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Teaching the Middle Class to Invest Like the One Percent

A new financial services company wants to create a “revolution” by giving everyday Americans access to the investment strategies of the wealthy

Illustration by Addison Eaton

Income inequality is by now a term most Americans know well. From French economist Thomas Piketty’s surprise bestseller tackling the topic, to the new leader of the Fed, Janet Yellen, confessing that the trend “greatly concerns” her, to a much-shared study indicating the U.S. is closer to an oligarchy than democracy, 2014 was the year that the widening gap between the wealthiest and poorest families in America went mainstream.

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Here's Where People Invest If They Don't Know How to Invest

Ok let's be honest, this asset allocation stuff can be crazy confusing. In order to alleviate the confusion and money off you, asset managers offer funds that do your asset allocation for you. They're called multi-asset funds.

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Ok let's be honest, this asset allocation stuff can be crazy confusing. In order to alleviate the confusion and make money off you, asset managers offer funds that do your asset allocation for you. They're called Multi-Asset funds.
Multi-Asset funds have been in the news over the last few weeks, mostly because, nobody knows where to put there money. Your bond funds are down about 3 percent or so for the year most likely, your U.S. stock funds are still up over 10 percent, but international stock funds have been hit, as has gold and other commodities in general.
Here's what Multi-Asset do:
Say you have $1,000 dollars.
You invest $1,000 in a Multi-Asset fund.
The manager of that fund decides which asset classes to invest in for you.
The fund manager rebalances the portfolio and makes sure the fund is
diversified across a handful of asset classes so you don't have to worry about it.
Sounds dreamy...
But there are two glaring risks:
1) It is not easy to be the jack of all trades, i.e. switch from investing in bonds to investing in stocks. It is hard to time the market right and many (most) portfolio managers are not that.
2) The asset allocation of the fund is not tied to your own personal risk tolerance and risk tolerance for your age (also talked about in the asset allocation video).
3) Some of these funds charge high sales fees.
Check out the video, we talk about these risks and a few more.

This post is part of a regular series of money explainers for non-finance people. Follow along and join in the conversation at good.is/makinsense.

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How to Educate Next Generation of Entrepreneurs? Start by Reviving Financial Literacy

For better or for worse, money pervades the fabric of American life. Money funds our life-résumés, from our most basic needs, to our most...


For better or for worse, money pervades the fabric of American life. Money funds our life-résumés, from our most basic needs, to our most extravagant experiences, but it is also the leading cause of divorce, domestic abuse, stress, and low college persistence rates.

Given the considerable influence of money on the American psyche, one may imagine our society would go to great lengths to promote proven financial education strategies. In fact, we do. Millions of dollars are spent each year on financial education programs to educate our populace on the costs and benefits of sound money management. Unfortunately, to date, financial education has been remarkably unsuccessful.

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Jay-Z and Warren Buffett Team Up to Teach Kids Financial Literacy

One's a billionaire and the other has major street cred. Together they hope to bring the cool to financial literacy.


One is worth $39 billion, while the other has a comparatively meager $450 million but significantly more street cred with young people. So Warren Buffett and Jay-Z are teaming up to teach kids about financial literacy. Buffett's animated series Secret Millionaires Club is set to move from the web to television this month, and an animated Jay-Z is the guest star for the first episode on October 23.

During the episode, Jay-Z invites four students to his office and applauds their hard work in school, then gives them some tips on how they can become successful later in life. The idea is to get kids hooked by Jay-Z's endorsement, then keep the lessons going long after the television is turned off. Secret Millionaires Club is simultaneously launching "Learn and Earn," an initiative to teach students a well-organized series of lessons on financial literacy. To that end, the program is providing more than 100,000 educational kits to teachers, and putting a pretty fantastic collection of free, downloadable materials online.

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