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Rookie Mistakes

Brian White  |  May 15, 2020

I LIKE TO THINK of myself today as a pretty savvy investor. But I wasn’t savvy when I started out. Despite attending business school and earning a master’s degree in computer science, I knew nothing about managing money or saving for retirement, so I initially made a number of blunders—but also one particularly lucky choice.

My first real job after college was in 1987, as a systems programmer for the University of North Carolina in Chapel Hill. In my first year, I figured I should put away some money for retirement. I started investing through the 457 plan offered by the North Carolina retirement system. That turned out to be a fortuitous choice because, for years, North Carolina had promised its employees that the state wouldn’t tax their retirement savings.

Then, in 1989, the state reversed its position, and decided to start taxing state employee pensions and retirement savings. A 1995 court decision, however, ruled that North Carolina couldn’t tax either the pensions of employees who were already vested—or the retirement accounts of employees who had retirement accounts as of 1989, which included me. While my initial investment in the 457 wasn’t a great moneymaker, it meant I had my foot in the door.

Since then, the plan’s fund choices have improved and, as an added bonus, I can now roll money into this account and thereby avoid paying North Carolina state income tax on it. This has worked out great for me, but I can’t take credit for it. It was sheer luck.

Of course, I made many mistakes along the way, too. In addition to the 457 plan, I put money into a 403(b) plan offered through the university. The plan included a variety of mutual funds. My first big mistake was looking at various investing magazines for tips on which funds to pick. I compared fund performance over time and ignored fund expenses, since that’s what the magazines did.

The magazines focused on currently hot fund managers, which suggested there were people out there who knew a lot more than I did and could beat the market by making clever stock picks. I wound up with several funds that invested in very similar things, mostly large-cap stocks with a few small- and mid-cap stocks thrown in. There was no mention of index funds and, in any case, back then they weren’t among the investment options.

The worst mistake I made was listening to the pitch from a mutual fund salesman. He worked for one of the companies through which university employees could invest. He convinced me to move a good chunk of my investments into several American Funds. At that time, the funds had 5% front-end sales loads. Sure, they had performed pretty well compared to whatever benchmarks were used. But I don’t recall that 5% off the top getting figured into the comparison.

Other mistakes I made involved what I wasn’t doing—not considering my goals or asset allocation (or even knowing what that was), not having an investment plan, not rebalancing and not consciously diversifying. Fortunately, it was early on, with a relatively small amount invested, and I didn’t lose too much money in the process.

With all that, there was one thing I did right: I was automatically investing part of every paycheck. At the time, I didn’t know what dollar-cost averaging was. But I was doing it nonetheless. I was saving regularly without watching the market. Yes, I could have done better. But I could also have done a whole lot worse.

Brian White retired from the University of North Carolina, where he worked as a systems programmer and then director of information technology in the computer science department. He likes hiking with his wife in a nearby forest, dancing to rocking blues music, camping with friends and stamp collecting. He also enjoys doing volunteer income tax assistance (VITA) work in the Chapel Hill senior center.

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