I have a close friend who has been asking me for investing tips. At one point I considered setting up and account and running his money for him, but was advised not to do so. Instead, I have offered to use this web site to teach him what I can of what I have learned about investing. This is the first such lesson.
I expect I'll continue these lessons, about one per weekend, as long as the friend leaves me a comment most weeks.
Here's the profile of the friend, who is probably similar to a lot of people. As such, this set of lessons may be valuable for a lot of people. My friend:
- Is a low 6-figure hi-tech marketing manager.
- He has a couple of years salary saved up in a self-directed IRA. He's been playing around with individual stock picking and mutual fund investing for a couple of years, but has never really gotten serious about it.
- He is still putting kids thru college.
- He is in his 50s with a stay-at-home wife.
- He has a fairly fully mortgaged house.
- He's like to retire (or redirect his efforts to some charitable activity) as soon as possible.
I'd say this is pretty typical of a decent fraction of baby boomers out there.
In this lesson I'm going to introduce myself and provide a little background that the reader can use to determine whether I'm worth learning from.
I've been obsessing over investing since around 2003. They say it takes 10,000 hours to develop serious skill in any area. A full-time job is around 2000 hours a year (50 weeks times 40 hours/week), so we are talking 5 years, easy, to develop a serious skill like investing. Coincidentally, I just started gaining traction in my investing around 2006 and certainly was not playing with a full deck thru the recent 2008 collapse. I believe that now, nearly 7 years later, I've paid my 10,000 hours and you can decide whether my level of skill is worth learning from.
Here's how my savings accounts have done since I started recording it every day in Q3 2006. There have been some deposits and with drawls during this period (probably more in deposits), but not enough to seriously affect the outcome.
I don't know what you make of this. I believe it shows:
- I have a much higher risk appetite than most people. Its true. I decided that I wanted to take my risks while I still have my lucrative day job and while retaining my nest-egg in the form of a paid-off residence.
- There's now way anyone would want to be like me unless I have really learned my lesson and figured out how to avoid another experience like I had during the crash of 2008. I believe I have, but only time will tell. I'd say the key thing I've learned from that crash is how to use technical analysis to limit the downside of my investments. From now on, when the charts go sour I'm getting out regardless of my perception of the underlying fundamentals. I'll explain this in subsequent lessons.
Well, dear friend, if you want go on with this, leave me a comment. I expect that next week's lesson will be: "There are no safe investments".