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My Investing Journey, Just Do It

I began contributing to an IRA in the 80s, buying certificates of deposit at the local bank. Pretty soon I began thinking about investments. I knew almost nothing about the stock market, still, I knew I needed to be in it. I remember watching the nightly news, where the anchors always reported what the DOW did that day, never a mention of that other thingy…. What was it called…. The S&P500? 

I started reading up on the stock market, learning only enough to be dangerous to myself. The thought of investing was infesting me. At some point I was contacted by a smiling and dialing registered rep from IDS. 

I soon rolled over my IRA CDs, all $3500 of them, into a mutual fund and an Real Estate Investment Trust (REIT). Soon after that Black Monday happened. My mutual fund was down hundreds of dollars. Was the world coming to an end? I felt I would throw up. Still, I held on and soon learned that what goes down, usually goes back up pretty quickly. As for the REIT, I watched it go down with every quarterly report. There was no secondary market for it, no buyer for several years. When I was finally able to dump it, I lost about 40%. No more REITs for me. 

In the 90s I took over managing my own money. I spread my investments out in several managed mutual funds. I wish I had known Jonathan back then, because the hot managed funds I chose were nearly clones of each other. By the time the 2001 bear market came to an end, most of the stellar growth from the 90s had evaporated. 

Around that time came a period when I became securities licensed. I briefly worked for a financial company that was owned by a large insurance company. We had an investment specialist, and he taught me much about analyzing mutual funds. He was, however, all about selling managed funds with front end loads and 12b1 fees, and seemed convinced that he could beat the indexes. 

By the time the 2008 financial crisis rained down on the market, I was using either balanced funds or target date funds, still all were managed. They proved superior to my fund picking skills, largely because they dealt better with controlling allocations. 

It’s only been in the last five or so years that I have switched most of our investments into index or ETFs. I stubbornly hang on to a few managed funds, but in total they represent less than 30% of our portfolio. 

Earlier I posted about consolidating most accounts into Fidelity. That has worked out very well so far. I like the  platform and find the website intuitive enough; their phone reps have been perfect whenever I needed them. 

I leave about 20% of our assets with an advisor, whose referrals were a huge help when I was building my income tax practice. He does not charge me much, and uses ETFs in my account.

Over 40 or so years of saving/investing, I have made plenty of mistakes. Still, I kept plugging away, and although I surely could have made better decisions along the way, things turned out okay. The old Nike slogan comes to mind; Just Do It.

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DAN SMITH
10 months ago

Lester, thanks for commenting. 
I have a few thoughts regarding your appreciated stocks. 
One solution would be to leave them for your beneficiaries, who would (under today’s tax laws) receive a step up in basis to their value on the day that you die.
Another course of action is to calculate exactly what the tax would be on the gains. The long term capital gain tax rates are O%, 15%, or 20%, depending on your income and filing status. The 20% rate doesn’t kick in until income rises to between $533K and $600K. 
If it were me, I’d open my tax software, estimating the  best I could, current income along with the anticipated capital gain from the appreciated stock. The tax might not be as bad as you fear. Depending on the outcome you could consider selling all of the shares now, or selling a portion of them each year in order to stay in the 0 or 15%  brackets. 
If you are using Medicare, be aware of the IRMAA triggers.
Good luck.

Lester Nail
10 months ago
Reply to  DAN SMITH

Thanks Dan

Lester Nail
10 months ago

Thanks for sharing your experience. I’m sure I’m the only one who made every possible mistake in investing. My biggest regret is trusting several “investment advisors” until they proved to me they were not worth my trust. Finally at 65 I believe I know enough to handle my own money. I no longer need or want to chase high returns, Index funds in the broad market are sexy enough for me. Since have two many stocks that have hugh gains so not sure what to do with them because I’m not going to pay big capital gains to to move them into a index fund. Yes they are in my taxable account. But I think it’s a good problem to have. Thanks

Olin
10 months ago
Reply to  Lester Nail

Lester, I think the only way to avoid mistakes is to make mistakes. Most people can do their own investing, but at some point you need a tax strategy, or a very good tax advisor who can see the big picture, to prevent under or overpaying taxes now and in the future.

We sometimes get caught after the fact that I wish I knew the mistake back then to what I should know now in taxes. Our tax system has become too complicated unless you have one source of earned income and some interest.

As you say “have two many stocks that have huge gains so not sure what to do with them because I’m not going to pay big capital gains to to move them into a index fund.” This might be a case to seek out a professional (if there is one) for some guidance. But I’m afraid such person will make the situation too complicated that I wouldn’t understand it. I have a tax preparer with 50+ years experience and was a former IRS agent, and this person is not savvy enough in tax strategies…in my opinion.

I can input my age and personal financial data into AI to get a hint of suggestions, but yet when I read the advice of well known professionals (I won’t name them) on the web, I get different recommendations. Seems to be a catch-22 and all you can do is all you can do.