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?