Today marks another installment of TFD’s Afraid To Ask series! The Afraid To Ask series is meant to provide insight into a variety of subjects, and shed light on things people are sometimes ignorant about (myself included in every topic I cover!). This particular installment is all about how to navigate questions you have for someone with significant lifelong experience investing their money, but who is not an expert themselves. I was interested in exploring the human side of investing, such as what it feels like to invest alongside a partner, the time commitment to organize those investments, etc., and explore the questions that go unasked in more high brow finance articles.
This week I sat down with a friend, Stephanie Evans, who has been investing in the stock market continuously for the last thirty years, and who has worked with an investment advisor and financial planner. Along the way, she has picked up some great insights about the human side of investing, which she is sharing with us today!
Stephanie was kind enough to answer the questions that follow, which our in-house financial advisor reviewed (since Stephanie is not a financial professional herself). While this interview is not exhaustive, and there is a ton more to learn on the subject, it’s a great way to learn some basic knowledge that you’ll need to navigate the basics of investing that you might be reluctant to ask someone older and wiser! Take a look!
1. How long have you been investing in the stock market? How aware were you of the fact that starting early was so crucial?
I’ve been investing in the stock market for 30 years. When I was younger, I was very aware of the fact that starting early was of tantamount importance, since I sat down with an advisor who got me started. He explained to me that the stock market showed historically good returns over a long period of time, so I knew it was crucial to start early (I was 25 then).
However, I found myself to be the exception among a lot of the people I knew personally – not a lot of my friends and acquaintances in my social circle were talking about it at the time, but because I worked with an investment advisor I was able to get a lot of my questions answered.
2. What does someone need to decide for themselves before they start investing money? Are there any personality traits/tips that you found beneficial to someone interested in investing?
I think it’s important for people to start investing young, but when they feel comfortable to part with a little bit of money. While I’m not an expert myself, what has worked for me was starting with just a little bit of money taken out of each paycheck. Even if it was twenty dollars a paycheck, I knew it was better than nothing. Remember, that money has the chance to grow over time.
3. Where did you start investing? How did you decide where to invest your money?
At the very beginning, I started with mutual funds through my employer, and I spoke with a financial planner at the fund. The fund manager sat down with me, and discussed my retirement goals and long-term financial plan. He helped set me up with a plan that was tailored to those goals and would help keep me on track over the next several decades. Since I was young at the time, I invested in high-risk mutual funds because I would have more time to withstand ebbs and flows in the market and let my money work harder for longer.
4. What was the biggest loss/dip you experienced? How do you mentally handle market volatility and losses? How tempting is it to want to pull out and cut your loses for fear of losing more?
The biggest loss I ever incurred from a dip in the stock market was $175,000. I know – that was a lot of money, and it hurt. It happened during the financial crisis, and it was VERY stressful to deal with, but I had to remember that investing for the long term means accepting market dips and swells. I had to remember that it was important not to pull my money out just because I was panicked. My investment advisor told me, “you don’t really lose the money until you sell the stock”. I watched as some of my friends pulled out the rest of their money, but that meant they had no opportunity whatsoever to recover their losses. It took a good couple of years, but the market ended up evening out, and we recouped all the money we lost and more. That experience taught me to be patient, not to panic, and to kept on investing every month diligently like I always had been without obsessing over the short-term activity.
5. Do you find investing to be a taboo topics to discuss with friends? If yes, why do you think that is?
Investing can definitely be a taboo topic if you as an investor are talking with people who don’t invest at all. I think that we need to dispel the sense of awkwardness when we talk about investing in social settings – much like the way TFD seeks to make personal finance less secretive and more open, I try to talk about it with my friends more as I get older. I’ve found that people who are most sensitive about this topic are adults who are in their mid-fifties like me, who have nothing or very little saved for their retirement. It draws a parallel between those who invested for their future selves and those that didn’t.
I realize that I was fortunate enough to have people in my life explain the importance of saving for retirement, which for me translated to an interest in investing. I realize there are a lot of people who haven’t saved anything, and (for TFD’s audience especially) I want to do what I can to help convey the idea that it’s essential to make yourself as informed as possible about all the opportunities that are available to you while you’re young.
5. What would you say the value is in working with an investment advisor vs. going at it alone through doing your own research?
It depends on how much money you have to invest. If you have just a little bit of money to invest, like I did when I first started, looking into a Roth IRA (great articles about it here and here) or mutual fund can be beneficial. You don’t need to pay for an investment advisor when you’re investing very little. In my opinion, I would say you don’t really need a financial advisor until the amount of money is significant — I’d say more than a couple thousand dollars. This is my own personal opinion, but I’ve felt reluctant to reply on a financial advisor to manage my investment for me. I dislike the idea that they take most control over decision-making (and charge fees) and I’ve found that it means I often don’t know what’s going on to the extent I do when I’m the one managing the accounts.
6. What if I want to start investing but I have very little money to do so with? Was there ever a point at which you felt like you had too much money tied up in stocks?
Again, start small – $25 per paycheck is enough to get going! The way I did it was that I made monthly contributions from each paycheck that were small so I wouldn’t feel the hit. Then, over those 20 years, each time I got a raise I would increase the amount accordingly. I started with $50 a month, and increased it every year after that. After a while, it becomes so habitual that you truly just write that money off as if it was another expense – if you don’t see the money to begin with, you can’t spend it!
The only time I ever felt like I might have put too much money into the stock market was when the recession hit, and I lost all that money. I wondered, “have I gone and got myself too entrenched in something that is risky and might not work out in my favor?” I had to stop looking at my records every month until the market got better. In the end it worked out, because I left my money where it was and reminded myself that I was in it for the long haul.
7. How have your investment techniques changed over the last 30 years? Do you find that your investing strategies have served you well?
My investment techniques have changed over time with my age and the percentage of my money in high risk accounts. As I’ve reach my mid-fifties, I’ve started to adjust the percentage of money in high risk funds. The older you get the less risky you should be with your stocks, and the younger you are the more risky you should be. Of course, everyone’s financial and retirement goals are different, so it’s important that everyone develop a strategy that works for them.
8. After having money invested for roughly 30 years, would you say there is anything you wish you could change and do differently?
Definitely! I wish I was more of a risk taker when I was younger. I skew on the nervous/conservative side since I completely hate losing money (as do most people), and that meant I was very reluctant to invest money in high risk stocks. But, looking back on it now, I realize that there is more opportunity to profit when you invest in riskier stocks. Again, this is a matter of personal preference, so everyone needs to figure out their own investing methods.
9. Do you and your partner/SO/spouse manage your investment portfolio together or does one of you handle it? How important is it for both parties to be involved in the process and why?
I think couples should always work together when making investment decisions since the final outcome is important to both parties. Of course, if one person has more intimate, well-informed, and more thorough knowledge of stocks and investing, they can be the lead decision maker. However, the other should always be in the know, give their thoughts and input, and have a clear understanding of what’s going on. It’s easy to blame someone for things going wrong when one individual doesn’t know anything. It’s frightening because I find that a lot of women my age have no idea what’s going on with their finances, and leave the financial decision making all to their husbands. That’s something I strongly oppose, and something I could never allow in my own household. But it’s comforting to see sites like this one urging young women to take charge of their financial lives.
10. How much complexity has having investment accounts added to your life? Does it feel like a “set it and forget it,” or is it more time-consuming? What kind of time commitment does it take to manage something like a fairly diverse, moderately aggressive investment portfolio?
I look at my investing performance about once a month to see where things are. Every six to 12 months I look at the allocation of my assets based on the past performance of the last six-12 months. My husband and I sit down and look at all the funds we’re invested in, where we lost the most money, if and where we should move funds around, etc. It takes about one Saturday afternoon to do that, so it’s not THAT time consuming. We sit together and work out the numbers, and it makes me feel more comfortable and more in control as to what’s happening. You have to be picky about where you’re adding money to each month.
We have a professional look over our mutual funds once a year to make sure everything looks good, if we’re on track to meet goals, if we should change anything, etc. Our advisor asks us a lot of questions about our lifestyle, and what we want out of retirement which helps him get a more clear picture of where we’re headed.
Over the years, I’ve learned that a lot more goes into investing for retirement than I thought. It’s been great because it has kind of forced me to think about my long-term financial goals and my plans for the future I want to build for myself.
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