As a personal finance blogger, most people assume I’ve always had a knack for money. I must admit, I’ve made a lot of mistakes over the years and the reason I started blogging was because I didn’t want anyone to make those same mistakes.
I’m actually happy I made money mistakes over the years because it forced me to seriously take a look at my finances. We all go through these stages and you’ll see from my journey that you become a do-it-yourself (DIY) investor in no time.
Investing for the first time
The one thing that I would say that put me ahead of others was the fact that my parents encouraged me to start saving for retirement as soon as I landed my first job. Although I was putting away just $50 a month, compounding worked its magic.
Like most people, I started investing in mutual funds. I went to the bank and told them I wanted to start saving for retirement. The investment representative recommended a fund without really explaining what I was buying. I assumed everyone at the bank was there to help. To be fair, they helped me set up automatic withdrawal payments. But beyond that, I never heard from them again.
Of course, I followed up on my own every year. The investment representatives would read stats off their screen and sell me new funds, but I never felt there was a real plan in place. It just seemed to me that they really didn’t care about me as a person, which is why I decided to jump ship.
Working with an investment firm
When a former coworker approached me about moving my investments to his firm, it really didn’t take much convincing. He was a smooth talker and seemed to be much more interested in being proactive with my investments so I made the switch. I should note that the only time my bank called me to talk about my investments was when they saw the transfer request.
My advisor’s presentations were slick. He had projections and made it sound like I could be a millionaire and afford anything. Of course, I believed it all. He would meet with me every three months and talk about his plan, and best of all he barely charged me anything for his services. But then reality sunk in.
After posting on a forum about the low fees I was paying, a random stranger messaged me to tell me that my advisor was most definitely charging me much more than I thought. After investigating the claims this stranger had made, I was shocked to find out that he was right. The funds I was invested in had a high management expense ratio (MER), which is the annual fee to pay for the fund’s operating expenses. And they also had a significant deferred sales charge (DSC), which is a back-end fee you’ll pay if you sell your funds within a certain amount of time (the fee is usually waived after five to seven years). Neither of these fees were ever disclosed to me.
Deciding to go DIY
I rightly felt cheated by my advisor so I started to research everything I could about personal finance. Fortunately for me, the same stranger suggested I read David Chilton’s The Wealthy Barber and to look into the couch potato strategy.
With this newfound knowledge—which took about 40 hours total—I felt comfortable managing my own finances. I transferred my funds out of my investment firm and fired my advisor. I was even able to get the DSCs waived since I proved that my advisor wasn’t looking out for my own interests.
I admit that being a DIY investor isn’t for everyone. Even if you decide to be an index investor, it still requires some work and it’s always possible to still make mistakes. The reason it works is because my experience with my advisor made me realize that no one will care more about my money except for me. Now when I make a mistake, I have no one to blame but myself.
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