Over at Moolanomy, Pinyo is running a contest on investing stories. Up for grabs is a copy of Wise Investing Made Simple by Larry Swedroe. 

As my entry, I thought I’d recount my first investing adventure and some of the lessons it taught me.

All Dressed Up and Nowhere to Go

Back in my days in the military, I was young, naive, and a bit stupid about finance.  As I mentioned here, I didn’t learn all that much about money from the parents. So, when I finally saved up what I thought was a lot of money ($1500), I went to my local bank to invest it.

I walked in, and got to see an investment counselor, and told him I wanted to start investing.

"What would you like to invest in?" He said,

"I don’t know, what would you recommend?" I said.

"Well, Putnam Voyager mutual fund seems to be doing well." I was told.

"Ok, Let’s invest it in that." I said, and so it was.

Now I was the happy owner of about 75 shares of a mutual fund that I had never heard about before, and didn’t know what stocks/bonds/securities/magic beans they invested in. But I was an investor!

(Note: Mistake #1, Not doing your own homework on an investment.)

A Watched Pot Never Boils (and a Closely-Followed Mutual Fund Never Makes Money)

So, for the next four months, I followed a repeating pattern. I’d get off of work, stroll down to the convenience store in the lobby as I left and pick up a Wall Street Journal for $1.25. Then I’d go home and figure out how much money I had made (or lost) that day. That would set the stage for how I felt the rest of the evening.

If the fund made money, I was on Top of the World! If not, I hid in my room and contemplated bankruptcy. I don’t remember how many of each day I had, but I do remember it seemed about even.

(Note: Mistake #2, Never, NEVER get emotionally attached to an investment.)

When All Said and Done,..

A few months after I invested the money, I had to sell the shares because I had to get some major work done on my car (transmission problems) and ended up making a total of $15.75 in profit from my investment for about 4 months worth of time. Considering that at the time, bank accounts were giving %7 interest, and CD’s were at 14%, I think it’s safe to say I felt a little foolish.

And to add salt to the wound, a few years later, I remembered that I was also buying those Wall Street Journals each day. Every Day. So when I also added them in, I Lost about $95.00.

(Note: Aaand Mistake #3, Never invest in mutual funds for short timeframes.)

20-20 Hindsight

Now, having years more knowledge, there were more than a few things I would have done different.

• Done my Homework – Check out the history, investment record, P/E Ratio, and a lot of other indicators to give me a better idea what was going on.
• Planned for the Long Term – Investments like mutual funds are BAD investment vehicles for short-term investments. They’re designed for the buy-and-hold investors in mind.
• Deducted Investment-Related Expenses – Unbeknownst at the time, I could have deducted the Wall Street Journal money as an investment expense. Wouldn’t have added up to much, but every little bit counts.
• Built up an Emergency Fund – Investing your only liquid assets is just inviting Murphy to come live in your spare bedroom. Have available savings equal to about 3+ months of salary available for the unexpected.

I still look back fondly at my military time, and I don’t really regret the investing. It was fun and exciting to think I was "playing with the big boys", even if I didn’t make any profits.

(This blog does not endorse nor detract from the Putnam company. Nor do I currently have any investments in the fund mentioned, or in any other Putnam fund. Invest wisely with good information and/or the aid of a trusted advisor.)