Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
Support MFO
Donate through PayPal
What Should You Have Done Differently About Money In Your 20s?
You need not apologize or agonize over any of your earlier investment decisions. I believe you made all the right choices. The fact that you suffered from some totally unpredictable markets is unfortunate, but the discouraging outcomes are part of uncertainty risks when investing. If the markets were predictable, any excess equity rewards above other investment categories would be nearly zero.
Market timing is a fragile, untrustworthy enterprise. Any lucky forecaster who correctly anticipated the early 2000s skid probably failed to project the last Bear market event. Repeat winners in the market forecasting game don’t exist.
I commend you for your early lifecycle savings program. That’s a noteworthy accomplishment when income is often stretched to the breaking point. As the experts like to say, it is the process that is paramount and not the immediate outcome. Over time, the outcomes will regress-to-the-mean. So keep the faith and stay the investment course.
It is somewhat amazing how similar topics seem to coalesce within the investment community in a timely manner. Just today, MFOer Ted Linked to a Jonathan Clements relevant article. The title of the piece is “The Simple Secret to Building Wealth”. Here is a do-over of that Link:
The subtitle of the article says it all: “Saving Steadily Is Far More Important Than High Earnings or Investment Wizardry”. Clements and I are completely on the same page with regard to this advice.
And we don’t have to go too far to secure confirmation from highly respected financial wizards. One such wizard, Warren Buffett, is known for his frugality. For example, a famous Warren Buffett quote is “Don't save what is left after spending; spend what is left after saving.” His priorities are especially illuminating.
Buffett has proposed a 5-step program to save better. His 5 tips are: (1) Practice Living A Simple Life, (2) Avoid Compulsive Buying, (3) Buy only What Is Important To You, (4) Learn To Save, and (5) Be a wise investor.
The wise investor advice is best summarized by yet another Buffett quote: “Long ago, Ben Graham taught me that ‘Price is what you pay; value is what you get.’ Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.” At your age, you have plenty of time to recover from your poor start. Market volatility can work to your advantage in the long haul.
In closing, permit me to congratulate you on your fine young family. No mistakes and hopefully no regrets here. I applaud both your early savings and investing disciplines. Good for you; good for your family.
All to quickly you will be confronted with other major life stage planning challenges like retirement and estate planning functions. Based on your brief submittal, you will likely not have much difficulty preparing for these later life necessities.
Since life is full of uncertainty you will need good luck to boost your considerable planning and practical skill sets. I wish you the very best of Good Luck.
Re: "You need not apologize or agonize over any of your earlier investment decisions." Ditto. No one here needs apologize. Investing has a learning curve like any other endeavor. 20-ish is pretty young.
Only job I know of where you start out on top is digging ditches.
There's very little that I should have done differently in my 20s. My 30s were another matter. With more money, I had more ways to make mistakes.
In my 20s, while I was in grad school, I lived frugally (found a wonderful low rent room to rent, didn't own a car, etc.), and saved enough from my TAs, RAs, fellowship to pay for my first car when I graduated.
I signed up for my company thrift plan (401k precursor) as soon as I could, and initially allocated 50/50 to company stock (a Fortune 100 company) and fixed income portfolio. Didn't have too many choices back then. Still, after going through a bear market for a couple of years, I apparently got spooked, and allocated all new contributions to the GIC option. (I'm inferring my reaction from checking my investment records - I don't recall doing this.)
Bought my first home - with substantial financial help from my employer via relocation benefits. (That home nearly doubled in value during the four years I owned it.) Maxed out my IRA contributions in years I was eligible to contribute - funded an aggressive equity fund targeted at retirement accounts (i.e. managed without attention to tax consequences).
Realize that this was before the 90s when everyone and his grandmother was looking for the next pets.com. Before then, investing was viewed more as something for the wealthy or the eccentric, or both.
Sorry I'm late to this discussion but here goes...
In my 20’s, I didn’t have a clue about saving or investing. However, I was earning decent money and had a fat checking account because I didn’t buy expensive cars or luxury items.
Exposure to investing came along when a stock brokerage became an advertising client. (At the time, I was an art director at an ad agency) The brokerage needed brochures that would highlight their use of Wave investing. They described Wave Theory and I was tasked with creating graphics/charts that represented this theory.
This was my introduction to the market and how the movement of price over time forms patterns. I was hooked. I invested a few thousand dollars with them. Over the next few years, the results weren’t spectacular but they were good enough to convince me that this was worthy of more investigation.
The more I learned, the more I realized how lucky I was to have had this early exposure to investing. By my 30’s, I began passing along what I had learned to relatives and close friends. However, since I wasn’t an ‘expert’, I might as well have been trying to blow out an oilrig fire. I just didn’t say the right stuff in the right manner. Much later, I gave it another try and for the past 20 years, I’ve been teaching an adult education investment class at a local community college.
Please, pass along what you’ve learned. And like your portfolio, keep it simple. And if it’s someone close to you, don’t just tell them. Show them. Words are not enough. Get them started. Some times, you have to take them by the hand. Help them decide how much they can afford to invest immediately and help them open an account. Then follow up. Don’t overwhelm them with your knowledge. You’re not trying to prove how smart you are. Don’t be an instructor. Be a real friend.
Often I’ve suggested that if you save and invest regularly, you’ll never regret it. But if you don’t, some day you will regret it. And then it will be too late.
This is a really good thread. Thanks all who've contributed. In the vein of some recent contributors, I began with zero knowledge. Parents both worked hard. Big family. We lived paycheck to paycheck. That and the experience of the Great Depression in both their childhoods meant they never would consider any investments other than making the mortgage payment on our modest home.
A friend at work (1970s) advised me to put a little away each month in the newly created 403B where I worked. He was very smart and talked about the great returns he'd received from the plan's investment in TEMWX (with a 4% front load) over the past several years. Pretty much still in the dark, I followed his advice and had my employer contribute a little every pay. As I grew older and wiser, I increased the amount. Am ever grateful for his advice.
My biggest lesson however came from getting burned buying some silver and gold coins in the 70s and 80s. This was all the the rave of the day. Touted in all the media and everyone was concerned about the high inflation back than. Started at $800 for gold. As prices plunged to $600, $500, $400 etc. over the next decade, I bought more. Finally gave up and sold out. I learned that chasing markets down is generally not smart (but still succumb to the temptation now and than) and also how volatile seemingly safe investments can be. I'm confident this was the best lesson I ever learned - worth the price I paid.
It is good to hear from you. Thank you for your contribution. It is simply terrific. It is never too late since it always adds a fresh and meaningful perspective to any MFO panel discussion. Your posts are both clear and concise. This current one did not disappoint in that regard. Great stuff!
It is interesting that you were nudged in the direction of technical analyses by your work on a Wave Theory advertisement. I presume it was the Elliot Wave Theory as proselytized by the Robert Prechter version given the timeframe. Prompted by my engineering background, I too launched my investing career by favoring graphic technical analyses.
I even explored the Elliot Wave modeling with its 5 upward segments and its 3 downward thrust basic framework. I never did buy into its purportedly Fibonacci Number fundamental foundation.
I was constantly puzzled by the multitude of cycles buried within any complete cycle that ran from super tsunami-like overarching waves to micro-wavelets. It seemed like each and every Wave Theory advocate had his own unique interpretation of what was revealed by his graphs. I was never comfortable with my understanding of the Theory, so I abandoned that ship in rather short order. Lots of noise within the Wave Theory community.
I know that you deploy moving market averages and crossover points to define market entry/exit decisions, and have done so successfully for an extended time period. Congratulations on that success. It may surprise you that I too still review these crossover signals. However, I do so not to provide a primary decision signal, but more for secondary confirmatory evidence.
Thanks again for your input. I’m sure you gained an additional gravitas standing and even more respect from the MFO membership with this documentation of your background.
Should have stole'd more. Other than that, I helped someone who claimed to be innumerate (my word) to pay down her mortgage faster; set up a chart she could fill in each month with an extra $25 when she had it. Investing in self comes first. Get the education, etc.
Comments
You need not apologize or agonize over any of your earlier investment decisions. I believe you made all the right choices. The fact that you suffered from some totally unpredictable markets is unfortunate, but the discouraging outcomes are part of uncertainty risks when investing. If the markets were predictable, any excess equity rewards above other investment categories would be nearly zero.
Market timing is a fragile, untrustworthy enterprise. Any lucky forecaster who correctly anticipated the early 2000s skid probably failed to project the last Bear market event. Repeat winners in the market forecasting game don’t exist.
I commend you for your early lifecycle savings program. That’s a noteworthy accomplishment when income is often stretched to the breaking point. As the experts like to say, it is the process that is paramount and not the immediate outcome. Over time, the outcomes will regress-to-the-mean. So keep the faith and stay the investment course.
It is somewhat amazing how similar topics seem to coalesce within the investment community in a timely manner. Just today, MFOer Ted Linked to a Jonathan Clements relevant article. The title of the piece is “The Simple Secret to Building Wealth”. Here is a do-over of that Link:
http://online.wsj.com/articles/the-simple-secret-to-building-wealth-1411862971#printMode
The subtitle of the article says it all: “Saving Steadily Is Far More Important Than High Earnings or Investment Wizardry”. Clements and I are completely on the same page with regard to this advice.
And we don’t have to go too far to secure confirmation from highly respected financial wizards. One such wizard, Warren Buffett, is known for his frugality. For example, a famous Warren Buffett quote is “Don't save what is left after spending; spend what is left after saving.” His priorities are especially illuminating.
Buffett has proposed a 5-step program to save better. His 5 tips are: (1) Practice Living A Simple Life, (2) Avoid Compulsive Buying, (3) Buy only What Is Important To You, (4) Learn To Save, and (5) Be a wise investor.
The wise investor advice is best summarized by yet another Buffett quote: “Long ago, Ben Graham taught me that ‘Price is what you pay; value is what you get.’ Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.” At your age, you have plenty of time to recover from your poor start. Market volatility can work to your advantage in the long haul.
In closing, permit me to congratulate you on your fine young family. No mistakes and hopefully no regrets here. I applaud both your early savings and investing disciplines. Good for you; good for your family.
All to quickly you will be confronted with other major life stage planning challenges like retirement and estate planning functions. Based on your brief submittal, you will likely not have much difficulty preparing for these later life necessities.
Since life is full of uncertainty you will need good luck to boost your considerable planning and practical skill sets. I wish you the very best of Good Luck.
Ditto. No one here needs apologize. Investing has a learning curve like any other endeavor. 20-ish is pretty young.
Only job I know of where you start out on top is digging ditches.
In my 20s, while I was in grad school, I lived frugally (found a wonderful low rent room to rent, didn't own a car, etc.), and saved enough from my TAs, RAs, fellowship to pay for my first car when I graduated.
I signed up for my company thrift plan (401k precursor) as soon as I could, and initially allocated 50/50 to company stock (a Fortune 100 company) and fixed income portfolio. Didn't have too many choices back then. Still, after going through a bear market for a couple of years, I apparently got spooked, and allocated all new contributions to the GIC option. (I'm inferring my reaction from checking my investment records - I don't recall doing this.)
Bought my first home - with substantial financial help from my employer via relocation benefits. (That home nearly doubled in value during the four years I owned it.) Maxed out my IRA contributions in years I was eligible to contribute - funded an aggressive equity fund targeted at retirement accounts (i.e. managed without attention to tax consequences).
Realize that this was before the 90s when everyone and his grandmother was looking for the next pets.com. Before then, investing was viewed more as something for the wealthy or the eccentric, or both.
In my 20’s, I didn’t have a clue about saving or investing.
However, I was earning decent money and had a fat
checking account because I didn’t buy expensive cars
or luxury items.
Exposure to investing came along when a stock brokerage
became an advertising client.
(At the time, I was an art director at an ad agency)
The brokerage needed brochures that would highlight
their use of Wave investing.
They described Wave Theory and I was tasked with creating
graphics/charts that represented this theory.
This was my introduction to the market and how
the movement of price over time forms patterns.
I was hooked.
I invested a few thousand dollars with them.
Over the next few years, the results weren’t spectacular but
they were good enough to convince me that this was worthy
of more investigation.
The more I learned, the more I realized how lucky I was
to have had this early exposure to investing.
By my 30’s, I began passing along what I had learned to
relatives and close friends. However, since I wasn’t
an ‘expert’, I might as well have been trying to
blow out an oilrig fire.
I just didn’t say the right stuff in the right manner.
Much later, I gave it another try and for the past 20 years,
I’ve been teaching an adult education investment class
at a local community college.
Please, pass along what you’ve learned. And like your portfolio,
keep it simple. And if it’s someone close to you,
don’t just tell them. Show them. Words are not enough.
Get them started.
Some times, you have to take them by the hand.
Help them decide how much they can
afford to invest immediately and help them open
an account. Then follow up.
Don’t overwhelm them with your knowledge.
You’re not trying to prove how smart you are.
Don’t be an instructor. Be a real friend.
Often I’ve suggested that if you save and invest regularly,
you’ll never regret it. But if you don’t, some day
you will regret it. And then it will be too late.
Words ONLY understood when it is "TOO LATE"
A friend at work (1970s) advised me to put a little away each month in the newly created 403B where I worked. He was very smart and talked about the great returns he'd received from the plan's investment in TEMWX (with a 4% front load) over the past several years. Pretty much still in the dark, I followed his advice and had my employer contribute a little every pay. As I grew older and wiser, I increased the amount. Am ever grateful for his advice.
My biggest lesson however came from getting burned buying some silver and gold coins in the 70s and 80s. This was all the the rave of the day. Touted in all the media and everyone was concerned about the high inflation back than. Started at $800 for gold. As prices plunged to $600, $500, $400 etc. over the next decade, I bought more. Finally gave up and sold out. I learned that chasing markets down is generally not smart (but still succumb to the temptation now and than) and also how volatile seemingly safe investments can be. I'm confident this was the best lesson I ever learned - worth the price I paid.
It is good to hear from you. Thank you for your contribution. It is simply terrific. It is never too late since it always adds a fresh and meaningful perspective to any MFO panel discussion. Your posts are both clear and concise. This current one did not disappoint in that regard. Great stuff!
It is interesting that you were nudged in the direction of technical analyses by your work on a Wave Theory advertisement. I presume it was the Elliot Wave Theory as proselytized by the Robert Prechter version given the timeframe. Prompted by my engineering background, I too launched my investing career by favoring graphic technical analyses.
I even explored the Elliot Wave modeling with its 5 upward segments and its 3 downward thrust basic framework. I never did buy into its purportedly Fibonacci Number fundamental foundation.
I was constantly puzzled by the multitude of cycles buried within any complete cycle that ran from super tsunami-like overarching waves to micro-wavelets. It seemed like each and every Wave Theory advocate had his own unique interpretation of what was revealed by his graphs. I was never comfortable with my understanding of the Theory, so I abandoned that ship in rather short order. Lots of noise within the Wave Theory community.
I know that you deploy moving market averages and crossover points to define market entry/exit decisions, and have done so successfully for an extended time period. Congratulations on that success. It may surprise you that I too still review these crossover signals. However, I do so not to provide a primary decision signal, but more for secondary confirmatory evidence.
Thanks again for your input. I’m sure you gained an additional gravitas standing and even more respect from the MFO membership with this documentation of your background.
Best Wishes.
Other than that, I helped someone who claimed to be innumerate (my word) to pay down her mortgage faster; set up a chart she could fill in each month with an extra $25 when she had it.
Investing in self comes first. Get the education, etc.