Josh Levin of OpenInvest: “Investing During The Pandemic; What Should I Do With My Money Considering All of the Volatility and Uncertainty Today”

…Yes. The real opportunity in the face of volatility–besides not exiting the market–is to harvest losses and transition to a more tax-efficient vehicle. Many investors keep products just because they’ve accumulated a lot of gains over the years and don’t want to take the tax hit of selling. But when you’ve had a market drop like we have, it may be the time to accept the reduced tax hit and migrate.

As a part of my series about “InvestingDuring The Pandemic”, I had the pleasure of interviewing Josh Levin, Co-Founder and the Chief Strategy Officer at OpenInvest. He has over a decade of experience in sustainable finance, including six years at the World Wildlife Fund (WWF) where he managed the Sustainable Finance Program. He holds a BA from Harvard and an MBA from NYU Stern, where he was a Reynolds Fellow in Social Entrepreneurship.

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?

I’m going to go way back. My first job out of college, nearly twenty years ago, was working in traditional environmental law enforcement in Southeast Asia. I worked with the Conservation International Team in the Cardamom Mountains in Cambodia. I was leading the “camera trapping” program, trying to locate endangered species such as elephants, tigers, Malaysian sun bears, etc. in support of the organization’s anti-poaching efforts.

However, at the end of the day, the outcome was that we were arresting impoverished locals. Local farmers were going into the woods to poach or illegally log in order to provide for their families. That’s when I realized that in order to protect the world’s remaining wild places and biodiversity centers — something which I’m passionate about — we can’t necessarily just rope them off. We need to figure out how to generate sustainable livelihoods for the people who live in and around the forests.

This was my entree into social entrepreneurship, ultimately leading me to sustainable finance.

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

The most exciting and all-consuming project in my life is building OpenInvest, the company I co-founded. We are one of the first venture-backed Public Benefit Corporations, which means that we are a for-profit, but with a public mission written into our legal charter. That mission is to build technology to help mainstream values-based investing. I am now blessed to get to work every day with some of the world’s most advanced financial systems engineers building tools and solutions to mainstream values-based investing and help people understand the impacts of their investments.

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?

Yes, I think I’d like to thank Alex Rampell, who is our partner from Andreessen Horowitz and an early investor in OpenInvest, as well as Eoin Matthews, Cofounder of Point, who so graciously introduced us to Alex. At the time, we were a fledgling and fragile startup. Alex took an early bet on OpenInvest and our model. He put his faith in our team and vision. This is no small thing as we were first-time founders with a lot to learn, and ESG investing, or values-based investing, was not nearly as hot as it is now.

That decision was truly an inflection point for OpenInvest. Andreessen-Horowitz has been an amazing partner, bringing connections, credibility, and sage advice. The subsequent year was like a rocket ship and one of the most dynamic in my career. Alex has remained an active and committed partner for our firm as we evolve, and I’m forever grateful for that early trust.

Let’s shift a bit to what is happening today in the broader world. Many people have become anxious from the dramatic jolts of the news cycle. The fears related to the coronavirus pandemic have understandably heightened a sense of uncertainty and loneliness. From your experience, what are a few ideas that we can use to effectively offer support to our families and loved ones who are feeling anxious? Can you explain?

I’ve now experienced three economic crises in my life. This time, I’ve started to become keenly conscious of how these setbacks affect people so differently. A crisis can be apocalyptic, a paid vacation, or anywhere in between, depending on a variety of factors like the industry you work in, stage of your career, wealth, and whether you have children. For example, the financial crisis of 2008 was quite bad for me as I was just finishing grad school and looking for a job, whereas my wife barely noticed it. All this is to say that I don’t know that I can give universal advice.

But for me, this time, my bedrock has been focusing on my kids. I have five-year-old twin boys. Due to their age, they are unaware of this crisis, but are as insanely energetic and silly as ever. While it’s been tough for my wife and I to balance our now-virtual work commitments and childcare, all I have to do is watch them for a bit, absorbing their blind joy, for a quick reminder of what’s important in life and how they are the future

Ok. Thanks for all that. Let’s now jump to the main core of our interview. As you know the stock market and the economy in general have become extremely volatile and uncertain. Many people “dollar cost average” and put aside a monthly sum into a long term savings plan for retirement, college, or a home purchase. If a loved one or a client came to you and said, “I have been saving and investing $500 every month in an S&P 500 index fund. Over the next few months until the dust settles, should I be doing something else with my money?”, what would you say to them?

At OpenInvest, we believe in long-term, diversified investing. One of the worst things people can do is attempt to “time the market,” pulling money in and out based on the unpredictable swings of Wall St. The three main reasons are:

1. Over 90% of professional asset managers fail to beat the market net of fees. Every time you buy or sell a stock and get lucky, there’s someone on the other side of that trade who lost. So it’s you versus thousands of brilliant, professional investors strapped to supercomputers. It’s often akin to gambling.

2. You have to get it right twice–both when you sell, and then when you buy back in. The market is already up 25% from its lows a few weeks ago. Would you have known to buy back in at exactly the right time? Otherwise you missed out on gains that, as they continue to compound over your lifetime, could add up to hundreds of thousands of dollars and an earlier retirement.

3. It’s time-consuming and stressful to make daily decisions about your money. That time would be better spent earning income or building your skillset.

The only time it makes sense to enter or leave the market is based on your life circumstances. Will you need cash soon? How much risk should you take based on your age? These should be the decisions that drive when to invest or take out money, and they are completely agnostic to the ups and downs of the market.

No one can time the market. The best strategy is to buy and hold a diversified portfolio and enjoy the compounding power of its growth for as long a time as possible.

Eventually the economy will recover and rebound. Certain sectors, like travel and hospitality might be hurting for a while. But other sectors, like technology and healthcare, might do very well. If someone wanted to prepare today to take advantage of the future recovery, what would you suggest they do?

The best thing you can do to take advantage of the recovery is to invest. Historically, for every month that a dollar is not invested in the stock market, it loses approximately .66% of value in terms of opportunity cost. While past performance is not a guarantee of future return, it may very well turn out that today was a historic buying opportunity. That was exactly the case a year out from 2008. One of the travesties of this crisis is that many millennials won’t have the free cash to invest and take advantage of the recovery.

While I have sectors I’m excited about, there are millions of other smart people thinking the same thing. I would say there’s no sure deal to be had.

Are there sectors that provide exciting and lucrative investment opportunities today, specifically because of the volatility and uncertainty?

Yes. The real opportunity in the face of volatility–besides not exiting the market–is to harvest losses and transition to a more tax-efficient vehicle. Many investors keep products just because they’ve accumulated a lot of gains over the years and don’t want to take the tax hit of selling. But when you’ve had a market drop like we have, it may be the time to accept the reduced tax hit and migrate.

Investors could migrate to a diversified, passive vehicle, but one that both reflects their personal values and enables tax-loss harvesting at the individual stock level.

Are there alternative investments that you think more people should look more deeply at?

I think people should be focused on investing with their values. If you personally don’t support everyone owning assault rifles, or mass incarceration, why would you invest in those things? If you want to promote clean energy or diversity, you are able to do that while still following sensible investment practices.

Thanks to new technology, you can seamlessly overlay your personal values onto your investments to fuel the kind of world that you want to live in, while still making the same smart investment decisions. This is what OpenInvest makes possible.

If a person in their thirties and forties came to you today and said that they have $10,000 that they want to put away today for a long term investment what would you advise them to do with it?

I would advise them to invest in an index fund, while incorporating their personal social and environmental values–what you do with your money really does make an impact. If they have not already maxed out

their IRA or other tax advantaged contribution limits, they should put it towards that. If they have, then they can put it in a normal, taxable brokerage account, but they should use a vehicle that enables tax-loss harvesting at an individual stock level. Especially in times of volatility, this can generate an additional benefit above and beyond the market by reducing their annual tax burden. After that, leave it there and don’t touch it.

Ok, thank you! Here is a more general finance question. 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?

· Go surf the internet and then buy some individual stocks, tell me why you did, and then track the performance. This is what I did as a kid (largely minus the internet), and I remember eagerly opening the back of the WSJ and Investors’ Business Daily for new prices. Casino capitalism is a great way to get young people interested in finance and to start learning how to read financials.

· Buy an index-tracking product and an actively managed mutual fund at the same time. As such, we can learn about multiple ways to invest. Importantly, keep a spreadsheet recording total deposits and total withdrawals. In a year, let’s look back at which performed better and talk about why.

· It’s also important to start talking about values up front. Your money fuels the operations and growth of these companies. Do you believe in what they are selling and how they are shaping the world? For your funds, there are a variety of free tools online that can be used to do such an analysis for the collective holdings (www.fossilfreefunds.org, www.deforestationfreefunds.org).

· Vote with your money! Just like in political elections, you may be just one voter, but, together, we determine the shape of history. The corporations you’re investing in are very powerful and they are only getting bigger. They employ hundreds of thousands of people, and may cut down forests or plant forests. You are able to be in charge with your investments. For this reason, OpenInvest created a feature that allows you to vote on major company proposals and issues with a swipe of your finger. Anyone should be able to vote in the elections and decisions of the stocks they hold.

· Work hard, save, and invest. That’s the magic formula. There’s no side door here, no secret options. As Einstein said: “the most powerful force in the universe is compound interest.” And as my father said: “your most valuable asset is your ability to earn income.” Put those two together, and it’s extremely potent.

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

I like the quote often ascribed to the Buddha:

The thought manifests as the word;

The word manifests as the deed;

The deed develops into habit;

And habit hardens into character.

So watch the thought and its ways with care,

And let it spring from love

Born out of concern for all beings.

I think one of the most important discoveries of my adult life was that we can control our own moods, our own thought patterns, our own mental states. No one really teaches us that in American culture. We learn how to work out our muscles and get physically stronger. But your mind is also a muscle.

If you want to be happy, you can choose to be happy. People may want a quick fix, but it’s that not easy. But just like strength training, it’s possible with repeated meditation and mental exercises.

You are a person of enormous 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. :-)

The movement I would inspire, which is why I founded OpenInvest, is for people to realize that their money is one of their most powerful tools to shape the world. The real economy operates within two frameworks: government and finance. But regulation typically lags by 20 years. So if you want to achieve a change in the world at scale, you can do it by changing finance.

Banks and investors are ultimately just agents operating on your behalf–they work for you. Through technology, we can bring tools to the people so that it’s easy and seamless to wield your influence. Not just in our lifetimes, but rather within this decade, I hope to unlock a global democracy that’s already embedded within our financial system and will fundamentally reshape our economy.

Thank you for the interview. We wish you only continued success!