This is a guest post by Eric @ Passive Income Earner
I am in my late 30’s nearing the big 40 and it’s only over the past few years that I’ve developed a decent investment plan. Interestingly enough, I’m relatively knowledgeable about money but never knew enough about successful investing until recently. Here is my story on how I turned my investments around – I’ve made many mistakes and I hope I can help someone avoid them.
Starting with Lack of Knowledge …
In my 20’s, my lack of knowledge in investing had me start with mutual funds – expensive mutual funds at that. I read books and magazines and I was swindled in the theory advertised about mutual funds.
Unfortunately, very little was advertised about the fees and the drag on performance over time. I was also reading the wrong books. Another reason I went with mutual funds was due to the high stock trading fees. Back then, discount brokers weren’t as competitive as they are now.
I thought I was smart with my mutual funds especially with a financial advisor selling them to me. After 5 years of investing in mutual funds and being unsatisfied, all my mutual funds ended up in dividend paying mutual funds as I just did not like what was offered. I had decided that I preferred a known return with dividends over the potential of a large capital gains. That’s when I started forming my dividend investing goals.
My suggestion for the young generation, gather a lot of information and interview others (especially those with success) to understand what’s ahead. These days, the TFSA is a great tool and I strongly recommend it.
Still Naive & Hitting For The Fences
Even as I was starting to save enough money to buy stocks without feeling the pinch of the discount broker fees, I was struggling with defining my investing strategy and I ended up experimenting with the bad news and momentum strategy. I made money with Apple and RIM but lost money with many others such as Crocs and shipping companies. The strategy wasn’t working and losses compounded during the financial market crash of late 2008. To make matters worse, the portfolio was leveraged.
The Lazy Investor book by Derek Foster really helped me see stocks from a different perspective. I could relate to his concept about investing in what I know and understand. After reading that book, here’s what I did:
- I focused on learning about Computershare to allow me to invest small amounts and to get my kids started early.
- I started the blog to help teach what I learn, hold myself accountable and try my hand at being an entrepreneur.
- I took a more systematic approach to researching my investments.
My Three Year Turn Around Journey
As my blogging journey started, I decided to part ways with my mutual funds and financial advisor. It took me 3 years to redirect my investments and establish a strategy that has been working for me. Below are the high level steps I took over time.
- I got setup with Computershare;
- Made use of Scotia iTrade (e*Trade Canada);
- Re-organized my RRSP by investing in stocks and selling my mutual funds;
- I established my TFSA account and maximized my contributions;
- Started investing in US conglomerates in my RRSP;
- Switched to RBC Direct Investing;
- Setup my RESP account and transferred my investments with mutual fund companies over;
- Sold RESP mutual funds and bought stocks; and,
- Continue to research stocks fitting the simple and easy to understand businesses with an economic moat strategy.
As you can see, my investing journey has been far from perfect. It’s important not to give up and adjust your plan when necessary. All the best in your investment journey!
About the Author: Eric @ The Passive Income Earner is a DIY investor and software engineer by trade. He has a passion for building a retirement portfolio to retire from the income it generates.