After my recent article about coping with haters, a reader named Sandy left the following comment.
Your site is called ‘money boss’. How about…you make a detailed post on how you invest. Let’s see some real life detail. I’m sure you won’t want to post exactly how much you have invested and that’s fine. I’m talking more along the lines of:
a: what stocks/funds you hold
b. what criteria you use to shift funds to maintain balance (good/bad/sky is falling markets)
c. your rate of return each quarter
d. how much you invest each month (ballpark)
…Let’s see whatcha got.
Although I’m skeptical that looking at my personal portfolio will be useful to anyone, and although I’ve already shared most of the following information at Money Boss and at Get Rich Slowly, let’s take a look at how my money is invested.
First, though, let’s talk about how I used to invest.
A Brief History of a Bad Investor
Before I decided to become boss of my own life, I did some dumb things with money. I was especially bad at investing. Like many Americans, I didn’t understand the difference between investing and speculating. I looked at the stock market as a place to get rich quick. I didn’t have the knowledge or patience for long-term planning.
As a result, my first forays into investing were great examples of what not to do:
- During the early 1990s, I followed my cousin’s advice and began investing in mutual funds. Over the course of a very long year, I plowed a little more than $2000 into a variety of Invesco mutual funds. But I cashed out all of my money when I decided I needed to buy a Macintosh Classic II computer.
- During the late 1990s, in the midst of the tech boom, some friends and I formed and investment club. Every month, the six (or eight?) of us would meet to choose which stock we wanted to purchase, then we’d each contribute $50 to buy as many shares as possbile. Our stock picks sucked. We continually bought whatever was riding high. We had no concept of sensible investing. We were gambling — and we lost. The tech bubble burst. After two years, we cashed out and folded our investment club. (For years, I’ve wanted to write this full story for fun. I have all the records from the club, and I’m still friends with all the members.)
- In March of 2000, as the tech bubble reached maximum size, I jumped on the bandwagon for the Palm Pilot IPO. On the day the stock went public, I bought as many shares as possible. Within weeks, I’d lost half my money.
- My final bout of investing stupidity? In the autumn of 2007, I had dinner with a friend who worked at the corporate offices of The Sharper Image. He told me that the company’s stock price had dropped but management was certain they could turn things around. It was just a passing remark in a much larger conversation, but I took it as a sign. The next day, I bought $3500 worth of Sharper Image stock at $3.14 per share. (That was the bulk of my Roth IRA money for 2007.) Within a few months, The Sharper Image declared bankruptcy and the value of my stock dropped to $200. Then to zero.
Gambling and speculating are fundamentally non-money boss activities: outcomes are at the whim of fate. Investing, on the other hand, is a conscious, directed activity that relies on discipline, knowledge, and patience. [Read more…]