FREE NEWSLETTER
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.