I’ll always remember my very first investment I ever made.
This was about 12-13 years ago or so. My dad had worked in various levels in banking, from loan origination to VP, and he was, and still is, by all definitions, a workaholic. I remember him waking up very, very early in the morning, checking Bloomberg TV to get a feel for the markets and interest rates that day.
He’d wait patiently for the 10-year Treasury to come up on the screen as various indexes, commodities, and currencies cycled across the right part of the screen. It was just part of the daily routine. I wanted to be just like my dad – I had to know what those numbers meant.
Of course, my dad, being the great dad that he is, tolerated my every question. “Why?” was, by all accounts from my parents, my single favorite question.
Dot com bubble
These were the glory days of the stock market. Everyone was getting rich. Companies were IPOing at a record pace. Webvan. Pets.com. AOL. Yahoo and eBay. It was unreal, really, watching the NASDAQ hit new highs every day.
Even to me, then a 10-11 year old kid, it was the most alluring thing I had ever seen. Very smart people would get on the television and explain why everyone was getting rich. The stock markets were the place to be. No ifs, ands, or buts about it.
Compound interest had always been a fascination of mine after my parents explained that my bank account, which I had opened at 6 or 7 years old, would pay me just to keep money in it. (My goal then was to make $1 per month in interest…I saved every dime I could to get to that point.) But that 4-5% per year, whatever it was, wasn’t the 10%, 20%, or 30%, that stock markets were seemingly set to provide investors for years and years.
I wanted more.
From gambling to stocks
Back in those days I was obsessed with odds and numbers. There was something special about them. I remember devising a scheme that would allow me to beat a table top over/under 7s game at my Catholic school summer social.
Yeah, I can’t believe I’m admitting this either.
It was only after a month of watching Bloomberg, and after maybe a year of collecting coins, that I realized the Canadian dollar was worth less than the US dollar. If I played over or under 7 with Canadian coins, but got paid out in US dollar coins, I could effectively beat the odds, supposing I could buy Canadian quarters and play them as US quarters. (I never did it; something about ethics and taking a church for dollars, one quarter at a time. Although, hey, they were letting the second and third graders gamble!)
The stock market quickly took over my obsession with odds. I wanted to play the odds in equities.
So, I did what any kid should do. I hounded my parents for subscriptions to Money magazine, and, using the internet, signed up to a 14-day free trial to Investors Business Daily. I started getting investing books on every trip to the local library. My dad introduced me to Warren Buffett’s ideas. The simplicity was attractive. I was going to get rich in the markets, I told myself.
I was going to master my dad’s many HP12C financial calculators laying around the house. Combined with my annual reports and library books, how could I fail?
Funny thing about magazine and newspaper subscriptions. Sign up for enough and you start getting really good junk mail. Well, I got an offer from Etrade and the Motley Fool whereby I would get a $100 bonus for just opening an account. That was the turning point. I could invest with someone else’s money.
From Investors Business Daily, I started ordering free annual reports.
Actually, I ordered hundreds. They were free, after all!
So I started cracking them open as they came in the mail. My dad sat with me and helped me digest line-items on an income statement. I’m lucky to have had a father that studied accounting in undergrad and who was patient enough to deal with my every concern and question.
Buying my first stock
Dollar General was the first stock I ever purchased. If I remember correctly, it traded for something like $12 a share, paid a robust $.13 annual/quarterly dividend, and was a model that made sense to me. (Dollar General was taken private and relisted a few years ago or I’d look these numbers up). I remember looking at an IBM annual report, too, but what I had learned in my recently readings and from my dad’s own warnings was that I should only invest in something that I understood.
My dad cautioned that with tech, R&D spending is something to pay attention to, but neither of us knew what that R&D may eventually bring. Suddenly, the cost of goods sold line in DG’s annual report looked much more appealing, and much more understandable than the R&D in IBM’s income statement. So Dollar General it was!
Did I really understand Dollar General? Hell no. I could spit out its P/E multiple, PEG multiple, dividend and dividend yield, and probably tell you way too much about how many stores it had, or its gross margins, but hell, so could Yahoo Finance!
I mean, really, I don’t even care to pretend that the idea of business valuation was something I truly understood as a 11-12 year old kid.
But I did know enough, I thought, to make my first purchase. So I did. And boom! Just like that, everything that had ever enticed me to the stock market hit me like a ton of bricks. I was part owner in one of America’s greatest enterprises, I thought. I was set to be a bazillionaire, just like every other person who puts $100 of someone else’s money (thanks, Etrade!) into a stock of their choice.
Since that time
Not much has really changed since then. I’ve become older, and naturally a little better with the basics of investing and corporate accounting. I’ve self studied ever since that first day, reading everything about investing that I could get my hands on.
I’ve become much better at reading annual reports and finding what really matters in a company’s reporting. I’ve also figured out what kind of stocks I really like, what “cheap” stocks actually means, and found a better understanding of what made Warren Buffett and Benjamin Graham the kings of Wall Street by reading their every book and books on them.
If I were to do it all over again, or start now, I’d probably start with a stock market game. They’re a great (and free) way to learn about stocks and get a feel for how the stock market moves each day. Plus, Etrade doesn’t hand out free $100 bills any more!
What I wouldn’t change is getting hooked early. I remember telling my peers that I wanted to be a stockbroker shortly after buying my first stock. Yeah, in a classroom of future doctors, lawyers, and firefighters, that may have made me the laughing stock, but it’s all in good fun! They just don’t understand, I told myself.
Starting early, either by “paper trading” or committing a very small amount to the markets is a great way to start. I couldn’t be happier that I started when I did. I don’t think there’s a single person in the world who wishes they found the markets later rather than sooner.
A special thanks goes to my loving and caring parents who nurtured my love of finance to the best of their abilities. I cannot thank them enough.
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