4 Things I Would Tell My 20-Something Self About Investing

Photo: Freeimages.com/Joseph Sebastian

I’ve been investing for about 30 years and have learned a lot about investing over that time. Even more important, I’ve learned a lot about myself – my tolerance for losses, my patience (and impatience) with investments and what strategies work for me as an investor.

I started out in my late teens buying mutual funds in my favorite asset management company and buying individual companies that “looked good” (usually based on tips from personal finance magazines), moved to dividend companies (but not necessarily dividend growth companies), took a detour to focus on momentum investing with fast growing companies, and have finally arrived at dividend growth investing as the core of my wealth building investing. Seeing where I’ve been and where I am now, I thought about what I wished I had known back when I was starting out as a novice investor:

“Start Now – You Aren’t Too Early” – The biggest thing I had going for me back then was compounding benefits of time. Here, in my mid-40s, I can see retirement approaching fast. Granted, it’s still 20 to 25 years away, but my planning is getting more urgent as my one finite resource – time – slips away. But looking back, it’s clear to me that the biggest investment gains that I’ve had are due to the compounding benefits of consistently putting money away and letting it sit in decent investments.

“Focus the Core of Your Cash Flow on Companies With Consistent Dividend Growth – And Don’t Sell Unless You Need the Money” – I remember buying RPM, Inc. (RPM) at a split-adjusted price of about $10/share based on an article in Kiplinger’s Personal Finance. Without knowing it, I picked up company with good free cash flow, good management and a record of sharing profits with investors. Foolish me, I sold my RPM holdings a few years later for what I thought was a better investment. After I sold it, RPM continued to increase its dividends each year – and I missed out.

“Good Investing is Boring” – The best successes that I’ve had in investing have come from “boring” investments. I do enjoy actively managing my investments, so I have a separate account to satisfy my desire for “excitement”. But results are what matters, and I’ve done far better when I leave things alone.

“You’re Investing for the Long Term – Don’t Watch Your Account” – My long-term investments are just that – long term. Which means that yesterday’s or today’s stock prices aren’t important. I won’t need my retirement investments for another 2 to 3 decades, so I don’t need to constantly check the values of my portfolio. I do check balances every 6 to 12 months to make sure that the asset allocation is still what I intended.

So what would you tell your younger self about investing?

Oh yeah, I’d also tell myself not to sell the RPM stock.

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2 Comments

  1. victor says:

    very good, i’m 23. I opened by roth ira a year ago. the tips i have recieved here have been great. Thanks!

    • Jason says:

      Victor:
      You’re doing the best thing that you can for your future – starting to save early. Thank you for the kind comment!

      Cheers,
      HD