Saturday, October 25, 2014

How I Got Started in Investing

Working hard is important. But there is something that matters even more, believing in yourself. Think of it this way; every great wizard in history has started out as nothing more than what we are now, students. If they can do it, why not us? -- Harry Potter
The title of the first page I opened to was, "What is a stock?"

I had no idea.

It was the summer of 2003, I'd just graduated from college and was reading through a Series 6 license study guide that Vanguard sent me a few weeks before my start date. All the financial lingo I came across as I flipped through the study guide was intimidating to say the least. 

"I might have made a mistake," I thought. I might be out of my league with this job.

I was a history major in college, and even though I minored in economics, I had no clue about finance and investments. To illustrate, a neighbor who heard I was hired by Vanguard said to me, "Oh, we own some of their mutual funds. It's a really good company."

I nodded along with her, but I confess that I still wasn't entirely sure what a mutual fund was. I needed to learn a lot. In a hurry.

The telephone game

Before taking the job at Vanguard, I was deciding between a career in law or in teaching -- the typical paths for history majors.

Investing, however, was something I knew I needed to learn about and I figured I'd try working in the industry for a year or two before going to law school. At the very least, I'd leave the industry knowing what to do with my money, so I applied to a few financial firms near Philadelphia.

Vanguard was hiring entry-level registered representatives and they liked that I had experience managing a call center during college. My break was that I knew how to talk on a phone. The finance stuff, they must have figured, they could teach me. 

(With hindsight, I realize how lucky I was to start my investing career at a firm that preached things like focusing on the long term, insisting on low costs, and staying the course. If I'd started my career at a commission-based firm or one with front-loaded funds, things might be different.)

Into the fire

It was a steep learning curve. After a few weeks of training, I was on the phone speaking with 40 or more clients a day about mutual funds, placing trades, and walking through IRA transfer forms. While it wasn't exactly the job I'd envisioned as an idealistic recent graduate, speaking with such a broad group of individual investors was great training.

After a year on the mutual fund side, I moved over to brokerage and was introduced to equity investors. My first day on that job, someone called and asked for the current quote for Microsoft. I asked him, "What's the ticker?" Click. Guy hung up. That's how green I was with stocks. 

Working in brokerage was my first real meeting with Mr. Market and the emotions that drive short-term stock swings. The busiest day I had in brokerage, for example, was not on some good economic news or during tax season -- it was when Howard Stern announced he was joining Sirius Satellite Radio. No one cared about price, they just wanted to buy. 

Lessons learned

My first two years in the industry were a tremendous learning experience and those early lessons have stuck with me in the nine years since. Here are some of them:
  1. Few people have a strong understanding about investing and many people are intimidated by it.
  2. Learning how to invest is not easy and requires a lot of time, interest, and dedication.
  3. Most people are aware of the first two points and want someone they can trust to help them achieve their goals so they can focus on other things. 
  4. Investing and money management is an emotional business. The account balance isn't just a number -- it represents someone's life savings and is a by-product of their labor. The financial professional's job should be to help the person manage those emotions and make prudent investment decisions.
  5. There's always something you don't know about investing. It's a never-ending education.
Getting started in investing can be overwhelming, but it's important to remember that everyone has to start somewhere and no one is born a natural investor. The critical thing is to stay confident and never stop learning

What I've been reading & watching
Stay patient, stay focused.