Every investor has to get started. This is my story of the first time I set up an investment of my very own. I didn’t necessarily act wisely. I wasn’t knowledgeable. In retrospect, I picked mediocre investments for all the wrong reasons.
Despite those mistakes, I learned key financial behaviors that you have to learn to become a successful behavior.
This is my beginning investing story.
“You really need to start investing,” my boss told me. Jim was 6’9”, long haired, bearded, and burly. Since he had been building bookshelves, he was sweaty and covered in streaks of sawdust. He looked like an oversized Viking about to go plunder, not a mentor discussing long term wealth building.
“Um, okay.” I was working a not-quite minimum wage job in a used bookstore, living at home with Mom and, while loving my job, not really sure it could be called a career. I had left grad school with student loans and ill-advised credit card debt, but no degree and no desire to go back to academia. The lesson I’d learned was that compounding interest was not my friend. Jim tried to change my mind.
He had been trying for months, and he was slowly making an impression.
I did have some stock, gifted from my grandmother. Someone had once told my grandfather to buy stock in a life insurance company instead of life insurance, and since he lived into his mid 80s it had turned out to be pretty good advice. Mom told me in no uncertain terms I was to leave it alone and reinvest the dividends. And I wasn’t supposed to think of the stock as mine. That money was to take care of my single Mom if she needed it when she got older.
I had watched the balance on the quarterly statements increase far in excess of the dividends, so Jim’s lesson about the benefits of investing wasn’t entirely new. But I wasn’t an investor. I didn’t actively contribute or save. I was just someone who had some stock.
“Look, you’re still in your 20’s. If you start putting a little money away now, on a regular basis, you’ll have a lot more later. My stocks have been doing well, and all I do is put in a little money every week. Come with me next time and I’ll introduce you to my guy.”
“I don’t have a lot of money. Don’t you need a lot of money to invest?”
“There’s a $1000 minimum. Aren’t you getting more than that back on your tax refund?”
I was. On Jim’s advice, I had started withholding more from my paycheck as an enforced savings. (Yes, I know now that I gave the government an interest free loan.) The idea of having a big chunk of money after tax time sounded good, but I really hadn’t a clue what to do with the money.
Going to See the Guy
So when the check came in, I went with Jim to see his guy.
Jim’s guy was 50ish, white, dressed in a suit. He was no Gordon Gekko, but he fit the stereotype of who normal folks talked to about investments.
Jim talked to him a bit about his investments, and I listened. And then he talked to me. I don’t remember much, even the guy’s name, because it was 25 years ago. It must have been enough to convince me. I got 4 prospectuses, and went with an international fund because that was what Jim was doing. Before long, I set up the account and a small monthly draft to contribute.
The next year, I used my tax refund to start investing in a second fund and started saving more to reflect the higher pay I was earning.
I had seen the guy and become an investor. Not a great investor, but someone who contributed to an IRA and planned for their future.
In looking back at it now, I definitely did things I would never do again. I picked an advisor who was not necessarily the best for me, and investments that I didn’t understand, because my friend chose them. I didn’t read up on the investments, or do more than flip through the prospectuses looking for company names I recognized. Worst of all, I didn’t talk to my mom, who by that time was a sophisticated investor with a clear retirement and investment strategy.
I just winged it.
For all of these things I wouldn’t do again, however, overall the experience was still really important and a good one.
I got started.
I used windfalls to get my first investment going and to grow investments faster, set up an automatic monthly draft, and learned to live a little below my means. With those three things, I accidentally found three keys to successful financial planning.
Bank windfalls. Invest often. Live below your means.
With those three fundamentals in play, I gave myself the space to become a better investor. I bought a few shares every month, and learned that I could save and invest. I looked at monthly statements, and learned not to panic when the price of my investments went down, and not to get too excited when it went up.
Most of all, I learned that I could become an investor, and changed the way I thought about money and putting some of it to work for me.
How did you get started with your first investment? What would you do differently if you were starting over?
This article was first published July 24, 2015 and updated 8/10/16.