What forms the investment style of a person? Why do you invest in active managed funds, trackers or individual stocks? We all have a story to tell and past that explains why our portfolio contains certain products. The same with me.
As an index investor, it is very unnatural to have a portfolio of actively managed funds. Index investing preaches just the opposite. I know, I know…but you have to look at the bigger picture
The bigger picture
By nature, I am a risk averse person with my money. At home, I got the lessons that you need to work hard for your money and that you should save for the rainy day.. You can say that I was more or less raised frugal: we did not splurge. At a certain moment in time, we needed to make conscious decisions on what to do and what not to do with our money. The good thing is that my parents were very smart with heir money and passed on this knowledge and experience to me . When things got better, we were used to think twice before spending. A good habit was born, and the basis for a good base was created.
I think this is the reason why I want to play on the safe side with my money. Having a decent amount of cash available when you are in need, is a great feeling.
The wish to invest
With the sale of my apartment, the property equity came free. A good part was used for the house. What was left needed a destination: investing. I already had experiences with mutual funds and trackers. I also knew I wanted to be a self-directed, independent investor with my money. I want to be in control!
Mutual funds seemed to be the perfect solution for me. Why?
- individual stocks are too risky and too time consuming for me.
- In the past, I used trackers to bet on certain regions. Bad Idea and I took some losses
- Around 1999 I had some good results with mutual funds offered by my main bank.
- Index investing and dividend investing at that time did not sounded like me at that time.
After a lot of research on the web, I came across a website (Dutch only) that had a good method to evaluate mutual funds over a longer period: the goal is to get stable returns with a limited volatility. I checked out the numbers and methodology and was convinced.
I decided to put a part of my money in insurance products (ultimate security) and another part in this fund portfolio.
I also decided that I wanted some play money: money that I was willing to risk in exchange for the kick of being in the market. A higher return would be nice as well.
Having play money was fun. I played with stocks and trackers based upon technical analysis and market timing. It was fun to play with, but it was too much hassles and worries compared to the results. I have to touch wood, I did not loose money, I came out with a small profit. Wiped away by an option bet...
It is then that I started to do a more in depth search of investing alternatives and methods. I came across index investing and dividend investing. I so much better understand now the bigger picture of the markets and what works and what does not works.
Around that time, I started to think about one of my favorite items: travel ans see the world. As this costs a lot of money, I started to make some financial plan to see if a lot of travel now and in pension would be feasible. This led me to reading Personal finance blogs, frugality and FIRE. This was trigger two.
All the above experiences have brought me to where I am today. I am happy to have significant part invested in safe insurance products, to have a funds portfolio that has a historical track record to keep volatility under control. Those 2 combined allow me now to be more sure about my move into index investing and later on dividend investing.
The need to play remains, hence the options techniques that I am discovering.
How about you? What is your story that tells your current investment style and approach?