The Story Behind My Investment Strategy: 3 People Share Key Lessons Learned

The Story Behind My Investment Strategy: 3 People Share Key Lessons Learned

Whether you realize it or not, how you manage your money can often have a lot to do with the personal experiences you bring to the table.

Perhaps your parents encouraged you to plunk spare change into a piggy bank as a kid—which helped turn you into the supersaver you are today.

Learnvest

Get started with a free financial assessment.

Or maybe a bout with big credit card balances during your post-college years made you vow never to run up debt like that again.

These are just a couple of examples of the way your personal history can affect how you spend and save.

And it’s no different when it comes to another part of your money life—investing.

Yet you rarely hear tales of how someone’s financial trial and error helped inform the investing strategies they use today, perhaps because talking about the markets or asset classes sometimes leaves us scratching our heads.

And let's be honest: For many of us, it's hard enough to remember to rebalance an investment portfolio once a year—let alone take the time to decipher the differences between investing in stocks, index mutual funds, actively-managed funds and relatively lower-fee ETFs.

That's why we asked several amateur investors to divulge the backstory behind their approach to portfolio building—forehead-slapping errors and all.

And while their financial situations are unique to them—and what works for you may be different—you can still learn a thing or two from their investment journeys.

RELATED: 3 People, 3 Portfolios: What the Ups and Downs of the Stock Market Have Taught Me

KateLandscapeSlow, Steady—and Staying the Course

Kate Dore, 31, social media marketer, Nashville

“I made a big mistake when I stopped investing for an entire year during the financial crisis.

I was just a couple of years out of college, making less than $30,000 as a concert promoter—and I freaked out when my investments lost a sizable chunk of their value when the recession hit.

So from 2008 to 2009, I squirreled money into a savings account instead of investing.

I had a very limited understanding of market cycles at the time, so as a result, I missed out on the chance to purchase stocks and index funds at a cheaper price. Plus, I bypassed the opportunity to earn compounding returns on that fresh capital for an entire year.

“It taught me about the importance of thinking long-term when it comes to investing—particularly when you’re young and have a lengthier time horizon.”

It didn’t hit me that I should have done things differently until 2013, when I enrolled in an introduction to finance course at UC Irvine.

I was considering a major career change at the time, since I knew that being on the road 24/7 as a concert promoter was an unsustainable long-term path.

I wanted to improve my financial literacy—and get my money under control—in case I went through a period of unemployment in between jobs.

That university course literally changed my life.

I got really excited about investing and began obsessively devouring content about financial strategies, and I learned just what I had been missing by not investing during that time.

Ultimately, the course inspired me to max out a Roth IRA, as well as open a separate brokerage account. It also taught me about the importance of thinking long-term when it comes to investing—particularly when you’re young and have a lengthier time horizon.

So despite the fact that the market hit some turbulence this past summer, I’m going to continue to invest. Rather than view that turbulence as a setback, I see it as an occasion to hopefully get more in return for my investment down the line.”

RELATED: 30 or Bust? What Retirement Really Looks Like When You Put Off Saving

Matthew r

The Value in Not Having to Do It All Yourself

Matthew R., 35, director of finance and business development, New York City

“I started investing in my early twenties. And since I’m curious by nature—preferring to explore how the world works on my own terms—I wanted to try actively managing my funds.

It helped that I was working as a business consultant back then, so I naturally spent a lot of time thinking about companies that were doing well or not—and why.

That led me to explore the idea of value investing: buying stock in companies that the market has underestimated.

Compared to growth investing, you’re taking advantage of existing inefficiencies in the market, instead of banking on an organization’s potential. The idea being that, inevitably, the market will readjust to reflect the company’s actual worth.

Of course, you need to be able to find these hidden gems—as well as have an advanced understanding of investing to go this route. So in addition to the research I was doing as part of my job, I also subscribed to newsletters published by well-respected investors that detailed companies that leaders in finance were banking on.

“It’s like taking care of ourselves physically: We know we’re supposed to eat five servings of fruits and vegetables and exercise … but we often don’t do this consistently.”

So in 2008, I invested alongside those savvy bankers—but in a modest way. I did well, but despite this, I switched gears in 2011, moving away from active investing.

For one thing, I became a father, which meant that I had a lot less time for financial research. I had also been reading about how difficult it is for individual investors to beat the market. Once you have 20 to 35 stocks in your portfolio, which I did, your results will typically start to more closely correlate with the market at large.

In addition, I wasn’t as disciplined with my finances as I should have been—rebalancing my investments, reinvesting dividends, adjusting my risk profile, employing tax-loss harvesting, etc.

It’s kind of like taking care of ourselves physically: We all know that we’re supposed to eat five servings of fruits and vegetables a day, exercise and go to the doctor … but we often don’t do this consistently.

So I started investing in low-cost index funds that could help me take better care of my finances, not to mention save me time and effort. My fund's service provider does the financial maintenance that I always intended to do but that was slipping through the cracks—and probably costing me in the long term.

It’s a much more sensible approach for me.”

RELATED: 6 Rookie Portfolio Mistakes Even Seasoned Investors Make

Here, the Simms family (with Joe, top center) receive an award for their family investment club.

The Family That Invests Together ...

Joe Simms, 52, teacher, White Bear Lake, Minn.

“During a family vacation in 1993, my mother, Martha, who had just retired from her career as a nurse, proposed the idea of a family investing club.

She’d always been fascinated by the business world, and since she never had a money mentor growing up, she wanted us to become financially literate. My mother hoped to show us how even if you’re an ordinary citizen—not a banker—investing can be within your reach.

We dubbed our family investment club the “Fortune 14” because there were 14 of us, including grandparents, parents, kids and even newborn babies.

In the beginning, each member contributed $10 a month—a small enough amount that we wouldn’t miss it, but big enough that it added up over time. As an added incentive, my parents threw in an extra $5 per grandchild, per month.

Twenty-two years later, we’re still going strong—the oldest member is my 81-year-old mom, and the youngest is my 14-year-old nephew.

“Just because something is the darling of Wall Street doesn’t mean that it’s where we should put our money.”

We meet quarterly to go through our portfolio, and one of the kids gives a presentation about an investing strategy each time.

There are a few overarching philosophies we adhere to: For one, we invest for the long term and rarely take money out. Because of this, we don’t get too concerned about large dips in the market.

Second, we try to spend as little as possible on fees so that we’ll have more to funnel directly into investing—and we also reinvest our earnings.

And even though we do this as a group, everyone has their own goals for their investments—as my mother says, we aren’t trying to build a dynasty.

For example, we took some money out of the fund a few years ago to help cover my daughter Abby’s college costs. She has been a member of the club since the day she was born, and it certainly helped that she could access her portion.

In general, it took some trial and error before we hit our stride with our investments.

During the early cell phone craze, we thought we should get in on some of those hot stocks. It didn’t work out so well for us, teaching us that just because something is the darling of Wall Street doesn’t mean that it’s where we should put our money.

We’ve also seen firsthand how contributing as little as $10 a month can add up over time. And, most importantly, this has been a great family bonding and financial education experience.”

RELATED: 10 Retirement Myths That Can Wreak Havoc on Your Nest Egg

LearnVest Planning Services is a registered investment adviser and subsidiary of LearnVest, Inc. that provides financial plans for its clients. Information shown is for illustrative purposes only and is not intended as investment advice. Please consult a financial adviser for advice specific to your financial situation. LearnVest Planning Services and any third-parties listed, discussed, identified or otherwise appearing herein are separate and unaffiliated and are not responsible for each other’s products, services or policies. LearnVest, Inc. is wholly owned by NM Planning, LLC, a subsidiary of The Northwestern Mutual Life Insurance Company. LearnVest Planning Services does not specifically recommend any particular security product. 

Learnvest

Financial planning made simple.

Get your free financial assessment.

Related Tags

Get the latest in your inbox.

Subscription failed!

You're Now Subscribed!