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HerMoney Podcast Episode 177: Cryptocurrency Investing For Dummies With Kiana Danial

Kathryn Tuggle  |  September 4, 2019

If you're not sure where to get started with investing in cryptocurrency and blockchain, our guest this week has all the answers.

This week we’re boldly going where no HerMoney episode has ever gone before — we’re talking cryptocurrency and blockchain technology. Listen in as we explore some of your most frequently asked questions, including: How does it work? Should you invest in it? How do I use my money once I buy crypto?

Our guest, Kiana Danial, is the author of the new book Cryptocurrency Investing for Dummies, and CEO of InvestDiva.com. She talks with Jean about her journey into investing in cryptocurrency, and understanding what blockchain was all about. With Kiana’s help, we’ll learn about the digital ledgers that record cryptocurrency transactions and keep them secure.

Of course we’ll also tackle the risks associated with investing in a new technology, and how difficult it is to pinpoint which of the thousands of cryptocurrencies currently on the market will be the “winner” in the end. Kiana also talks about her international upbringing, with a childhood in Iran, her time spent in Japan, and how that shaped her perspective on a de-centralized currency like Bitcoin.

Kiana also shares her thoughts on exactly when we’re all going to be able to use cryptocurrency in a “real” way, to pay for things on our mobile devices, just like we would with any other purchasing app. Hint: The future isn’t so very far away.

Here are the links to the robocall blocker companies mentioned in Thrive: NomoroboHiya Caller ID and BlockRoboKillerTNS Call GuardianYouMail and Truecaller.

This podcast is proudly supported by Fidelity Investments. Making smarter, more informed financial decisions can help you meet your goals. Look to Fidelity for tools, resources, and investment advice that can help. Learn more at Fidelity.com/HerMoney. Fidelity Brokerage Services LLC Member NYSE, SIPC.

Editor’s note: We maintain a strict editorial policy and a judgment-free zone for our community, and we also strive to remain transparent in everything we do. Posts may contain references and links to products from our partners. Learn more about how we make money.

Transcript

Jean Chatzky: (00:07)
HerMoney is supported by Fidelity Investments. We want you to demand more from your money, so start by knowing what you own and what you owe. We’ll help you take the next step at fidelity.com/demandmorenow. HerMoney comes to you through PRX. Hey everybody. It’s Jean Chatzky and this this week we are boldly going where no HerMoney episode has gone before. That’s right. We’re talking about cryptocurrency. Yes, cryptocurrency. We’re going to get into how does it work? How does block chain work? Should you be putting your money in it? Could you use it if you bought it? We’re answering all of these questions and more with Kiana Danial who is author of the new book Cryptocurrency Investing for Dummies, which is exactly what we feel like we need because we are starting from the beginning. She’s also the CEO of investdiva.com where she coaches people on their investments. Hi Kiana.

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Kiana Danial: (01:18)
Hi.

Jean Chatzky: (01:18)
Thanks so much for coming into the studio to talk with us about this.

Kiana Danial: (01:22)
Thank you so much for having me. I’m super excited.

Jean Chatzky: (01:24)
So before we get into this, let’s learn a little more about you because you’ve got a really interesting background. You were born and raised in Iran, you went to school in Japan, you found yourself on Wall Street, connect the dots.

Kiana Danial: (01:39)
Yeah, it’s a little bit odd I think for anybody from Iran to go via Japan to come to the US but that’s definitely the route that I took. I was born and raised in Iran to a Jewish family during the Iran/Iraq war actually, and my father, before the Iranian revolution was, had one of the largest construction companies in Iran working with the Shah. However, as you might imagine, after the revolution, the new government took over all of his belongings, everything he had in the bank, which is one of the reasons why now I’m kind of interested in cryptocurrency. I’ll tell you in a little bit why. Everything that we had, our house, and then he had, we actually had to be undercover, otherwise they would’ve killed him. He got lucky that they didn’t and he didn’t leave Iran, which is kind of ironic ’cause everybody else did.

Jean Chatzky: (02:23)
He’s still there?

Kiana Danial: (02:23)
Yeah, they go back and forth. Now they have American citizenship. Very weird. I know. But everybody else, literally in our position left Iran after the revolution, but me and my mom and my dad, even my sister and my brother came here before we did a long time before that. So I grew up watching my parents only talking about the good days of before. And my dad was an engineer so I was expected to become an engineer. So I went ahead and studied electrical engineering in Japan, which, that was kind of coincidental. I wasn’t planning to do that in Japan. My mom kind of pushed me to apply for this scholarship and I got it and I went on. I was planning to stay there only for six months. But when I got there, I actually really fell in love with Japan and I decided to stay there. So the six months turned into seven years.

Jean Chatzky: (03:18)
How did you come here and how did you make your way to Wall Street?

Kiana Danial: (03:22)
So that was, again, not on my agenda because once I got to Japan and I studied, and now that I love my major, I actually didn’t because I was the only girl in my class the whole six years, almost. And it was very intimidating. I was setting everything in Japanese. It was not fun. But I still love Japan though. So I was planning to stay there, but I was looking for a way out of engineering. And when the 2008 financial crisis happened, I kind of had my aha moment. Which is weird. I didn’t know anything about finance, like zero, but all I could hear was that the US dollar is getting cheaper versus the Japanese yen. And I have some Japanese yen in my savings account. And I thought, alright, my family lives in the US and I might at some point go to the US so maybe now it’s a good time to buy US dollar to exchange my Japanese yen to the US dollar at a cheaper price. And I don’t know if you remember, but in 2008, September or August, that is when was the start of the US dollar depreciating. And I started going to the ATM every single day. And every day the US dollar was cheaper than the day before. And every day was like, “Oh my God, I should wait another day. I should wait another day when it is going to be the cheapest and can I code, do I tell my bank to buy it at the cheapest price?” I was just talking about it out of nowhere with a friend. And she said that, “yeah, there is some that you can do that it’s called trading. You can go to a broker.” And I was like that. I didn’t know anything about investing really at the time. And so she hooked me up with a Forex broker and we ordered a position to short the US dollar with his Japanese yen. I didn’t know what shorting mean at the time.

Jean Chatzky: (05:17)
So you were betting that the US dollar was going to continue to fall in price? Exactly.

Kiana Danial: (05:22)
And she also put me on a margin trade. So not only I was betting that the US dollar is going to fall versus Japanese yen to this price point, which I think we put 96, so dollar yen being 96 at the time it was 110. So it was a very big bet. But we also said that we want a 14 time margin or leverage so that if I win, I win bigger. 14 times bigger. And within a month that did happen and I made $10,000. And that was really cool because as a college kid making $10,000 with a very small initial investment sounded great. And I was like, okay, this is it. This is what I want to do. Now. Disclaimer, of course I took a lot of risk. I do not recommend anybody doing the same thing. I had no idea what I was doing. I just got lucky. But it was enough for me to really want to switch and find my passion in the financial industry. And I said, all right, where can I go where finance is the center? Wall Street.

Jean Chatzky: (06:31)
What job did you get when you got here?

Kiana Danial: (06:33)
An analyst at a Forex broker on Wall Street.

Jean Chatzky: (06:36)
Okay, so in the currency market?

Kiana Danial: (06:38)
Yes.

Jean Chatzky: (06:39)
How did you make the leap from currency to cryptocurrency?

Kiana Danial: (06:45)
So there was not really a leap, which is interesting because when I started on Wall Street and the year after I started Investiva, one of my investing friends in Switzerland told me to buy Bitcoin and I was like, “no, that is way too risky for me.”

Jean Chatzky: (07:01)
When was this?

Kiana Danial: (07:02)
This is 2011.

Jean Chatzky: (07:03)
Okay.

Kiana Danial: (07:04)
This is way back when Bitcoin was $11 now as $5,000.

Jean Chatzky: (07:10)
We’re going to talk about the ups and downs in Bitcoin, but somebody said to you in 2011 “you should buy Bitcoin.” You said “no.” Why did you say no then and what was it that made you start thinking “this is interesting?”

Kiana Danial: (07:22)
So I said no because frankly I wasn’t informed and it just sounded too risky and too new and unfamiliar and I think it was lack of knowledge. Even though I wasn’t one of the riskiest markets. Currency market is way riskier than the stock market or bonds market, but even for me at the time, Bitcoin sounded incredibly risky simply because I didn’t understand what it is. Why do we need Bitcoin? What’s wrong with the US dollar?

Jean Chatzky: (07:52)
What changed your mind?

Kiana Danial: (07:54)
In 2016 a company in the UK asked me to do research and analysis for them about the blockchain technology and cryptocurrencies. I told them, “Hey, I don’t know anything about this.” They’re like, “yep, well. Could you please do some research analysis?” And I started actually studying it. That is when I was blown away.

Jean Chatzky: (08:15)
All right, and that is where all of our education into cryptocurrency begins. So I want you to understand that I think the vast majority of people listening to this podcast have certainly heard of Bitcoin. Maybe we’ve heard of blockchain. We might’ve even heard of Etherium, which is one of the other currencies out there. But as far as an understanding of how it works, we don’t have it. So let’s, let’s sort of take it step by step. What is cryptocurrency?

Kiana Danial: (08:47)
Cryptocurrency, simply put, is a form of digital cash, but it’s very different than your PayPal or Chase QuickPay or any other form of digital cash that is connected to a central middleman. Your central middle man is your bank, is PayPal, is a company that is asking for your information and is acting as a middleman to do all of your transactions. When you go to Starbucks and you’re paying with your credit card, Starbucks, that little machine, it puts your credit card in, it sends a digital message to the bank, the bank says, “yes, she has the money and we were approved” and the bank sends the. money to Starbucks. Cryptocurrency. Basically we moves a centralized middleman.

Jean Chatzky: (09:38)
The way it’s been described to me is that instead of a middleman, there’s a central ledger.

Kiana Danial: (09:45)
Decentralized ledger. So that’s the key. Decentralized, meaning that everybody in that blockchain community are watching. What’s happening and everybody is taking notes. “All right, Kiana went to Starbucks, she paid money, and now it’s on that ledger almost forever.” It’s very, very hard to hack that.

Jean Chatzky: (10:07)
Where does that ledger live?

Kiana Danial: (10:10)
On everybody’s personal computer who are a part of that community.

Jean Chatzky: (10:13)
So as soon as you buy cryptocurrency of a particular type, you become a member of that cryptocurrency community.

Kiana Danial: (10:21)
Let’s go back to blockchain. That is a great question. But the community that I’m talking about are the people who are actually watching and checking the ledger. Those people are the ones who you might have heard of the word mining. So those are the people who, in return for a little bit of a reward, which is in that cryptocurrency, there are checking what’s happening in the blockchain and recording everything that is happening in the blockchain.

Jean Chatzky: (10:48)
Okay.

Kiana Danial: (10:48)
So by me making a transaction, I don’t become necessarily a node. I’m just simply making a transaction. But my transaction is recorded on the blockchain forever and everybody has access to it. So it is very difficult to remove that information or that data from the blockchain.

Jean Chatzky: (11:08)
Okay. So that’s cryptocurrency in general. Bitcoin is a type of cryptocurrency, like dollars are a type of currency. How are they different? How is Bitcoin different from a dollar?

Kiana Danial: (11:23)
Right. So the US dollar is backed by the federal reserve of the United States. The fed can print money and there are basically backing the US dollar and picking it to whatever economic measures that they have. Bitcoin is not backed by any single entity. Bitcoin lives throughout the internet of everybody’s connected computer who owns the blockchain, who are monitoring the block chain. So that is one thing that people actually get scared about Bitcoin because it is not backed by a government or a bank or somebody they know of. It is backed by everybody around the world…

Jean Chatzky: (12:05)
Who believes it…

Kiana Danial: (12:06)
Who believes in it, or have downloaded the Bitcoin blockchain into their computer. Let’s go back to blockchain because it’s a little bit, I have to explain blockchain a little bit so that we understand cryptocurrency a little bit better.

Jean Chatzky: (12:18)
Okay.

Kiana Danial: (12:19)
And blockchain is just a ledger. Blockchain is a ledger, is a digital ledger, that records everything of value. It can be currency, it can be voting, it can be medical records, you can record anything on a blockchain. Cryptocurrency and Bitcoin is just one way of using a block chain. And the reason why block chain is so important is that it’s basically the new internet instead of, again, the internet, you going through Facebook, that centralized middleman to send your picture or anything to another person on the other side of the world, you can, technically, use the blockchain to do that and you don’t have to go through Facebook to give up your personal information.

Jean Chatzky: (13:09)
It would seem like, although there are risks in giving up your personal information to Facebook, as we all well know, it also might seem hard to put your trust in the decentralized blockchain. How do people come to trust in this?

Kiana Danial: (13:27)
So I’m guessing the reason why you’re saying “trust” is that you think that you have to give up your information to basically everybody?

Jean Chatzky: (13:35)
Or I’m wondering if you say you bought a Bitcoin, how you can trust that you actually own that Bitcoin?

Kiana Danial: (13:44)
So it comes to trust. Yeah. Why would you trust Chase Bank?

Jean Chatzky: (13:50)
Because it’s got FDIC protection from the government.

Kiana Danial: (13:53)
Why do you trust your government?

Jean Chatzky: (13:54)
Because it’s been proven to be trustworthy.

Kiana Danial: (13:58)
Okay, so it comes down to being proven, and I understand that then in America it is much easier to trust your government than something that everybody around the world as monitoring. But put yourself in the shoes of somebody in Iran, like my dad, whose money was simply taken away by the government. If cryptocurrency existed at the time that my dad lost his money, and if we had all of our money in cryptocurrency, the Iranian Reigme would not have access to it and we would have had our money in the form of cryptocurrency and we would’ve been able to exchange it anywhere else in the world. Countries like India or emerging countries, Venezuela, where people cannot really trust their government, they have better odds of trusting in this blockchain technology that is decentralized and everybody around the world is watching it. It’s not only one eyeball, everybody’s eyeball is on that single transaction. If I go to Starbucks and I make a transaction with Bitcoin, everybody knows it. And I’m not saying it’s impossible to hack it. There are many ways and I’m not going to get into to hack it and the blockchain is improving itself to become more secure, but at the moment we could easily say that it is more trustworthy than a government that you cannot have that much trust in.

Jean Chatzky: (15:18)
It is fascinating. I want to get into the other risks involved and particularly the volatility of the prices. But before we do that, let me just take a breath because I think I need a breath because it’s complicated. It is just, it is complicated and I want to remind everybody that we’re having this important conversation and we are trying to understand this thanks to Fidelity Investments. Fidelity wants us to demand more from our money. It wants us to make our savings work as hard as we do because it knows that will help us reach our financial goals faster. So step number one is to get a financial checkup, get an understanding of what you own and what you owe. And from there the folks at Fidelity will work with you to evaluate all of your investment options. And the different ways that you can grow your savings. You can get started today at fidelity.com/demandmorenow. We are talking with the brilliant Kiana Danial, author of Cryptocurrency Investing for Dummies. Let’s focus on Bitcoin for a second because I think Bitcoin is the example that we all know best. At least we’ve heard about it most. You said when you first heard about Bitcoin in 2011 it was $11. When I first started to hear about it from my son who was suggesting that maybe we should buy it, it was soaring and would eventually reach a price of $17,000. Now it’s back to about $5,000. Sounds pretty speculative to me. So who should own something like Bitcoin and how is Bitcoin different than other cryptocurrencies?

Kiana Danial: (17:09)
Okay, so that is my passion and the best question because I’m going to give you a personal example because I don’t want to advise people to own Bitcoin, but let’s first address the volatility. Bitcoin in 2011 went from $11 to $1,000 and back to $11 and it has a history of being volatile. Even though the cap used to be at $1,000 until 2016 when the hype really started and everybody started buying Bitcoin. It is kind of similar to the .com boom. When everybody was excited, the internet and everybody were buying the stocks of internet companies. And guess what happened? It bubbled up and then it burst. I really believe that that is what happened to Bitcoin. The only reason why Bitcoin soared that much, and Bitcoin actually didn’t soar as much as some other cryptocurrencies, was the hype because everybody was talking about it. Everybody was investing in it. Even people who had no idea about investing or finance.

Jean Chatzky: (18:15)
Right. I mean I was hearing from my Uber drivers about how much Bitcoin they owned.

Kiana Danial: (18:20)
Exactly. So that is when I knew that I should step away and I didn’t touch it ’cause everybody was buying it and it was an inevitable burst that happened. And I think it was great for the industry because, at the time, the places that you would go to buy Bitcoin were not able to handle the community and the demand and everything was coming down crashing. So I’m happy that that happened. It gave us time to write the book so that people are more informed and now people are more, now regulators are looking into it. Exchanges are trying to make themselves more real secure. So the next round of whatever price action then is going to happen for cryptocurrency, I think we’re in a better spot.

Jean Chatzky: (19:11)
Where does cryptocurrency fit in the portfolio of your typical individual investor? When we talk about the people who listen to this show who are trying to pay for college, buy a house, pay for retirement, eventually. Maybe they’re FIRE movement people who want to retire early. They have specific goals. Does cryptocurrency fit into your typical asset allocation or is this something that you take a flyer on, like you’re investing in a very, very small company like an angel investor does?

Kiana Danial: (19:48)
So there was always risk to any kind of investment, as you know. Cryptocurrency for me, just because I’m incredibly passionate about it and the technology behind it, I have allocated 20% of my own portfolio.

Jean Chatzky: (20:01)
Wow.

Kiana Danial: (20:02)
And my parents’. So I have reduced my Forex portfolio.

Jean Chatzky: (20:08)
In currencies.

Kiana Danial: (20:09)
Yes, my currencies portfolio and in favor of cryptocurrency because the volatility in currency, in my opinion, is not giving me as much reward in return of all the sticking to the screen that I have to do in order to follow the volatility. So I won’t be able to answer you which cryptocurrency you should be investing in because there are now 2000 of them and Bitcoin may not be the suitable one. At the moment it is still early stages. Even though the bubble has burst. There are many other blockchains who are working on new types of cryptocurrency that challenge Bitcoin and the shortcomings of Bitcoin that we didn’t get to talk about today. So we’re doing more research and analysis. So to answer your question, who should be investing in cryptocurrency? First of all, anybody who is at least a little bit educated about what it is and anyone who can afford the risk of losing. So if you are only comfortable with bonds or things that are a lot more secure, you may not want to allocate cryptocurrency to your portfolio, but if you’re somebody who is a little bit more risk taking and who is into tech, then you might want to consider it. And I do want to address something and I know that Warren Buffet is completely anti-crypto and I do want to address that. He’s also a person who uses a flip phone. I’m not saying that to demean him, but he’s obviously not a tech person.

Jean Chatzky: (21:49)
From my own personal perspective, and I’ve said this often through the years, I think once you have checked off the boxes that you know you need to check off, once you are putting away as much as you should be putting away for retirement. Once you are funding the college account, once you’ve got your HSA funded, if you have an HSA. If you’ve got some additional money and you want to invest it in something that drives some passion for you, I’m all for that. Right? I have angel investments that I have made in a number of small startups, some of which I am sure will lose absolutely everything and some of which might make me a little bit of money, but I’m enjoying it. It’s something that I’m liking being involved in. To me, I would put a cryptocurrency investment in that bucket. In that I could lose it all bucket. Does that make sense to you?

Kiana Danial: (22:49)
Yes and no. No, because to me it’s a little bit more advanced than that. So I think my trust and cryptocurrency and blockchain is a little bit further. So to me, investing in cryptocurrency probably falls in the same category as investing in cannabis industry. I don’t understand that industry. I don’t invest in that. But I know a lot of people who are interested in it, and even though they are not using the cannabis, but the, this, the new kid around the block. It is not necessarily a startup. It is getting more regulated around the country and more and more people are using as medicine. So I think we are at that stage that we can put cryptocurrency in that category.

Jean Chatzky: (23:37)
You mentioned there are 2000 different cryptocurrency.

Kiana Danial: (23:41)
Yes.

Jean Chatzky: (23:41)
Is there a way to diversify?

Kiana Danial: (23:44)
Absolutely. That is my number one go to because at the moment, even for me, it’s very hard to really pinpoint which one is going to be the winner.

Jean Chatzky: (23:54)
So how do you do it?

Kiana Danial: (23:55)
I am diversifying. I do thorough research and analysis and I talk about it on my website. And so for me right now, whenever you’re going to diversify in a stock market, you have to go and learn about the company behind that. The team, the industry where the future is going.

Jean Chatzky: (24:14)
I would just buy a fund, can I just buy a fund?

Kiana Danial: (24:16)
So we are trying to get a Bitcoin or a crypto ETF. It is not accepted that yet by the IMF. So the, people are working on getting an ETF or a fund for cryptocurrency and there are some out there but I wouldn’t recommend them yet. So at the moment what I’m doing is literally diversifying in 20 different cryptocurrencies.

Jean Chatzky: (24:41)
Okay. When are we, as we wrap this conversation up, going to be able to use cryptocurrency in a real way to start paying for things if we have it? I have a former colleague, she was just on a trip to Israel. She met with an acquaintance and the acquaintance paid for coffee with Bitcoin.

Jean Chatzky: (25:00)
Yes, Israel is the best. My friend actually just sent me a picture of a Bitcoin exchange right down in Tel Aviv. So there are pioneers over there. There’s a lot of things happening in Israel with crypto. So I think the answer to that is depends where you are. It looks like to me that Americans, because we are kind of spoiled with a government that we can fully trust, it is going to take a little bit longer for people to really understand the value of it. But around the world and internationally, there are so many people that are already using Bitcoin and other forms of cryptocurrency to pay for goods. I know that on my website I’m already accepting cryptocurrency for my services because I want to be able to serve as many people as possible around the world.

Jean Chatzky: (25:47)
And it does seem like the tide may be turning in the United States. JP Morgan recently announced that it would be rolling out the first US bank-based cryptocurrency. So if you looked into your crystal ball, where do you think we are five years from now with crypto?

Kiana Danial: (26:06)
I believe that things are moving very fast. The very JP Morgan, the now, is backing blockchain and crypto. Jamie Diamond is a person that two years ago called Bitcoin a fraud. So I think we’re moving very fast and five years from now, I’m not saying that the US dollar is going to be obsolete or we are not going to be using any form of Fiat, you know, traditional currencies. But I think that we could see cryptocurrency being used as an addition to our PayPal account.

Jean Chatzky: (26:35)
For beginners who are looking to dip a toe in the water, maybe invest or buy a little cryptocurrency. Where can they get started?

Kiana Danial: (26:44)
So if you want to exchange your US dollar to at least five of the most major cryptocurrencies Coinbase Exchange is where you can do that because other exchanges, you have to have at least some sort of cryptocurrency in order to be able to diversify into others. So I believe in the US Coinbase is one of the most secure ones that you can actually use your US dollar.

Jean Chatzky: (27:11)
To get you started.

Kiana Danial: (27:11)
To get you started. Yes.

Jean Chatzky: (27:13)
Excellent. We’ll keep watching you investdiva.com. Kiana Danial, thank you so much.

Kiana Danial: (27:20)
Thank you so much for having me.

Jean Chatzky: (27:21)
Absolutely. And we will be back to digest this with Kelly and your mailbag. That was a lot of information in a very short period of time.

Kelly Hultgren: (27:35)
Very much so, but fascinating information, for me at least.

Jean Chatzky: (27:39)
For me too. Kelly Hultgren, our producer, of course, has joined me in the studio and Kelly had the opportunity to do a pre-interview with Kiana, which was I’m sure just as interesting as this conversation.

Kelly Hultgren: (27:53)
Yes.

Jean Chatzky: (27:54)
My background in addition to doing a little bit of interviewing on the topic in the past year or so is really limited to the story that we did for Your Money, which is our magazine for fourth, fifth and sixth graders that we produce in cooperation with Time for Kids and the PWC Charitable Foundation. And we did a crypto story in which we tried to explain it to fourth, fifth and sixth graders. Tried to explain crypto, tried to explain blockchain. And the explanation that made the most sense to me throughout that process was the one that Kathryn Tuggle, our colleague who wrote this story came up with, which was that blockchain is a little like borrowing a book from the library. That there is this record of everybody who’s ever borrowed that book in the past. It’s just more universal than that. That kind of resonated with me. And we all trust libraries. So, there’s that.

Kelly Hultgren: (29:06)
The trust questioning part was really interesting to me. But no, there’s this idea, there’s this documentation of the transactions for each, all transactions, but for each coin, I guess we can say for what we were talking about today. But the idea of blockchain technology, I really like, I still don’t know enough to put my money into it.

Jean Chatzky: (29:29)
No.

Kelly Hultgren: (29:29)
I’m not there yet. But I do like a lot of these ideas in theory and you know, she had me at the idea of like, you know, why do we trust the government? Why do we trust our government? They are defaults and we are fortunate to in a country in which, like, Yes it has proven to be trustworthy a handful of times, maybe a few times, not so much, but for the most part, like, we are so lucky to live in this country so we don’t question that. Like, it’s not just an immediate “Nope” or, like, just the other examples that she gave, but it’s good to be challenged on that.

Jean Chatzky: (30:02)
Absolutely and I have watched other means of payment happen in my lifetime and so have you. Right. I mean Venmo was not around few years ago. PayPal was not around a few decades ago. We’re seeing these revolutions happen in real time and I think crypto is real. I’m just not sure which of the 2000 is going to be most real.

Kelly Hultgren: (30:31)
Sure.

Jean Chatzky: (30:31)
If there was a fund, you know, if there was a fund where I could buy a little bit of all of them, I might do that.

Kelly Hultgren: (30:38)
Right. To play around with it. Or even maybe we find the top five that have been proven to be most trustworthy. If there is a source that has done the audit for us that we then trust. Like, there are so many resources we don’t even know that probably exists who have answered some of these questions for us just because it’s a whole new arena, but I’m still, too, stuck on your question of how does this fit into our portfolio? And then going back to thinking of our listeners in mind of these life stages, like, we don’t even know, I don’t know how to quantitatively say, like, cryptocurrency is more risky by this much than a stock like what we do with between stocks and bonds.

Jean Chatzky: (31:15)
Well and we don’t trade currency so let’s just put that right out there, right? I mean she is coming at this, she was a currency trader. The world of currency trading. I don’t talk about trading in currencies when I’m looking at my asset allocation. I do know that there are mutual funds that I’ve been in where they are hedging, but that’s not my area of expertise. It’s her area of expertise and that makes her much more suited to be investing in cryptocurrencies because she studied it and just like I would not buy an individual stock before I did homework on that company. I think that’s, if this is something that’s of interest to you, she told us when she was leaving that she actually has her book on her website these days for free Cryptocurrency for Dummies. You do have to pay shipping and handling. It’s about seven bucks. But that might be a good first step.

Kelly Hultgren: (32:13)
Oh that’s awesome. Yeah. I think some followup questions for myself are what makes Bitcoin, Bitcoin or Ethereum, Ethereum? What are differentiating factors between different cryptocurrencies? And then starting to figure out, okay like I would approach a stock, like, you know, for me is this cryptocurrency or this is this coin, does it, you know, check the boxes of one that I would want to invest in versus others? So I’ll see. But I think we’ve talked about a long time on the show of kind of looking at it as gambling in a way. If we are so, it’s so new and we’re still so unsure of it, just to put out a small amount of money and to explore. Because also, like what we talk about with investing, we’re not going to really understand it and learn it until we actually do it.

Jean Chatzky: (32:59)
Well you and you know, I mean I take these small positions in small startups.

Kelly Hultgren: (33:03)
Sure.

Jean Chatzky: (33:03)
That is incredibly risky.

Kelly Hultgren: (33:05)
Yes.

Jean Chatzky: (33:05)
There are some of those investments where I will lose all of that money. I know that going in so it’s okay. And I do my homework.

Kelly Hultgren: (33:15)
Yup. And homework. Very important. So no, I’m really happy we had that show and we want to hear from you, too, like, what you thought of it, what you want to hear more of or less of. Hopefully it’s more of, but maybe it was something that is just not going to be ever of interest to you. I’d be interested to hear that.

Jean Chatzky: (33:29)
Okay. That sounds good.

Kelly Hultgren: (33:31)
Yeah. Okay. And then speaking of our listeners, we have some questions. First one from Chloe. I’m a recent college graduate and have been a regular HerMoney listener for years now.

Jean Chatzky: (33:39)
Thank you, Chloe. I love it when people say for years, it makes me feel so established.

Kelly Hultgren: (33:44)
We kind of breezed over this. It was our third birthday in April.

Jean Chatzky: (33:48)
It was.

Kelly Hultgren: (33:48)
Yeah, and we didn’t do anything.

Jean Chatzky: (33:51)
Oh no. We’re going to have to throw ourselves a belated happy hour.

Kelly Hultgren: (33:55)
Okay, so Chloe then writes, I want to start out this new chapter of my life by practicing financial responsibility. As such, I knew just the people to turn to for financial advice. She’s talking about you. I’m not sure yet…

Jean Chatzky: (34:06)
She’s talking about us.

Kelly Hultgren: (34:06)
I’m not sure yet what my career will look like and I’m in the process of applying for jobs. I had the luxury of living rent free at my parents’ house in a big city and graduated college without student loans or any other debt. That’s awesome. Currently I have a modest checking, credit and two savings accounts with bank of America. One of my savings accounts is labeled longterm savings and the other is emergency fund. I think it would be a good idea to start an IRA. I’m also curious about investing. I am wondering what direction would you steer me in with regard to choosing an IRA and or beginning to invest? I have about 1000 to 1500 to put towards beginning these accounts.

Jean Chatzky: (34:42)
I love that.

Kelly Hultgren: (34:42)
I know. So good.

Jean Chatzky: (34:43)
So I think an IRA makes all the sense in the world. The one thing that you didn’t mention is your employment situation. So in order to make an IRA contribution, you actually have to have earned income for that year. So assuming you had a job, a part time job, in 2019, and that’s where this money came from, then you can make an IRA contribution. Otherwise you may want to wait to get started until you get a job or you get a job where you have an employer that provides you with a work-based retirement account, like a 401(k). The way that these accounts work best is when you automate contributions into them. And so whether your employer is doing that for you into a 401(k) or a 403(b) or whether you’re doing it for yourself into an IRA, the goal is to figure out how much you can put in every paycheck and just set it up so that it goes on automatic pilot. And once it’s in the account, because the account, whether it’s a 401(k) or an IRA, is the bucket, then you have to choose the investments that go in the bucket. Because you’re so young, you have plenty of time to be aggressive. These are your most aggressive investing years. Assuming that this money is for the longterm, that it is for retirement or something way down the road I would look into a low cost diversified portfolio that is largely based in stocks. You could put 80% to 90% of it into a total stock market index fund and the rest into a total bond market index fund and just call it a day. And if you go the IRA route or if your employer offers the option of a Roth, I would consider that because chances are really good that your earning power will only go up and your tax rate will only go up through the years.

Kelly Hultgren: (36:46)
Yup. And I connect to the question that you asked. I am wondering what direction would you steer me in with regard to choosing an IRA and/or beginning to invest. And they’re one in the same.

Jean Chatzky: (36:57)
They are.

Kelly Hultgren: (36:58)
And I asked the same question around your age and I didn’t take the ownership that having an IRA and putting money into it, investing in an IRA was investing.

Jean Chatzky: (37:09)
It is, that is beginning to invest.

Kelly Hultgren: (37:11)
That is beginning to invest. And I also did 90/10 at your age and I’m still in 90/10 so for your allocation. So thank you Chloe. Good luck and write to us and let us know what your next step is. It sounds exciting. Our next question is from Whitney. She writes, first of all, I would like to say that I absolutely love listening to Jean and Kelly. I listen every single time I get a chance throughout my day.

Jean Chatzky: (37:31)
Thank you Whitney.

Kelly Hultgren: (37:32)
But I have a question as far as income goes, I am 23 years old and I have two girls who I want to teach if you put your mind to anything you can make it happen, especially with money. I just started a new job, but the pay isn’t what I was expecting. I’m making roughly $1600 take home after I put 5% into a Roth 401(k) and what’s required to pay for a whole life insurance policy, plus the least amount of medical I can get away with. What is the reasonable amount of time after starting a new job to ask for a raise in wage? 90 days, six months? Is it even reasonable at all to ask for a raise since I just started?

Jean Chatzky: (38:06)
I would say probably six months. I think going in and asking for more money, it’s a little tough to do short of six months in, unless you’ve come across information that makes it really, really clear that you are underpaid to begin with. I would try to gather string on not just what your value is on the open, market but also what you are bringing to the company in terms of added value. What is your work contributing to either the bottom line in terms of adding to its profitability or saving them money, which also contributes to profitability. And then I have one other question that you didn’t ask, but you mentioned contributing what you needed to to a whole life insurance policy. In my experience, and if you’ve got two small kids, it’s going to be very hard to afford the amount of life insurance that you probably need if you’re buying whole life insurance. It’s much easier to afford the amount of life insurance that you need, and parents of young children need more because you have to provide for the care and feeding of those kids until they’re adults, and you may also want to provide money for college or to pay off a mortgage or for other things that you would have wanted to provide for them along the way that are not available if you’re not there. It’s much easier to do that with term life insurance, which is significantly cheaper than whole or cash value life insurance. So what I want you to do is go back to your benefits department and check on that whole life policy and see if there is a cheaper term policy that will provide your young family with more of what it needs.

Kelly Hultgren: (40:05)
Thank you Jean and thank you Whitney for writing in. We’ll do one more from Adriana. Thank you for your great show. When discussing a raise, I mentioned my $65,000 worth of student loans to my boss. She recommended I try to buy a house and explained I should get the highest possible mortgage with a lower interest rate than my student loans and use the money to pay down the student loans. This sounds sketchy to me. I assume a mortgage has a lower interest rate because a home is a seizable asset and my post-education brain is not. For my student loans. I am currently on a 20 year loan repayment plan with an average interest rate of 5.67%. if I can get a 20-year mortgage approved at a lower interest rate, should I go for it? It seems like there has to be a catch.

Jean Chatzky: (40:45)
The catch is that the mortgage lender is not necessarily going to lend you more money than it will cost to buy that house. The mortgage lender is looking at the value of the house as a secured asset and is going to hedge its bets by knowing that it can take the house if you fail to actually pay on that loan. I get what your boss is saying. What your boss is talking about is a strategy that people who own homes sometimes use, called a cash out refi. So you own a home. Let’s say you bought it for $300,000 and you’ve been paying on it for a while, so you owe $150,000 and you have $150,000 in equity in that home. If you refinance the mortgage and you pull, say, $50,000 of cash out of that home, what you end up with is a $200,000 mortgage and $50,000 in cash. And the interest rate on that mortgage, because it’s secured by that $300,000 house, is a low interest rate. Mortgage rates, and rates on secured debts, are lower than rates on student loans. She’s right about that. And then if you could take that $50,000 and use it to pay off those student loans, you would win because right now the interest rate on a 30 year mortgage is probably about 3.5%. So you would win. The other thing to think about right now, the other wrinkle to throw into the equation, is that the other thing that makes mortgage debt so cheap is the fact that it’s still tax deductible. At least up to $750,000 in mortgage debt. The money has to be used for the home or improvements to the home to be tax deductible. So you can no longer take money out of a mortgage using a home equity product or a second mortgage and use it to pay off a student loan, use it to pay off credit card debt and deduct that. You would have to use it to actually improve your loan. Now in this case, you would still win because of the wide disparity in the differences in the price of the loan, but chances are pretty good, it’s not going to, you’re not going to be able to make it happen that way. What you may be able to do is refinance your student loans. And you should absolutely look at that. We have talked many times about the various lenders in the student loan space. You can find a list of them magnifymoney.com but you might want to look at Ctizens or SoFi or Common Bond and see if there’s a better interest rate out there for you.

Kelly Hultgren: (43:32)
Great. Thank you Jean and thank you everyone for your questions.

Jean Chatzky: (43:34)
Thanks so much everybody in this week’s Thrive we are hoping to stop spam phone calls once and for all. I mean, lately I have been wondering, does anyone just answer the phone anymore? I don’t know a single person who doesn’t first, analyze the incoming number, and then debate whether or not it might be a robocall or a scam. Belarus? Bad. A number similar to your own? Bad. But you can’t screen everything. For example, if you’re waiting for an important call from a doctor’s office or from work, you have to pick up. In March, Americans got more than 5.2 billion automated calls. That’s a record of about 16 for every man, woman, and child in the country, and that’s according to reporting by the Washington Post. Thankfully though, even though modern technology has made it easy for scammers to place thousands of calls per second, engineers are busy developing clever technologies that let us take back some control. Today there are six companies leading the charge to flag and block robo calls on cell phones. We’re going to put their names in the show notes because it’s a little bit confusing, but they are Hiya, NoMo Robo, Robo Killer, TNS, True Caller and You Mail. You can also activate your cell phone carriers free service that will help identify and block robocalls. For at&t subscribers, he app is called at&t Call Protect. For Verizon, you download the Verizon Call Filter app. And for T-Mobile just turn on the company’s scam ID and scam block service. There is no app required. We should all do that. Thank you so much for joining me today on HerMoney. Thanks to Kiana Danial for the fantastic conversation. If you like what you hear, we hope you’ll subscribe to our show at Apple Podcasts. We also hope that you’ll tell a friend about how much you love us. If you like what you hear, please subscribe to our show on Apple Podcasts and leave us a review. We love hearing what you think. We also want to thank our sponsor Fidelity. We record this podcast out of CDM Sound Studios. Our music is provided by Track Tribe and our show comes to you through PRX. Join us next week when we’ll be back with another great guest and we’ll talk soon.


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