Messages from the World Wide Web

Los Angeles:

Sent: Wednesday, October 14, 2015 4:23 AM
To: Frank Paiano
Subject: Thank you from a very grateful online student

Dear Frank,

I listened to your online course, Business 121, a few months ago and it was my first introduction to learning about how I could manage my finances. You've not only taught me a lot, but did so in such an engaging an entertaining way that I enjoyed and looked forward to every class/presentation.

After a decade of schooling (college, masters, doctorate in pharmacy, post-doc fellowship) I am finally able to experience what earning a real living is like. Your presentations had so much impact on me that I refer to it in my head when discussing my benefits with my employer, or when discussing my finances with my bank. I feel that I have made more intelligent financial decisions since I've listened to your presentations. I wanted to give credit where credit is due and take the time to say a big thank you.

I hope you are enjoying your sabbatical and when you're teaching again, I hope to meet you to thank you in person as well as to have the opportunity to pick your brains.


Note: Theia is a former Southwestern College student and she credited Southwestern with getting her started on her current career. Thanks, Theia!

Somewhere in the United States:

From:Someone in the United States
Sent: Tuesday, July 16, 2013 12:40 PM
To: Frank Paiano
Subject: Your presentations helped me place at nationals - Thanks!
Hi, Mr. Paiano,

I wanted to thank you for your wonderful Financial Planning and Money Management and Introduction to Investments presentations that you made available to the world.

I competed at the Future Business Leaders of America (FBLA) National Leadership Conference this summer after moving on from the local and state competitions in Personal Finance, a written test competition. FBLA is a student run organization for high schoolers that does career development and community service in addition to hosting sixty or so competitive events in various business topics. Anyway, for nationals I listened to all of your BUS-123 presentations and a lot of your BUS-121 presentations to make use of time in the car and to clarify on topics I read in textbooks. You're hilarious and make seemingly confusing financial instruments easy to understand.

I ended up placing first in the open event Securities and Investments (your Bus-123 course was my primary study resource) and third in my event Personal Finance at nationals!

Thanks for the help,

Someone in the United States


From: Someone in Ohio
Sent: Tuesday, October 30, 2012 11:42 PM
To: Frank Paiano
Subject: Huge fan of your iTunes University

Hello Professor Paiano
I'm a current student in Ohio, and I love your video lectures. I haven't found any other resource as good as your BUS 123 and BUS 121 classes (I finished the Intro to investments and I'm about half-way through financial planning). I can't understand why other schools don't have classes like this. Heck, I don't understand why we were taught "Walden" by Thoreau instead of this kinda stuff in high school. Your video series is great and I wanted to thank you for making such valuable information so freely available.

Someone in Ohio
Department of Accounting
Case Western Reserve University


Dear Prof Paiano,

I am listening to your BUS-123 lectures and loving them. Thank you so very much to you and to Southwestern Community college for making them available online for free!! I always believed that best things in life are free and this is yet another proof! :)

I live in Hyderabad, India and I work for a global asset management company (which is mentioned in your slides as well :)) and am giving the Claritus Investment certification shortly and upon searching in iTunes, I found your course. What a serendipitous find! I know you'll like that word...:)

best regards,
Dear [[FRED]],

You are very welcome! It is always a great joy and privilege to know that your efforts are helping others. Best of luck to you in the upcoming Claritas Investment certification. If I may ask, which company do you work for? Please feel free to tell your co-workers about our class. And please tell us when you pass the certification and how your investing career is going. We love to hear how our students are succeeding, no matter where they are in the world!

Wishing you the best of luck and success,


Frank Paiano
Southwestern Community College

Georgia, USA:

Hey Dr.Paiano,

My name is [[FRED]]. I am a college student at Valdosta State University. I currently study Marketing and Finance. Recently, I've gained tremendous interest on investments but did not have a whole lot of knowledge since I am a sophomore. So I watched your BUS-123 videos online through ITUNES. I love how you teach. Big fan of yours. I had a question regarding the shareholder fees videos. I wanted to know if it would be smart to just invest through a Index funds than through a broker and pay the Class A,B,C sales percentage. Can a individual do their own research on investing in a particular stock and bypass a broker? Would that be more efficient in the long term?
Dear [[FRED]],

Okay, I have some unfettered time. Let's take a look at your two issues. Your two questions essentially are this:
1) Should we go it alone or use a broker, a.k.a. financial advisor, financial planner, wealth manager, etc.?
2) Should we choose index funds (a.k.a. passively-managed mutual funds), actively-managed mutual funds, or individual stocks?

There is much debate and controversy regarding both of these questions. Let's start with the first question. The answer is very dependent upon the individual. Some people enjoy educating themselves and have the temperament, time, and ability to pick prudent, long-term investments that should do well over the long-term. Others have no temperament, no time, and would rather eat barbed wire than sift through the literally thousands of choices of investments. They want an advisor. Of course, if you want someone to help you, then you should expect to pay them for their services. How you should pay them and how much you should pay them is a whole other topic of discussion. (We can deal with that at another time.)

The very famous investor Warren Buffet likes to say, "Investing is simple ... but it ain't easy!" As you go through the BUS-123 lectures, it is my hope that you will understand that there are two parts to investing. There is the intellectual part (the "simple" part) and there is the emotional part (the "ain't easy" part). Knowing about and understanding volatile (a.k.a. losing money) is one thing; living through it and not running for the exits is another. As a broker, I believe I make my money not when the market goes up, but when the market goes down. My clients are paying me for those times when it feels like you are kicked in the teeth by the huge drops that stocks experience periodically. This may sound self-serving, but I can honestly tell you that I have seen people make the most fundamental mistakes over and over again. It starts to sound like a joke. The market goes up and up and you hear people say, "Ooh! Ooh! Ooh! Is it too late to get in?" Of course, you know the answer but they go ahead and buy the riskiest, high-flying stocks only to watch the inevitable fall and say, "Ooh! Ooh! Ooh! Is it too late to get out?" The problem is that the joke ain't funny when it translates into real money lost.

So, in essence, if you believe that you are ready intellectually and emotionally, then, by all means, do your research and, as Benjamin Graham, Warren Buffet's teacher, said, "Have the courage of your convictions." BUT DON'T SELL WHEN THE MARKET TANKS, Okay?

Now with regard to the second question, let's just say that most people really should not pick individual stocks, in my humble opinion, without some serious education. A course such as BUS-123, Introduction to Investments, is mandatory for the vast majority of those who want to pick individual stocks. A scant few will be able to teach themselves but, in my humble opinion, they are few and far between. Also, most people simply do not have the time to pick individual stocks. For those with the motiviation and who are just getting started, my advice is, at first, to stick with large, multi-national "blue-chip" companies with their roots deep in the economy. These are the companies that have been around for decades and will continue to be around for decades. Oh, okay, you want a hot, new high-tech (a.k.a. high-wreck) company? Buy one "hot" company for every 4 or 5 dull stalwart (as famed-investor Peter Lynch calls them) companies you buy, okay? Plus don't forget that you will need to spend time keeping up-to-date about the companies you invest in. The world changes very quickly these days, in case you had not noticed.

So let's say that we would rather choose mutual funds and let the professionals pick the investments for us, yes? Now, should we buy low-cost, index funds (a.k.a. passively-managed funds) or go with actively-managed funds? The drumbeat from the financial media grows ever louder each day. "Active funds are bad. Passive funds are good." So if you are a financial media journalist and you want to keep your job, you had better also start banging loudly that refrain because if you dare to point out that although there are many funds that underperform, there are many funds that have beaten their respective indices over several years and some for several decades, then you will be accused by the armchair generals in the comments section of your article as being a shill for the industry. Don Phillips, former CEO of Morningstar, said, "The active-versus-passive debate has been grossly overplayed to the detriment of many fine, actively managed fund shops and to intelligent investment discourse."

Let's go back to Warren Buffet’s mentor, Benjamin Graham. Decades ago, he warned against any investment strategy that removed human judgment from the equation. Index funds do just that. When a company’s stock price is going up, the index fund must buy more shares. They can not stop and think, "Has greed overtaken common sense with regard to this stock?" They must buy. So when a company has a meteoric rise, the index funds buy more shares, thereby driving up the price even further. The exact opposite happens on the downside. When a stock is beaten down for whatever reason, the index fund manager can not ask themselves, "Is now a good time to buy this company? They are a solid franchise and have great prospects for the future." They must sell.

The index-fund drum-beaters will counter that trying to determine when a company is over or under valued is simply too hard for anyone to accomplish. Well, hitting a fast ball at 98 mph ain’t easy, either. Neither is driving a tiny white ball 330 yards down the fairway into a tiny little hole in 3 shots. But there are people who can do it. And history tells us that there are many actively-managed funds who can consistently beat their respective indexes over statistically-significant periods of time, not just one year, but decades. Those are the people who I want to manage my mutual funds. They are out there. Don’t let the drum-beaters tell you otherwise. Do your research and you will find them. (Hint: Check out the links to the mutual fund companies in the chapter 4 section of the BUS-123 web site.)

One of the companies that has trumpeted index funds over active management is Vanguard. Allow me to pose a simple question for the drum-beaters: If Vanguard is absolutely convinced that index funds are the only way to invest and that active managers are simply stealing their investors’ money, how come they have not shut down their PRIMECAP and Wellington mutual funds and transferred all their investors’ money to index funds? It is because these funds have shown they can do what everyone is saying can not be done. They can "beat the market" over the long-term. That is where I want to put my money! I want managers with long-term perspectives that have done well in good times and bad times. Just as with financial advisors, it is in the bad times where the good mutual fund managers earn their salaries, in my humble opinion.

As I said in the previous e-mail, you have to be careful when you ask an academic a question about their subject. We can talk a whole lot longer than any reasonable person would ever want to listen. But for us, it is a very great joy to have the time and opportunity to be able to do so. So, thank you for this opportunity, and thanks, again, for your kind words. Keep in touch, [[FRED]]! We love to hear how our students are doing, no matter where they are in the world. If you ever find yourself in San Diego, we would be happy to show you around our little corner of the world, Southwestern Community College.

Best of luck and success to you!



[[FRED]] = FRiend of financial EDucation