Dr. Linda Zhang of SoFi Invest: “It’s ok to lose. Every investor does”

It’s ok to lose. Every investor does. — I’ve not met or heard any investor, professional manager who never lost money in investments in my career. Investing is about opportunity seeking, that always comes with both risks of up and downs, as well as reward. The good news is that you have the time on your side […]

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It’s ok to lose. Every investor does. — I’ve not met or heard any investor, professional manager who never lost money in investments in my career. Investing is about opportunity seeking, that always comes with both risks of up and downs, as well as reward. The good news is that you have the time on your side to find the next potential winning investment.

As a part of my series about the 5 Essentials of Smart Investing, I had the pleasure of interviewing Dr. Linda Zhang.

Linda is a senior advisor to SoFi Invest, and the CEO and founder of Purview Investments, a SEC registered investment advisor specializing in low-carbon and ESG global investing. Linda is also the Portfolio Manager for an active ESG ETF, ticker ECOZ. Linda has years of institutional asset management experiences at Blackrock, MFS and Schwab’s subsidiary Windhaven. She is a co-founder and a board member of Women in ETFs, as well as a recipient of the Top Women in Asset Management Awards 2015 by Money Management Executive. Linda is a frequent contributor to industry conferences, journal publication and financial media such as Bloomberg TV, Bloomberg News, ETF.com, Wall Street Journal and the Financial Times. Linda holds a bachelor’s degree from the University of Regina, and master’s and doctoral degree in finance from the University of Massachusetts at Amherst.

Thank you for doing this with us! Our readers would like to learn a bit more about you. Can you tell us the “backstory” about what brought you to the finance industry?

My initial interest in finance was not love at first sight, but rather out of necessity! When I left China for a business major in college in Canada, I was completely unprepared for the necessity of command of the local languages. While struggling with essays for marketing classes, I thrived in statistics and math, or any subject that required logical and analytical skills, with less of a dependence on language. I soon found myself finishing a Ph.D. in finance in the U.S., and I became a young finance professor teaching MBA finance classes, consulting with respected quantitative asset managers on the side, and publishing research papers, while raising my first child.

Before long, I ended up as a full-time industry practitioner by chance. A British asset manager was looking for a quant analyst to solve the problem of comparing emerging markets from Asia to Latin America in an objective, comparable, quantitative framework. I recommended a few of my MBA students for the job. The firm ended up asking me to join them instead. I thought I could build investment models and it would be easy. So I took the offer, and wow, was I wrong on the “easy” part! Real-world investing is often illogical and unpredictable, to say the least.

Can you share with our readers the most interesting or amusing story that occurred to you in your career so far? Can you share the lesson or take away you took out of that story?

Back in 2012, I was approached by an executive recruiter for an investment role heading the team, which was the largest ETF (exchange-traded fund) strategist at the time. I had a comfortable and well-paid portfolio manager job at a blue-chip mutual fund firm at the time, but I took the meetings to learn about the investment approach. I decided to leave my well-established firm to join the much smaller, relatively unknown ETF strategist, and most of my colleagues showed concern and bemusement over my choice to enter the decidedly less fancy, retail-investor-focused ETF world (“You are joining WHO?”). I admit I didn’t have all the answers myself as to why I needed to take a new path at the time, but I just felt that strong “pull.” It turned out that my leaving the mutual fund industry that Christmas was right around the time that the ETF industry took off. That once-obscure part of the finance industry has grown to 7 trillion dollars business today, shaking up the mutual fund industry.

The lesson for me is that sometimes you do not have all the logical answers. Trust your heart and take the leap, whether it’s a career change or other decisions. That strong pull you might feel is often not random — it comes from your experiences and judgments.

Are you working on any exciting new projects now? How do you think that will help people?

Yes. I am working on a couple of exciting new projects. This year, I became a senior advisor to SoFi Invest, a digital finance company focusing on its members’ financial well-being, including those of Gen Z and millennials. I’m excited that more younger generations are interested in investing and many have cited the desire to invest in companies that align with their values.

I’m also working on another exciting project this year. I started Purview Investments to help investors wishing to reduce climate risks, social equity, and firm governance problems (ESG) using the power of their investments. My dream became a reality when I started managing a new ETF listed on the New York Stock Exchange, ticker ECOZ, TrueShares ESG Active Opportunities on Feb 28 this year.

I’m very pleased that the ECOZ has proved two points so far: (1) Performance resilience throughout the pandemic bust and market recovery, and (2) ECOZ drastically reduces investors’ portfolio carbon footprints to just a small fraction of comparable products.

Ok. Thanks for all that. Let’s now jump to the main core of our interview. According to this report in Fortune, nearly two-thirds of Americans can’t pass a basic test of financial literacy. In your opinion or experience what is the cause of these unfortunate numbers?

Probably a combination of fear, lack of awareness and resources.

If you had the power to make a change, what 3 things would you recommend to improve these numbers?

  • Include an investment curriculum starting from elementary school.
  • Have parents start a savings account for their kids when they start 1st grade.
  • Encourage Americans to think about what products they like, what companies they admire. Those often turn out to be good investments.

Ok, thank you! Now to the main question of our interview: You are a “finance insider”. If you had to advise your adult child about 5 non intuitive essentials for smart investing. What would you say? Can you please give a story or an example for each.

Start small, start early

A key asset a young person has is that the time is on her/his side. That means the younger generation has more time to grow investments, and more time to recover from a potential loss. But you have to use your time asset and act now, however small of an amount that is.

Open a brokerage account today. There are many options for brokerage firms, from traditional large brokerages to fintech firms that might fit better with the user experience of young investors, with user friendly mobile apps, social interactions on investing and fractional share trading.

Invest with your heart and mind

Investors in the past have often driven blindly on potential investment returns, not asking themselves if they actually support those firms and their industries. This often places investors in moral dilemmas, such as investing in tobacco firms while donating to cancer research, investing in oil and coal firms while protesting for actions for climate change, or investing in a social media firm that repeatedly incur data security breaches or permit hateful speech on their platform. When you invest in an ETF, a fund, a stock, ask about how the firm make money.

There are plenty of investments that can meet your investment goals without these moral inconsistencies. Your investments do leave a footprint on the environment and society, and shape corporate behaviors. Use your power as an investor.

Believe in the industry trend before believing in a company

Looking back at my investment career, the best investments I’ve made were often due to being early and persistent in getting a piece of major long-term economic and industry transition trends. Back in 2005, as a portfolio manager for Blackrock’s global multi-asset funds, I was in early on the transformation of China’s economy and the creation of the largest middle class the world has seen. We invest heavily in themes reflecting the rapid rise of Chinese consumers and urbanizations.

In February this year, we launched the low-carbon ESG ETF (ticker ECOZ). We went for the themes like energy transition from fossil fuels to renewables, the electrification of the transportation industry, the food industry’s transition to plant-based food, for example. These long-term trends happened to be accelerated by the pandemic and our portfolio benefited greatly in investment performance. Identifying a solid trend is often more critical than betting on one company.

Build a portfolio, not just one single stock

My advice is don’t get too tied up and lost in one company. Invest in the trends and themes with a few companies or ETFs. For someone with a limited budget for investment, ETFs offer a way to insulate yourself from the emotional reaction to the daily swings of a single stock, and allow you access to a basket of stocks and build a portfolio with one purchase. There are plenty of choices of ETFs today, which you can screen for themes that resonate with you.

It’s ok to lose. Every investor does.

I’ve not met or heard any investor, professional manager who never lost money in investments in my career. Investing is about opportunity seeking, that always comes with both risks of up and downs, as well as reward. The good news is that you have the time on your side to find the next potential winning investment.

None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story about that?

I’m eternally grateful to two women, one in my career and one in my life. Kim Goodwin, CIO of State Street Research at the time, hired me in 2003 as the head of quant research and trusted me for two things I’d never done before: portfolio management and people management. It was common in our industry that men were hired for their potential, and women were hired for their track records. Kudos to Kim, she threw the gender gap out the window; I was clearly hired for my potential and not my track record at that time. To her, the transition from an experienced quant analyst to a quant manager is a natural progression. We still need more leaders like Kim in our industry today.

I’ve always looked up to my mother, Huijun Xiang. I lost her to cancer last summer — she has been my idol all my life. She was a talented medical doctor with deep compassion, a brilliant medical professor with a cult-like student following, and a beautiful and fearless mother who was completely oblivious about her beauty. In 2001, right after 9/11, nervous about flying, I asked if she would like to accompany me on a business trip to London. We had a wonderful time in the city for a long weekend, which became the beginning of many memorable mother-daughter trips later on. Today, I am carrying on that tradition with my own daughter.

Can you please give us your favorite “Life Lesson Quote”? Can you share how that was relevant to you in your life?

It is in you that you must look, not around you.” — Eugene Delacroix (born 1798) There is much noise and uncertainty in life. They often become our excuses not to seek changes. You have to check in with yourself from time to time what make you happy and fulfilled, not what others tell you. It helps to set directions for your career and life, and more importantly, helps you deal with setbacks.

You are a person of great influence. If you could inspire a movement that would bring the most amount of good to the greatest amount of people, what would that be? You never know what your idea can trigger. 🙂

Humanity is faced with two key crises: A climate crisis and a social equity crisis. The wildfires from Australia to the U.S. West Coast are poignant reminders of climate risk destroying the heart of communities and bottom lines of businesses. Separately, gender and racial inequity are not only moral issues, they restrict talent pools, limit business opportunities, and creates social anxiety and public health problems.

I am trying to address these issues through the power of investing. Young investors, such as many of those on the SoFi Invest platform, will be disproportionately more affected by the these crises. I hope they will become a force of change, influencing how their parents invest, how their companies invest. Demand your firm’s retirement plans to include sustainable and impact investment options.

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