I have been obsessed with the stock market since the 4th grade, when my class did a stock market game. We did it again in the 5th grade, and then to add icing on the cake, my 6th grade teacher told us a story about how his friend the stock broker arrived at work on Wall Street in a limousine everyday.
When I returned home during the summer between my freshman and sophomore year of college, I opened an online brokerage account. I had free trades for 90 days, and boy did I stick those free trades to the broker. The couple thousand dollars I was trading was from hard work during summers and weekends. My research was whatever I could find on Yahoo Finance, and I was off and running. I hadn’t even read a page of The Intelligent Investor. I thought of myself as a hedge fund manager, except with no outside capital, and come to find out no real investing strategy or talent. This was the summer of 2007, and about five months before the stock market peaked before the Great Recession.
Some may think that the big decline I felt right away would have scared me off, but it had the opposite effect – I was hooked. I loved the adrenaline rush of trading. When I would come up with an “investment thesis” (read: hunch) on a stock, I’d buy it, and then it would do exactly what I thought it would do. It was the best feeling. It more than outweighed the hurt of the bad beats. I continued on this path for another seven years. Not investing by any means, but just trading in and out of stocks. Essentially, it was a legalized form of gambling. Over that time, I never thought to actually look back to see how I was performing against the broader market indices (it wasn’t good… at all).
Seven years after I opened that first online brokerage account, I discovered online personal finance blogs. This lead me to the financial independence, retire early (“FIRE”) community, and more importantly index investing. Now I’m not saying index investing is the best way to invest. What I am saying, is that it clicked with me, and I’ve stuck with it ever since. Everything about index investing made sense to me. Why was I spending many hours each week, researching stocks, researching the stock market, and watching live stock quotes, while I was under performing the stock market itself? It was the best investing decision I ever made. Unfortunately it took me over seven years to figure it out, but it was better late than never.
I sometimes wonder if someone had told me about index investing when I was 18 or 19, would I have listened and understood? It’s hard to look back and answer that question with any certainty. If I am being honest with myself, I don’t think I would have cared. I would have continued to trade and tried to beat the market and get rich. I was a confident teenager, with little actual investing and market knowledge. But if someone had opened my eyes to the index investing world, maybe it wouldn’t have taken seven years to figure things out. Maybe it would have only taken three or four years. But, in the end, I think I needed to take my lumps.