I started investing when I was 13. I learned about compound interest at school, and I figured that I would become a millionaire if I could just invest my entire life savings ASAP.
Initially, I looked into the stock market but heard only reports of doom and gloom thanks to the dotcom bubble.
In retrospect, the crash would have been a great time to invest, but I had the attention span of a flea (or a 13-year-old girl who needed to get back to AIM), so I asked my dad.
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My dad and my grandfather (both experienced real estate investors) were buying land that was available for commercial development, and they welcomed me in with a 3 percent share (equivalent to my life savings of $3,000).
Less than three months after we bought the land, the city closed off the road access to my beloved investment, which rendered it worthless. No, wait — it’s less than worthless because I still have to pay property taxes on it every year.
Buying that land was a bad investment, but I hate to say that it’s not my worst ever.
That would be the condo my husband and I bought at the height of the housing market. Between home improvements, homeowner association dues, mortgage interest, and the decrease in value, we lost nearly $40,000 on that unit before we were finally rid of it.
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And then there was my foray into individual stock picking and volume trading, which mercifully lasted only a year before I lost a few thousand dollars, and learned about portfolio management.
You see, when it comes to investing, I’ve made tons of mistakes. I’ve lost plenty of money. However, my mistakes are a small price to pay for an early financial education.
Thanks to my mistakes, I know something that most investors never learn. Investing is hard.
It's hard to stick with an investing plan when you aren’t committed to your goal. It’s hard to shy away from attempts to beat the market. It's hard to admit when you’ve made a poor investment and need to cut your losses. It’s hard to predict the next market correction and to be reasonably certain that you’re getting a good deal.
Even more, it’s hard to be greedy when others are fearful, and fearful when others are greedy.
It’s hard to develop an investing strategy that doesn’t waver even as the markets and my own emotions waver. It’s hard to admit that I’ll make more mistakes.
However, none of this stops me from investing.
If anything, these hard facts helped me get back in the saddle after each investing failure. They led me to learn about the intersection of financial markets and emotion. It’s how I stumbled across concepts like modern portfolio theory, disciplined investing, and index investing, which have shaped the investor I’ve become.
I’m no expert investor, but over time I’ve become more philosophical and more goal-oriented in my strategy.
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I’ve committed to take what the market offers and to act as a buy-and-hold investor. I’ve learned that constantly switching strategies is worse than sticking with a strategy that was a loser this year.
Even in my state of relative maturity, I find investing hard. I don’t find it difficult to create rules that should maximize long-term, risk-adjusted returns, but I do have trouble following my own rules because it’s nearly impossible to predict how I will react emotionally to changes in my circumstances.
For me, investing is hard, but it’s also worthwhile.
It’s worthwhile for me to know that I’m doing what I can to set myself and my family up for long-term financial success. It’s worthwhile knowing that given a long enough timeline, even mediocre investors can become wealthy.
Learning to invest doesn’t yield an immediate sense of financial peace like paying off debt or learning to budget. Rather, learning to invest helped me to connect my actions today to my opportunities tomorrow.