In April 2007, I took the investing plunge. I had been considering investing for a while but had never gotten around to doing it. Armed with the knowledge, limited to online advice and a copy of Investing for Dummies, I decided if I didn’t invest then I never would.
First, being a member of the military I only had three options for putting my money into the market. I could use the military’s TSP (Thrift Savings Program) which is like a 401k but doesn’t offer an employer match, open a brokerage account with one of the online firms, or open a Roth IRA with my bank.
I chose my bank for a number of reasons but the key determining factor was that I could start my IRA with automatic monthly transfers. All I needed to do was pick the funds I wanted to invest in, set up the automatic deductions, and let it ride. One advantage I really liked about having automatic transfers was it forced me to dollar cost average. $400 a month for the year would give me $4800. In order to maximize my contribution at the $5000 yearly ROTH limit, I would add an extra $200 that I would use to keep my portfolio balanced.
The mutual funds I chose divided my assets into a 25% balanced fund, 25% overseas fund, 25% income fund, 20% bond fund, and 5% precious metals fund mix. Sure, I may have overlapped by including a balanced fund but I’m ok with that.
Fast forward to the Dow hitting a high above 14,000… I’m a genius. People at work who are interested in investing are asking me how to get into the market and my wife is telling her friends how smart her husband is. Being leery of offering specific advice on what a person should do with their money, I always recommend they get online and check sites such as Kipplingers.com, Yahoo finance, CNN Money, and read a book or two on basic investing.
With my investments on full autopilot, I didn’t need to check the market every day. Sure, there were worries about the declining housing market but what did owning a house have to do with stocks. This shows how much of a financial guru I am but to be fair a lot of actual guru’s got crushed right along with everyone else.
Then things got serious. Banks were failing and the credit crisis was in full effect and the government was talking bailout. Like most people during this period, I didn’t do anything because I wasn’t sure what I should do. Around 1 October, some people had seen enough and began to pull out. This marked the beginning of what would be eight straight days of negative movement for the DOW. During these eight days, the DOW lost 22.11%. I worried as the media proclaimed “stock market crashes”, but I decided to stay the course and continued to invest $400 a month.
My buy and hold strategy was looking like foolish pride as I rode the market all the way down to a low of 6,626 on March 6, 2009. The questions I fielded about investing were now all about getting out and minimizing losses and my wife was asking “Are you sure you know what you’re doing?”. Glad I never offered any advice except what I mentioned earlier; all I would tell people is “I’m staying in because if I don’t sell I really haven’t lost anything.”
I stuck to my guns and I got some steep discounts by continuing to buy throughout the decline in stock prices and ended up ahead (only if I sell). While I may have benefitted by unintentional market timing, I wasn’t invested long before the crash, my long-term outlook and investing strategy has faced its first crisis. My plan may not have the flash of today’s hottest trends, (day trading, FOREX, and ETF’s), but it is simple and easy to maintain. K.I.S.S. (keep it simple stupid) is a mantra I try to live by and if the bankers would have utilized this theory maybe we wouldn’t have had to endure the financial mess of the last few years.