Expert Interview with Judd Hollas on What You Should Know About Personal Finance

What you should know about personal financeSaving money doesn't have to be a faraway dream for a time when you are earning more money. Judd Hollas, the CEO of EquityNet, shared his insights on what most people should know about personal finance and some crucial ways that you can get started on a healthier financial future.


What is your professional background? How has it served you in your position with EquityNet?

I have over 20 years of experience as an independent technology analyst and investment manager in the private and public domains, and I've also conducted quite a bit of research on methods of conventional due diligence, causes of private enterprise failure, methods for risk prediction, and marketplace characteristics in the private equity industry.

I also was a chemical engineer for Phillips Petroleum, where I worked on process modeling and supply chain automation. My background in finance and engineering led me to a point where I realized that you could combine a standardized, analytical system with an e-marketplace model, and create a large, effective, and scalable crowdfunding platform. My background really has served me well at EquityNet, and I draw upon what I've learned throughout my career every day.

Your website mentions that EquityNet is a recognized pioneer of crowdfunding. How did that come to be?

We saw in 2005 that crowdfunding, even though it wasn't really called that back then, was going to be something big. We put together a patent portfolio that describes crowdfunding and ended up getting five granted patents on separate crowdfunding inventions. So in that regard, EquityNet is a pioneer since we were the first to publicly describe many of the advanced capabilities you see in crowdfunding now.

Who should be visiting the EquityNet website and why? What can they expect to find there?

Basically, any entrepreneur from any industry, location, or revenue stage can use EquityNet to raise funds, create or refine their business plans, or just use the site to generate more web exposure for their companies. They have a home here.

On the flip side, investors who want to invest in privately-held companies can use EquityNet to screen opportunities and communicate directly with entrepreneurs on the site.

What do you think most people need to learn about personal finance?

The first principle a person who wants to learn about personal finance needs to grasp is to have the right expectations on what kind of return they should expect over their lifetime, per year. Since World War II, the stock markets have averaged around seven or eight percentage points per year. So, when people are 25 and they look at retiring at 60, they should expect not a 10 or 20 percent return, but a more modest six to eight percent; and then allocate enough of their income while assuming that rate of return to accomplish their goal by the time they reach 60.

Many people overestimate the return they're going to get and they don't save enough. The other main principle in personal finance is diversification. When people are younger, they can take more risk to achieve a higher return; and as they age and they get closer to needing that money, they can shift their assets from higher risk, higher yield assets to lower risk, lower yielding assets. Who wants to go through a 50 percent market decline like in 2008 when they're two years away from retirement?

For someone who is just starting to save money, what are the first steps they should take?

Basically, you need to set a goal for how much money you want at a certain age, and then calculate how much you need to allocate to accomplish that goal. Of course, you want to temper that by your standard of living expectations.

So, learn how to create a budget and stick to it. For some people who have a hard time doing that, they might want to consider having funds slated for retirement and investing automatically drafted from their paychecks. Of course, it's advisable to consult a professional prior to making any first steps.

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How can the average person get started with investing?

The days of knowing an advisor at Merrill Lynch are passing. They're being replaced with a host of self-directed options and education available online. They can do research on sites like Yahoo Finance or Morningstar, and can actually deposit funds and invest in securities on sites like E*TRADE and Fidelity. People can also consider EquityNet for investment options, as it appears that we're moving into a world where people are allocating five to ten percent of their portfolios to private equity or higher risk, higher return assets like what crowdfunding offers.

When it comes to investments, how do you know if you're on the right track to building a sound financial future?

Basically, it comes down to monitoring your progress towards your goal. You need to compare where you are to where you should be at least annually, if not quarterly. Financial advisors can certainly do that for you, and places like E*TRADE have tools that can help you make those kinds of projections.

The key is to monitor your returns against your goals and risk tolerance. If it appears that your returns are in alignment with your goals, then you're setting yourself up for a sound financial future. If, however, after 10 years you're materially under your projection that you need to hit because your rate of return is lower than you thought, you probably need to make an adjustment and contribute more.

On the other hand, if you're ahead of the game and ahead of your projections, maybe you can decide to pull back on your contribution. It really just depends on where you are relative to your projections. The biggest problem with personal finance is that people will get to 45 or 55 and realize that they have a lot of catching up to do; and it's almost impossible for them to accomplish their goal because they have under-contributed or underestimated their rate of return for the last 20 years. It's a very common problem, actually.

Is there anything else you'd like to share with our readers?

Investors, even modest investors, have a new option available to them in the form of high return, high risk investments they previously did not have access to via crowdfunding on platforms like EquityNet. Even accredited investors are finding new investments that were previously inaccessible. When Title III of the JOBS Act comes into play, all Americans will be able to put up to 10 percent of their income into high return, high risk assets, which will hopefully increase their compounded internal rate of return to help them get to their eventual goals.

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