with Mike Egan”