Investing is scary. Many of us millennials don’t have the stomach to see market fluctuations, corrections, and worst of all…crashes. The 2008 Financial Crisis looms heavily in our minds.
In 2008, I had just entered college, and I didn’t know a lick about investing. I didn’t even hear my parents talk about it much in relation to their retirement accounts. All I could see were frenzied headlines about banks going bankrupt, people not being able to take out their money, and new grads from my university unable to find jobs. All the while, the stock market was at an all time low since the Great Depression.
But being a new college student with no money, all of these were beyond me. In a way, it was a blessing because I was saved from the emotional scarring of hearing about people losing tons of money from investing. No doubt that would have scared me off completely from investing.
The idea of investing was introduced in tiny, unnoticeable steps. That was a blessing too. I didn’t have 10 different people telling me the best way to invest my money and how. No doubt that would have felt overwhelming to feel I had to know everything before even getting started or feeling comfortable.
Where I Started
Growing up, I knew nothing about investing. I didn’t know what the stock market was, only that it could make a person “rich” (according to my parents’ excitement).
Up until college, the only experience I had with investing was my dad playing around with stocks before the dot com crash. He worked at a community college at the time, and he would constantly check out books from the library about stock investing. We would always have the markets up on the TV. I heard the term “Dow Jones” constantly without any idea what any of it meant, other than knowing it was pretty important for adults to know.
I vaguely remember all my parents’ friends at the time saying we had to get stocks because we could make a lot of money. It was in my subconscious for a long time afterwards that stocks were a way for people who wanted to get rich quick. My parents never did become “rich”, they said many years later that they just about broke even.
The College Years
In college, I knew nothing about investing. I thought it was only for privileged friends who had cash to burn. I thought it was for people who wanted to circumvent the system and “get rich quick”.
My sophomore year of college, I had a friend who was interning as an analyst at Wikinvest, which is now SigFig, a robo-advisor. I remember talking to him about what his job entailed, and I had no idea what the value of it was. Was it just for rich people who wanted to get richer? His dad had also given him a relatively large investment portfolio for him to manage, and I thought, well wouldn’t it be great if I was just handed wealth too?
Similarly, my boyfriend at the time had stumbled upon some investment portfolio he had started years earlier with money his parents gave him specifically for the purpose of learning how to invest. The portfolio had grown a significant amount. Again, I was fixated on the starting amount he “inherited”. I didn’t even begin to question how the money had magically grown.
Once he started working, he started investing immediately. In what, I have no recollection, but at the time I probably assumed it was in stocks because I had no knowledge of other products you could invest in. I just remember him monitoring investments constantly and feeling this was just another guy-wants-to-get-rich-quick thing.
After College and Into The Workforce
Post college, my positively influential friends were setting up their 401ks, investing, and talking about saving for retirement. I finally felt the peer pressure to save for retirement. What investing had to do with retirement, I still had no idea.
When I saw all of my friends starting their 401ks and talking about company matches, I believed company matching was the only way I could retire on time. I had no clue that 401ks were accounts with investment options, nor did I understand that the compounding growth of the investments was how most people expected to get over the retirement finish line.
All I knew was I needed a 401k ASAP to help me retire. I didn’t know about other non-company sponsored retirement accounts at the time. The first company I worked for wouldn’t give me a 401k until I had been there a year. I left after 8 months. By this time, many of my friends were talking about investing, too.
One friend had used an entire summer internships’ money and put it in Tesla. Another friend was advised by her boyfriend to open a Vanguard brokerage account and invest in an index fund tracking the S&P 500, VFINX.
My second job also didn’t offer a 401k until the second year. That left me anxiously counting down the days until I could start getting my retirement in order. As far as I knew, contributing to a 401k and investing were completely separate. I still thought investing fell into the “only do it if you have money to play with” bucket. My plan was to start investing right after I could get my 401k started when I had money to spare.
I spent the waiting period for my 401k doing idle research. I wanted to have a solid plan for things I planned on investing in even though it was still a pretty big scary unknown. The research was on and off. A lot of my research was anchored around reading about the S&P 500 after hearing my friend talk about it.
I gathered ideas of the importance of avoiding fees, diversification, age + risk tolerance, expense ratios, and long term returns. I learned attempts to beat the market as an average investor was ill advised. As far as 401k research went, I did a lot looking at Roth vs. Traditional and that was about it.
When it came time to open my 401k, I put the majority of my contribution towards the S&P 500 equivalent index fund, as well as some bonds and other funds. This was based this solely on the 10 year return number. I forgot a lot of the optimizations I had learned during my research, which goes to show that learning and planning are different to actually executing. I still didn’t really consider my 401k contributions investments. It didn’t seem like real investing since I couldn’t touch it until I was a ripe old age.
After starting my 401k contributions, I bought 1 share of Apple because I was curious how buying stocks differed. That’s as far as my outside investing went.
How I Earn and Invest Today
Starting my job in SF with a new 401k gave me some more experience and knowledge about investing. I started a brokerage account this year. The process of learning to optimize it has made the picture clearer too.
Practice makes perfect. It allows for refinement. Once I settled into a secure job after moving to SF, I got to start a second 401k. I felt way more confident selecting the funds this time, and I was able to factor for expense ratios this time and a little more diversification on top of my old strategy.
Even for a passive investing strategy, there are plenty of things to learn. It’s an evolving process of tweaking and optimizing. I felt even more confident by the time I started my brokerage account half a year later especially because I’d done even more reading (books and blog posts) by then.
Sometimes it feels like when it comes to investing, you need to do everything perfectly. One wrong move and you’ve lost your life’s fortune. While investing does require some upfront research, it doesn’t require the Perfect strategy in order to begin executing. It’s not required to put everything you have down like a huge gamble. Like all things, you can start small while committing to slowly improving.
How did you get started investing? Was it scary? Did you jump in with the knowledge you would be fine or did you tip toe in like me?
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