A Q&A With Authors Elizabeth MacBride & Qian Liu

This month, The Little Book of Robo Investing by Qian Liu and Elizabeth MacBride (two founding members of the Wealthfront team) was released by Wiley, with a foreword by Wealthfront co-founder Andy Rachleff. In this Q&A, the authors talk about the biggest misconceptions investors struggle with, bear markets, and a lesson learned from a forgotten retirement account. You can order the book here.

Can you say a little bit about why you were excited to have Andy Rachleff, Wealthfront’s co-founder, write the foreword to The Little Book of Robo Investing? 

EM: Andy and I worked closely together in the early years of Wealthfront to craft the language and the voice for the company, which were part of “product” in those days. Andy’s rare among business executives because he recognizes the importance of language in the process of innovation. Language creates possibility, which is why there are so many battles over words and meaning. And you can’t always control language, which makes it fun!

QL: Andy and Wealthfront created the robo investing movement, so Andy was the perfect person to write the foreword to this book. 

How did your time at Wealthfront inform your approach to this book?

QL: In the book we basically explain the robo investing industry’s practices, which are heavily influenced by Wealthfront’s philosophy. Of course, we were familiar with that philosophy from our time at the company. 

EM: From the client’s point of view, investing on a robo investment platform is simple. Understanding how the best robo investment platforms make the most of the global financial system to improve after-tax, risk-adjusted returns for individual investors is more complex. I learned to see the financial system as a whole, starting from my time at Wealthfront. All this knowledge informs the book.

The book is structured around common misconceptions about investing. Which misconception would you say is the toughest for people to avoid, and why?

QL: The toughest misconception to avoid is that investing means buying individual stocks. People struggle with this one for a few reasons. Buying individual stocks feels intuitive, while holding a broadly-diversified low-cost ETF is more abstract. And buying individual stocks is more top-of-mind for individual investors because the press is dominated by reporting on individual companies and their stocks. The insight that no investor can consistently beat the market by picking individual stocks is not obvious at all.

EM: I think the toughest misconception to avoid is that you’ll “lose your shirt” in a bear market. The stock market declines sometimes, but in the worst bear markets in history, the declines have been 20-50%. And the market has always come back, even after a bad bear market. Worrying that you’ll be wiped out in a bear market is like worrying an asteroid is going to hit your house: a waste of time. You build a strong roof to keep the rain out, and figure it’ll protect you from the asteroid, too. A good, diversified portfolio is like the roof over your head. It’s not smart to avoid something you need because you fear an unlikely event. Fear keeps a lot of people from investing, particularly women, and that drives me crazy!

You use personal anecdotes throughout this book to illustrate your points. Is there a story that didn’t make it into the book that you think readers would enjoy hearing?

QL:  While I was researching Fidelity’s robo investing features, I found that I have a neglected IRA at Fidelity. It grew a lot during the years of my negligence. I am not advocating for negligence, but this story shows that growing your assets doesn’t necessarily require a ton of effort.

EM: I think I laid it all out there!

What would you say to readers who are already Wealthfront clients?

QL: You should be proud of yourself for applying investing best practices to grow your assets. Keep at it. 🙂

EM: If you have a low cost, diversified portfolio with the right level of risk for your particular situation, you’re giving yourself a good statistical chance of growing your assets over the long term.

What is the number-one thing you hope readers take away from this book?

EM: The big secret of investing well is letting go of the seductive illusion that you can beat the market.

QL: Start investing, even if you just make a $5,000 initial deposit and $500 monthly add-on deposits. Robo investing platforms make this so easy. The market and the power of compounding will do the rest.