Thanks to Mr. CBB’s email question recently today’s post will retrace my investing journey, how I became a do-it-yourself (DIY) investor. The purpose of today’s post is to shed some light on my investment journey to date and build upon this article for future blogposts including how I’m managing my retirement portfolio today.
In the beginning…
I became interested in personal finance, probably in my early 20s. Reading The Wealthy Barber cover to cover a few times over was definitely the trigger for me. Dave Chilton’s tale was extremely well-written and inspiring. I figured if Roy the Barber could amass that much wealth then maybe I could too.
Early focus on investing products
In my early 20s, I invested solely in mutual funds at one of Canada’s big-5 banks and did so for many years thereafter. With my meagre RRSP contributions set up every month as a young 20-something living in Toronto, I contributed to each mutual fund held for many years and did little to question the composition of these funds, their performance or their management fees. Like some of you I suspect, I got my RRSP statements in the mail and immediately filed them under “G” after I noticed the numbers seemed to climbing every month. Everything was fine and good. It certainly was good times for many investors in the late-90s.
Boom, bust and now fed up
With the tech boom, my returns were rather stellar but on the other side of the curve when Nortel and other companies came crashing down, so did part of my portfolio. I incurred some hefty losses. I wondered how this could be avoided? What had I done wrong? Maybe most importantly, why the hell did someone at the bank not call me and help me? Money is an emotional subject and to put it bluntly after the tech-bust, I got fed up with the performance of my investments and needed some answers. In retrospect, I’m glad my emotions took over…
I read and read and read some more
Annoyed and frustrated with my investment portfolio and the bank’s products, I bought books and started to read. And then I read some more, and some more. What I found out was not really that surprising but enough facts that gave me a kick-in-the ass to change my ways:
- Active money management fees will steal from your portfolio returns – for every $25,000 invested in a mutual fund that charges around 2% in fees, you’re kissing $500 per year goodbye. That might not sound like much, but keep paying that 2% every year for another 9 years. That fund will cost you $6,400 to buy and hold.
- If your money is being managed by someone else are you really going to follow it closely enough? Some might but I’m not one of those people. I’ve learned nobody cares about my financial future more than me.
- Contrary to what some financial institutions may advertise I am not richer than I think and I need think for myself in order to become wealthy. This means taking ownership over my financial plan and clearly understanding the products or securities I am investing in and the risks associated with them. This also means setting some goals and working towards them. They include simple things like having some financial discipline to delay gratification, consistently pay down mortgage debt and avoid making big purchases unless I have the money to do so. In short, there is only so much money to go around I can’t do everything I want with it as much as I’d like to.
The game plan
I’m far from a great investor and I don’t rub my pennies together. I am however becoming more picky where and when I spend my money and definitely more disciplined regarding how I invest it. I am much more competent on many financial matters and probably most importantly, I’m on a financial journey that I’m committed to. You can read more about that journey here and here although many more blogposts in the future will cover that. DIY investing does take some work but like most things in life, the more you learn the more you know and the more you know the better your chances to succeed will become.
I hope today’s post inspired you to take a firm grasp of your financial future and make a pact with yourself to learn a bit more every day so you can enjoy some of the financial freedoms this tool called money may provide. Thanks to Mr. CBB for your email question. Stay tuned to my blog for more posts about my investment journey and strategy. In the meantime, if you have any questions all you need to do is ask.