“Life can only be understood backwards but it must be lived forwards.”
This is one of my favorite quotes by Søren Kierkegaard.
I understand taxes, macroeconomics, and markets far better now than I did a decade ago. This is because I know that I know almost nothing about these topics.
I also understand myself as an investor a lot better too. This is as it should be. Through trial and error, I’ve gained more experience and a better perspective on all things, including money.
For example, I’ve learned I would never be able to ride a big winner. It takes a certain lack of prudence to yolo your life savings into a meme stock or cryptocurrency and then a certain lack of brains not to take it off the table when it goes to the moon.
But here are a few things I could have done better when starting out:
Thing # 1: Buy and HODL
Every finance blogger can (and does) extol the virtues of buying and holding but it’s actually really hard, especially during a bull market when it looks like everyone around you is getting rich with day trades, cryptos, and NFTs.
It’s also hard to hold during drawdowns when it seems like we are on the verge of the dotcom crash every other month.
When I was 18, I bought my first stock for $11. Looking at my tax returns from that year, I can see I also sold it less than a year later for about a 50% gain. Had I held onto it, I would have had a 900% gain.
Talk about a missed opportunity.
Thing # 2: Just when you think you have it figured out, you become the dumbest person in the room.
The more I learn, the less I know about this stuff.
When I was in my first year of college, I read Investing for Dummies (one of those yellow and black books that were written about everything in the 90s and 2000s). I knew what P/E stood for and that anything under a P/E of 20 was good (actually not true) and that’s about it.
I didn’t know how much I didn’t know about buying little pieces of digital documents that said I owned a part of a company.
I truly fancied myself a savvy investor simply because I was transferring money earned at a part-time job into a brokerage account and clicking Buy and Sell.
I also vaguely remember opening an IRA through the restaurant I worked at. I could not explain why I did it at the time, other than a few of the older guys were telling me it would be a good idea.
I closed it out 2 years later and paid all the fees and taxes because I didn’t know how to transfer it.
Then last year, I front-loaded my 401(k) and subsequently missed out on the company match for 6 months because I didn’t know our company’s true-up policy (spoiler alert: we don’t offer them).
Mistakes, mistakes, mistakes. Never get over-confident.
Thing # 3: Big market cycles are hard to understand without living through them.
Back in 2008 we were in the throes of the Global Financial Crisis.
Like all normal 18 year olds at the time, the crisis itself did not mean much to me. Thankfully my parents did not lose their home (although I remember some friends whose families did).
I was much more interested in being awkward around pretty girls, listening to rap at an annoyingly high volume, and playing World of Warcraft until the sun came up. Looking back, I’m only embarrassed about one of those things.
The one thing that made sense to me was the advice from Buffett to be greedy when others are fearful. But I was only looking at charts and what happened to the price in the previous day or week. If the price was lower than it had been in the past, that was enough for me to buy the stock. When it didn’t go up the week after I bought it, that was enough for me to sell it.
I was completely ignorant of the broader economic trends playing out around inflation and global trade and employment. I didn’t grasp capital gains taxes, tax loss harvesting, or the power of index funds.
Through dumb luck I eked out a positive return. It was probably a good thing that I didn’t know how serious the housing market collapse was because otherwise I may have been too spooked to invest.
Ignorance can be bliss but having lived through a couple booms and busts I now have a greater appreciation for how to prepare for the big storms and how to take advantage of them.
It’s amusing to watch 20-year-olds on Instagram talking about how easy investing is. They don’t realize the past decade of investing has been like playing tennis with no net.
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Thing # 4: Good saving habits can be more important than good investing.
After the GFC, I stopped paying attention to investing for 5 years.
I did save my money, though.
I’m a natural saver because we grew up poor but frugal. Learning how to save is actually the first step to being an investor. Without any money, you can’t invest in the first place.
Saving money year in and year out since 14 was the only way I was able to buy a house at 23 (there was also a lot of luck with the housing collapse just 5 years prior). But without a saving mentality, I wouldn’t have been able to capitalize on the opportunity in the first place.
Just recently it clicked that the only way to wealth is by living below your means, never being too proud to pick up a quarter, and automating your savings.
Thing # 5: Just get started.
Around 2014, I opened a Roth IRA and put about $1000 into a target-date fund each year. I didn’t know about expense ratios, index funds, or dollar-cost averaging.
I also opened a 401(k) at my company (because it was auto enroll), and chose the target date fund that matched my expected retirement year. I didn’t know what bonds were, what the annual 401(k) contribution limit was or the differences between funds I could choose.
Then I stopped paying attention to investing for ANOTHER 5 years.
I am really thankful that I started back then and then put it on autopilot. Even though I didn’t know it then, time is the single biggest factor in earning wealth. I still wish I had started years earlier.
Thing # 6: The simpler, the better.
FINALLY, a couple years ago, I started tinkering again. I read SubReddits about Personal Finance, looked up definitions on Investopedia, and downloaded a few podcasts to rekindle my love for all things personal finance and investing.
After a decade long hiatus, I was back baby! This time I decided to double down on learning and making this my hobby. I launched this blog as well as an Instagram dedicated to wealth and health.
But even with ten years of saving and investing under my belt, I’m still making mistakes by complicating things.
I still fall victim to my own emotions. I still experience FOMO. I still don’t have a formal investing plan for myself.
But over the past year, I’ve decided to go simpler. I don’t want to own any individual stocks anymore. I don’t want 5 different accounts across the internet. I don’t want to check stock tickers throughout the day. And I damn sure don’t want to worry about how much of my net worth is being blown up via crypto crashes overnight.
There is no better teacher than time and experience.
You can read this article, or talk to a financial advisor, or watch FinTok videos all day, but none of it will prepare you in the same way as getting your hands dirty.
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