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Of my first investments beyond CDs. Bought into a mutual fund in mid-1987 not understanding front-end loads and high expense ratio, not to mention residing in the bottom quartile. Invested in a REIT that immediately and constantly fell in value. Then Black Monday happened to the mutual fund, and the REIT had no secondary market I could sell to.
But the investments were small and the lessons learned huge. I learned that the market came back pretty quickly and that mutual funds are not created equally, and that REITs are not for me. Those mistakes helped get me on a proper road to retirement.
Have others learned from early mistakes?
Great question, Dan. I started learning about risk from my CD purchases of the 1980s at Rhode Island credit unions. Yields then were double-digit and the CDs insured. Perfect for an beginning investor, right? Except that deposits weren’t federally insured. Instead, the Rhode Island Share and Deposit Indemnity Corporation (RISDIC) backed the deposits. RISDIC lacked sufficient oversight and a statewide banking crisis eventually ensued. All deposits were frozen. For days I lost sleep and for months I worried about getting my principle back. To the state’s credit, by five years out I had been made whole and even received a modest interest payment.
In those times before the internet, I also learned to give rumors some credence. A few days before the bank and credit union closure, someone warned me to cash out my CDs. Thoughts of Jimmy Stewart in It’s a Wonderful Life crossed my mind and I did not act on the warning.
So I’m not the lone ranger JoBo. I was alerted to the overlapping inside my mutual fund investments and also choose to do nothing. Again it was a lesson learned with a relatively small investment.
Dan, I like this post, but I don’t have much of a contribution, because I got some good information early on. My first IRA was an active fund I’d seen highlighted in Money magazine, but within a year I rolled it into an index fund. Maybe this anecdote that illustrates your point will make up for my weak story–I don’t think I’ve posted it before
A younger man asked an older one, “To what do you owe your success?”
To which the older man replied, “Good judgement.”
Intrigued, the younger man followed up with “How did you learn good judgement?”
The older man said, “Experience.”
“How’d you get experience.”
“Bad judgement.”
I love that story Ed.
Early in my investment life, I also bought funds recommended by magazines. They were good calls at that moment. The problem is that the magazine didn’t later tell me when to unload them.
I was hired at AT&T in 1986 and started investing in the 401k. When the crash in 1987 occurred, I lost about 50% – roughly $750 – but it bounced back quickly. The message of Sam Walton has stayed with me “It was paper when we started out, and it’s paper afterward.” His loss that day was over $1B. Patience was the lesson.
If I could tell my younger self a few things, top of the list would be to be happy renting in a secure building in a great city, and 1.) never sell stock to pay cash for houses then years later calculate what that stock would be worth now; 2.) don’t be a landlord! As lucky as we’ve been in our careers buying houses has been a financial tragedy and trying to landlord is like adopting another family over whom you have all the responsibility, none of the control.
We have done okay with houses, otherwise you are singing to the choir. I paid cash for a new cars in 2009 and 2020. Got great deals both times, but how much growth did I miss out on.
We invested our kids’ college funds through my employer in some mutual funds with an 8% sales load. Not long after, we transferred the money to 529 plans (with no load) with much better expense ratios.
529 plans have come a long way in the last 20 years. Some of the original state plans were just terrible.
Yes! When we were young the conventional wisdom was to buy the most house you could. We fell into this since we were financially ignorant and ended up being house poor plus we were in a HCOL area. We didn’t understand why things were so difficult. That was about the time I started learning about personal finances (before the internet). Spouse was transferred soon after I started learning and we didn’t make that mistake again, even though we made some others. I am a slow learner. LOL! Chris
I was a slow learner myself. In the 90s I had my IRAs in multiple mutual funds….. all growth….. all with the same company. Then came the dotcom bust. That’s when I learned about overlapping. These days I have access to Morningstar’s x-ray tool, back then I didn’t know it even existed. Lucky for me most of my money was well invested in my employers 401k.