When Professor Sven K. Esche, Associate Professor in the Department of Mechanical Engineering, started his Investing Seminar Series, he intended to take his 25+ years of investing experience and “pay it forward.” That motivation led him to create an investing seminar series where he educates students about the fundamentals of investing, sharing his personal investing philosophy along the way. The Seminar Series is a six-part program that starts with the fundamentals of investing, then delves into more specialized strategies such as fund investing, dividend stocks, blue-chip stocks, and growth stocks. In Investing 103, Professor Esche explored different investment strategies. The seminar also included a recap of Investing 101 and 102, making it easier for both beginners and those looking to expand their financial knowledge.
Professor Esche opened Investing 103 by reflecting on his own introduction to investing. Growing up in East Germany, he was never introduced to the concept of investing. It was not until college that he entered the world of investing. He did not pursue a master’s or Ph.D. in a finance-related field and has continued to self-teach about investing ever since. Early in his investing career, he made mistakes that helped him learn valuable lessons, which he now hopes to share with others. His philosophy around investing centers on the idea that “simplicity is the ultimate sophistication.” Professor Esche emphasized the importance of starting early in investing. That way, you lose less money when you start, and gradually, as you accumulate more wealth, you are more experienced with investing and are more likely to be capable of investing a large sum of money. One of the takeaways from the lecture is that the most important organ when investing is not the brain but having a “strong stomach and butt.” This means your ability to take on risk and deal with short-term volatility. He explained the difference between risk and volatility. He shared that to mitigate risk you diversify your portfolio, while to mitigate volatility you make regular investments into your market account.
Throughout the lecture, he also emphasized that returns should be measured in percentages, not through points, because percentages measure the relative gain or loss on an investment and make it easier to compare investments with differing initial prices. One of Professor Esche’s favorite topics is leakage and tax optimization, which he highlighted multiple times throughout the lecture. He recommended looking into tax optimization done legally and was very keen on this idea. Leakage refers to the flow of money that leaves the circular flow of income, which decreases your ability to consume and invest. He highlighted the Rule of 72, which is a financial formula used to estimate the number of years it takes to double your money at a fixed annual rate of return. This calculation helps investors see how long it takes for a portfolio to double under compound interest.
The lecture started with a slideshow on how to get started with investing and how the first decade looks as an investor into the later stages, followed by the three As of investing, which are asset allocation, asset selection, and asset location. He also went over the types of index investing. He brought up legal tax optimization by highlighting different investment approaches and the tax implications of each approach. Professor Esche did not seem keen on advisors but rather on personally investing, and he gave a realistic view of choosing each investment approach, whether it was funds, dividend stocks, real estate investment trusts, blue-chip stocks, growth stocks, or moonshot stocks. He also reviewed fund metrics to gain an understanding of the basics of investing. If this is of interest to you, you can attend his lectures on select Wednesdays at 6 p.m. throughout the fall semester to gain a more well-rounded understanding of investing.
