Michelle Connell, CFA, owns Portia Capital Management, LLC, a registered Investment Advisory firm specializing in the investments of foundations, charities, and high net worth individuals. Portia Capital Management is the only investment management firm in the Dallas-Fort Worth area owned by a female CFA charterholder-an important resource in a world where 60% of women retire in poverty.
Michelle’s expertise is backed by more than 20 years of financial experience in management positions with large investment boutiques and private banks. She is also one of the highest-rated finance professors in the U.S., currently serving as an adjunct professor at The University of Texas at Dallas.
She works with her students and clients to understand the value of crafting a portfolio that includes conventional products as well as alternative assets. In addition to her work with students and clients, Michelle teaches the CFA Review through the DFW CFA Society.
She also founded “Portia’s Children,” through which up to 10 percent of her company’s profits are donated to the North Texas Charity, Educational First Steps.
“The only way that you’re going to have any security is by understanding money and finance.”
Worst investment ever
Michelle got a job analyzing semiconductor stocks for a private boutique in San Diego in the late 90s. She didn’t have a background in engineering, and because technology stocks can be extremely volatile, it was a struggle for her to handle these stocks.
No choice but to learn
To save her job and prevent losing too much on the stocks, Michelle quickly learned how to understand any investment’s downside, whether it’s a stock, a bond, a private investment, etc. This way, she could tell when to let go of an investment.
Though this was tough, this knowledge worked to Michelle’s advantage as a few years later; she got to use it as the head of the tech sector for Wells Fargo, right before the tech bubble burst.
Always look at the downside
Look at the downside of your stocks, and if possible, have your analyst hold back on what you own. And if you don’t understand the downside, be willing to sidestep the upside.
You need to evaluate the upside and downside in the different investments you hold. That doesn’t just mean the individual securities, but also those within a particular style or market cap.
No. 1 goal for the next 12 months
For the next 12 months, Michelle’s goal is to concentrate on her investment reallocations and take advantage of her portfolio’s fixed income side.
“Keep reading and looking at the downside as well as the upside. Think of investing as a long-term game. That’s the way you should approach your retirement and your assets.”
Andrew Stotz 00:02
Hello fellow risk takers, and welcome to my worst investment ever stories of loss to keep you winning. In our community we know that to win an investing you must take risks but to win big, you've got to reduce it. This episode is sponsored by a starts Academy, which offers online courses to help investors better manage their stock portfolios, aspiring professionals to learn how to value any company in the world business leaders to make their companies financially world class and even beginners to implement a simple lifetime investment plan. Go to my worst investment ever.com to get free access to my short course six ways to lose your money and six strategies to win where I share the six lessons I've learned from all these podcasts interviews. Fellow risk takers, this is your worst podcast host Andrew Stotz and I'm here with featured guests. Michelle Connell. Michelle, are you ready to rock?
Michelle Connell 00:53
Yes, sir, I am.
Andrew Stotz 00:56
Well, I'm so happy to have you on and I'm going to tell the audience a bit about you. So, Michelle owns Porsche Capital Management, a registered investment advisory firm specializing in the investments of foundations, charities, and high net worth individuals. Porsche Capital Management is the only investment management firm in the Dallas Fort Worth area to be owned by a female CFA charterholders. And important resource in a world where 60% of women retire in poverty. Michelle's expertise is backed by more than 20 years of financial experience in management positions with large investment boutiques and private banks. She is also one of the highest rated finance professors in the US currently serving as an adjunct professor at the University of Texas at Dallas. She works with her students and her clients to understand the value of crafting and perform a portfolio that includes conventional products, as well as alternative investments. In addition to her work with students and clients, Michelle teaches the CFA review through the Dallas Fort Worth CFA society. She's also founded Porsche's children to which up to 10% of her company's profits are donated to the north Texas charity, educational first steps. Wow, Michelle, you do a lot of stuff, please take a minute and filling further tidbits about your life.
Michelle Connell 02:15
Let me see where I could start. It all started in Seattle, where my mother tells me at the age of five, I love watching the stock tape go across the building in downtown Seattle. And I just had an affinity for stocks at an early age and came to love finance. Also because at a young age, I help take care of my family and was put to work at 15 and had to find a way to get into college and pursue a career in finance because I realized at that young age that the only way that you're going to have any security is understanding money and finance.
Andrew Stotz 03:02
That's interesting. And it's uh, you know, there's lots of different reasons why people get into the world of finance. And, you know, I think what I can see about your reason and why you came in also is part of your reason, I guess why you're helping a lot of other people to make some financial, you know, stability in their life. It's interesting, you mentioned this statistic that 60% of women retire in poverty.
Michelle Connell 03:28
That is the statistic for the United States, I need to qualify that. I don't know what it is for the rest of the world, I'm guessing it would be something similar. I know in parts of Asia, like Japan, for instance, it's actually worse. I don't know what it's for Europe, I think the issue is that women are raised to be caregivers. And so they're either taking care of their children or and or they're taking care of their parents or their in laws. And so they spend less time and work less time pursuing their career. And now with COVID, that's actually more of a problem. Because one in four working mothers, when polled recently in United States said that they're going to pull back on their careers and the number of hours they're working. They're just overwhelmed, you know, with having to oversee their children's education right now.
Andrew Stotz 04:32
Yeah, it's a lot. And it also, you know, there's a whole nother aspect and I think of my mother and my father. They work together on the finances of the family. So my mother knew, you know, what was going on. I think there's a lot of women who may decide to leave it to the husbands or husbands that don't want to share it with their wives. And, you know, I think that one of the things that that is so important is that if you're a woman And you're in a relationship where the husband or the boyfriend is not sharing that information, that it really is important to kind of step up and say, I want to talk about this, I want to be a part of this. Because there's so many cases where, you know, people women are left out, and then all of a sudden disaster strikes.
Michelle Connell 05:20
Yes, there is a 90% probability, probably no way too many statistics. But there's a 90% probability in the United States that at some point, during her life, a female is going to be in charge of a family's finances. That doesn't mean you know, necessarily divorced, that means you could lose a spouse, they could become disabled, you know, they could become an capacitated. 90% is, you know, it means it's going to happen, right? Probably is gonna happen versus not. What worries me is that a lot of millennial women, at least got a qualified again, the United States, one out of four are there, they're saying finance in investments is just too difficult. They won't even go near this subject, because they think it's brain surgery or something. It's not, it's just, they're a little bit overwhelmed by, you know, the subject. And I think also, as you kind of the topic of your podcast, the downside, women really focus on how much they can lose. Whereas women, a man rather typically, to their credit, are more focused on the upside, sometimes to their detriment, because they don't realize how much they can lose. But they'll just focus on the upside, women will focus on the downside. So I think that's why at least 25% of millennial women aren't even doing anything. I mean, they're even putting their money to work in a 401k.
Andrew Stotz 06:55
Yeah, it's interesting. I mean, in my family, I have two sisters, and they both have daughters. So I have five nieces, no nephews, and I, those five nieces were an inspiration for me to write the book that I wrote called, how to start building your wealth investing in the stock market, I turned that book into an online course, because I really saw the value of it. But the idea was, how can I teach my five nieces how to invest even if they're not studying finance, and they're not invest interested in investing? But, you know, how can they take care of themselves. So when they turned 18, I gave each of them $3,000, and helped them set up in their case, a Vanguard account, and start at the age of 18, to build a portfolio of just, you know, a simple thing, which is, you know, a fund that just owns every stock in the world and then contribute. And I think that that book, and that course, which you know, I continue to expand, it's something that's a good starting point for a young person, you know, and I think that the point is, nowadays, there's enough out there that it's not so scary and overwhelming. It can be if it starts, actually, you know, I think I'm curious what your answer to this to be. But for me, I would say, if you delve into the world of finance, and it starts to become really complicated, something's wrong.
Michelle Connell 08:17
I would totally agree with you. I think it's just, it's a lot of knowledge. And sometimes it can, that can be overwhelming. But even in teaching the CFA course, even that isn't brain surgery, or that it doesn't have the difficulty that engineering can have, I can say that because I started studying engineering for a very short period of time, and then quickly realized, that was not going to work out. So I don't think it's that difficult. I think it's just taking a concerted effort. And, and also having a curiosity. So I think, doing what you did with your nieces, giving them the $3,000 giving, you know, having them start a mutual fund account, I think that creates that curiosity. And so then they're willing to delve into it a little bit further, especially when they start to see their account go up, right? I mean,
that's a motivator.
Michelle Connell 09:19
So if they did it this year, during the pandemic, they probably have done pretty well. And so they're, you know, more apt to keep at it.
Andrew Stotz 09:27
Yep. Exactly. All right. Well, that's a great background on you. And then now it's time to share your worst investment ever. And since no one ever goes into their worst investment thinking it will be. Tell us a bit about the circumstances leading up to it, then tell us your story.
Michelle Connell 09:44
I would say that my worst investment is probably plural. My first area that I analyzed were semiconductor stocks because the men that I worked with in my firm had been so burned by them in the 70s, that by the time I got to this private boutique in San Diego, in the late 90s, I'm like, well, you handle this. And, you know, I don't have a background in engineering. And obviously, technology stocks can be extremely volatile, especially semiconductors. And I think they, I learned very quickly, you have to understand the downside of anything you're potentially going to buy, whether it's stock, a bond, a private investment, otherwise, you're going to stick with that investment too long. So having that upside information, which we all you know, we want to believe, okay, I'm going to make this percent or you know, it's going to be worth this amount in a short period of time. But looking at what is the worst? Or the what's a worst case scenario here in terms of what could this be worth, if things go sideways with this business? Hmm. And a few years later, I think that helped me a lot when I was the head of the tech sector for Wells Fargo, right before the tech bubble burst. And I started looking at the downside of a lot of those stocks, and had my analysts hold back on what we own. And if we didn't understand a downside in the situation, I was willing to sidestep the upside.
Michelle Connell 11:50
And I still follow that today that practice today upside capture downside with anything that I put in a portfolio. And I, I might that may mean, like, this year, I probably didn't hit the cover off the ball and some of my, with some of the managers I used, but more often than not, it means I lose less, and therefore I make more over time.
Andrew Stotz 12:17
So tell us about that for just a moment. How could it be that losing less means making more? I think in the world of finance, most people think making more is how you make more. Oh,
Michelle Connell 12:31
okay. Um, let me give an example. This was probably, let's say, it was luck, because that way it'll happen, it'll happen again, coming into the pandemic, I was concerned about some valuations. And I used a manager. That was he had been the head of derivatives at Barclays for a number of years, and now he's the head of derivatives at another major bank, and I saw that he had that he was putting together a portfolio because he was also concerned about potential downside. And so, you know, using option overlays, calls and puts in the market went down 30 some percent in March, that portfolio, which was a lot of my equity allocation was down five, hmm, being able to, you know, only lose five and then pivot when things got cheap, and then reallocate, you know, saved me quite a bit of money. And so, no, I haven't, I've been haven't honed the high flying mega technology stocks, you know, to a great degree, but the fact that I only went down five, and I had, you know, allocations to managers that do well, in other ways helped me and so that example, is threaded throughout my, my portfolios, since I started my firm over four years ago.
Andrew Stotz 14:12
Right. And I think the point is to we're playing, you know, investing is a much longer game than most people realize. And, and when you look at losing, you know, big over a long period of time, it just can be so damaging. So, let me ask you, what, what, what actions would you recommend that our listeners take to make sure that they're managing for their downside, you know, and that they're understanding this and making smart decisions.
Michelle Connell 14:49
I think you need EA to evaluate the upside and downside in the different investments you hold and that doesn't just mean the end. Individual, you know, individual securities. But that also means within a particular style or market cap. So, you know, we've had some market caps, that small growth has started to do well, in the last few months, small cap value is still negative, I think by more than 12%. Through the beginning of this week, I think I would move some money, I've moved some money around, taking money off the table with the large cap growth managers that I have, we allocate to the some of the small some of the value, because as we get out of this pandemic, you're going to see more of a recovery. And those smaller stocks, and those more cyclical stocks should start doing well. And, and same for international too, because they, a lot of international markets haven't had the upside that the US market has. So I think there's a lot of room for upside. Once we get through, you know, the elections, I'm speaking from, obviously, less perspective, because we're gonna have gonna probably have additional volatility. But, you know, typically the December after an election, you have 4% upside, if it's the incumbent, you probably have eight to 11%. And I would expect next year to be a fairly decent year, especially when you look at the fact that we're sitting on over $4 trillion in money market funds in the United States. And also, because everybody has switched to the belief, not that I agree with it. There is no other alternative to equities. You know, I agree that is true, because bonds aren't making what they used to make. And so you're having to seek that yield and that upside elsewhere if you're, whether you're an individual or an institutional investor.
Andrew Stotz 17:16
Alright, so last question, what's your number one goal for the next 12 months?
Michelle Connell 17:29
I'm going to say to do well with the reallocations that I just spoke of, and also take advantage on the debt side, or the fixed income side of the portfolio. We haven't had a lot of defaults, because of all the fiscal stimulus probably worldwide. So there are bond managers, a lot of bond managers I know are sitting on heavy allocations of cash. Because a lot of the defaults that we would have seen earlier, we're probably going to see beginning of next year, or maybe towards the end of the first quarter, and so you may have some really good opportunities for upside with a lot less risk that's associated with equities.
Andrew Stotz 18:15
Hmm. Interesting. That's exciting. Well, listeners, there you have it another story of loss to keep you winning, remember to go to my worst investment ever.com to get free access to my short course six ways to lose your money and six strategies to win. As we conclude, Michelle, I want to thank you again for coming on the show. And on behalf of a Stotz Academy, I hereby award you alumni status for turning your worst investment ever into your best teaching moment. Do you have any parting words for the audience?
Michelle Connell 18:50
Ie reading and keep looking at the downside as well as the upside and think of it as a long term game as you spoke to earlier, it's investing it's not gambling, if that's the way you should approach your retirement and your you know, your assets.
Andrew Stotz 19:11
Beautiful. Well, that's a wrap on another great story to help us create, grow and most importantly, protect our well fellow risk takers. This is your worst podcast host Andrew Stotz saying. I'll see you on the upside.
Connect with Michelle Connell
- How to Start Building Your Wealth Investing in the Stock Market
- My Worst Investment Ever
- 9 Valuation Mistakes and How to Avoid Them
- Transform Your Business with Dr.Deming’s 14 Points
Andrew’s online programs
- Valuation Master Class
- How to Start Building Your Wealth Investing in the Stock Market
- Finance Made Ridiculously Simple
- Become a Great Presenter and Increase Your Influence
- Transform Your Business with Dr. Deming’s 14 Points