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Monday, December 22, 2014

My Investment History

Posted by Dave on January 14, 2014

There was a period, before I started down my current path to early retirement that I really didn’t know what I should do with my money. I read a ton of books, and tried to find the best system that matched both my risk profile as well as my age to find the best way to make as much money as I possibly could. I have a unique mix of both being risk averse for the most part, while at the same time realizing that some known risks have to be taken in order to make some significant gains.

I’m not sure what level of esteem I am currently held in by readers of this blog, but please note that I was both young and not as well read and not as skeptical as I currently am when I decided to pay for investment advice online…..From Jim Cramer. At 24, this seemed like a great idea – I’d read his book and was impressed by the strategy he employed, and was hoping that his paid service would duplicate the massive profits his hedgefund had achieved in my tiny portfolio. Ideally, I was hoping my compounded profits would make me into a millionaire by the time I was 30, so I could buy cooler stuff than I was currently able to afford.

I forget what the service even cost, but I do remember that the advice I was paying him to help me make my millions of dollars was not always in alignment with what he was screaming about on television. That kind of ticked me off, and I quit it before making any significant investment gains or losses. I will chalk this up to a fairly cheap lesson learned.

After my Jim Cramer phase, I flip-flopped to an almost opposite method of investing. I read the book “The Smartest Investment Book You’ll Ever Read”. After my foray into almost day-trading, the advice of consistent purchases and re-balancing of index funds seemed to make considerably more sense to me. My RRSP investment account right now currently holds almost 100% in index funds, which I have essentially ignored since the beginning of my current path. I ignored the account both because I lost interest in investing, as well as because the value of the investments was low enough that it wasn’t worth moving the funds around.

As I’ve mentioned before, the book that really opened my eyes was Derek Foster’s “Stop Working – Here’s How You Can!”. I probably read and reread it a half dozen times when I initially took it out from the library. The idea that I could fairly rapidly achieve financial independence (depending on how low I could get my monthly expenses down to) was more attractive than any long-term strategy I had read or thought about. It was my light-bulb moment, which has lead me down my current path. The plan I set forth from there, after much more reading and obsessing (much to the chagrin of my then girlfriend, now wife, who was not yet used to my ways) is the one I am still following today.

In last week’s post, I wrote about how this year is a transition year for me, where “phase 1″ is complete (debt repayment) and I’m moving into the longest phase – investing to build cashflow to replace current employment income. This week’s post was a look back at my previous investment strategies. Next week I will post about how I see my current and future investment plans going.

How did you start investing? What sources of information did you use when you started? Did you make any mistakes you wish you hadn’t made?

Comments

6 Responses to “My Investment History”
  1. deegee says:

    Although I had been investing through my 401k since 1986, it wasn’t until early 1990 when I began investing with my non-retirement money. Then again, I did not really have any significant money to invest before 1990 because I had saved up to buy a car (in 1986) and an apartment (in 1989).

    In early 1990 I began investing in a tax-free, muni bond fund. It was nice earning interest which was not taxable, unlike bank account interest whose interest rate had dropped quickly in 1989.

    I did not dabble into stocks with my non-retirement money until 1994 when I began investing in a mixed-asset-class mutual fund which was majority stocks. Through the late 1990s I went more and more into stock mutual funds with the 1990s stock market boom.

    Back then, there was not an easy source of information on mutual funds. There is Morningstar but I had to go to my local library to read it. I did not have home internet access until 1996.

    I can’t say I made any big mistakes over the years. I I was in a bond fund for a few years which was a dog while other bond funds were doing reasonably well.

  2. Thanks for sharing. I started down a similarly blind path, where I had money to invest but no knowledge whatsoever. I started with my bank, and they eagerly took my money and put it into mutual funds. I didn’t even know what an MER was! When I realized the bank was making over 2% off my investments and I was making barely more than that, I knew it was time to make a change.

    I started reading as much as I could on investing, and eventually got up the nerve to open a discount brokerage account and switch all my money over to DIY investing. I know own low-cost index funds to an investment risk I am comfortable with. It was a big leap from where I was, but I’m glad I took it!

  3. Steph says:

    I am 33 and starting where u were at 24 i guess because i was thisclose to getting sucked in to buying tim sykes advice and pennystocking before a friend stopped me and said its a scam. I know i need to start with the basics like spending less and paying off my mortgage but when that is 21 years away its discouraging.

  4. handsfree says:

    “Your Money or Your Life” started me thinking about the possibility of early retirement/financial freedom, then it was the same Derek Foster book you mentioned that showed me how. After paying off the house, we’ve been steadily building up a portfolio of stocks that pay us growing dividends – mostly in our TFSA and non-reg accounts.

    Biggest mistake: dabbling in income trusts; I lost a bit from that – but not much thankfully as I had only just started investing at that point. Now it’s all blue-chip banks, insurance, infrastructure and utilities mostly in our accounts.

  5. James Brown says:

    Your Money or Your Life, for me, as well as The Millionaire Teacher.

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