Courtesy Rachel Kramer Bussel
- I invested my first $3,000 in a single stock a few years ago on the advice of a family member.
- Its value stayed the same and I got worried, but my family member advised me to stick with it.
- I’ve continued holding on and expanded my portfolio, and I know my slow-and-steady strategy works.
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When I turned 40 a little under six years ago, I was determined to finally get my financial life in order after declaring bankruptcy and owing $80,000 in debt. I wasn’t sure how to start investing in the stock market, but a family member who’s very well versed in investing helped me get going. They strongly encouraged me to invest even if I didn’t have a lot to start with, since time is such an important factor in creating wealth via the stock market over the long term.
The first year, I put $3,000 into a traditional IRA. In retrospect, since I qualify, I should have chosen a Roth IRA. I don’t remember exactly why I chose a traditional IRA over a Roth, but when I can start contributing for 2022, I will be opening a Roth so that my money won’t be taxed as heavily as with a traditional IRA.
That year, the maximum allowable contribution to an IRA was $5,500, but I didn’t have that much, and rather than wait any longer, I decided to start with the cash I had access to.
I invested in a single stock that was recommended by my family member
Since I didn’t know how to pick companies to invest in, and felt overwhelmed every time I looked at the companies I started tracking in an investing app, I went with one my family member recommended. They told me it was a solid communications company that had been around for decades and was likely to see steady growth. Well, that year, they didn’t; my $3,000 didn’t decrease, but it didn’t grow, either.
I was distraught. I felt I’d been promised that investing was the key to retirement, when I could have essentially achieved the same result by keeping my money in the bank. I considered pulling out of my IRA entirely, or not contributing to it again.
But I spoke with my family member, who assured me that sometimes even a good stock may have a stagnant year, and that over the history of the stock market, overall returns had continued to increase. Essentially, they said that even though my net worth remained the same as it had been the year before, I was still poised to gain if I stuck with my investment.
I tried investing in a different stock the following year
I asked for ideas for other stocks to consider. He advised me to invest in a well-known technology company that pays dividends, so the next year, when I was able to contribute the maximum, I moved my original investment and the new addition to the tech company. Almost immediately, I saw my total start rising. The numbers were small at first, but at least they were going in the right direction. Every time I got a dividend payment, I felt like I was getting magical free money. Rationally, I know it’s not magical and it’s not actually “free,” but since I didn’t have to perform any labor beyond the original investment, it still felt that way to me.
I learned during those first two years that if I’m going to be serious about retirement investing, I do have to pay attention to what my money is doing, rather than rely on someone else – within reason. My initial impulse to check my total multiple times a day was not only extremely stressful, it was counterproductive. I would fixate on the number and either be bummed out when it was low or overjoyed when it was high (only to later get upset if it dipped).
I decided to check it every day or every other day, assured that if there was a major upset in the stock market and I needed to sell, I would likely hear about it on the news or my family member, who also has shares in the same company, would let me know.
Seeing the dividends get deposited and the stock’s value rise was the best encouragement to focus on saving that I could get. By the time the maximum contribution increased to $6,000 in 2019, I was prepared; since then I’ve been able to open a brokerage account to invest even more. I’ve kept that tech company stock, but in the years since then, I’ve switched to investing any additional money in index funds. I don’t have the temperament to weather the ups and downs of individual stocks, so the two I currently have are ones I’m pretty confident will continue on an upward trajectory.
I get jealous of friends’ big wins, but I’m keeping my slow-and-steady strategy
Occasionally, I hear from friends who have made a killing owning a particular stock for a day or two – or less – and feel jealous, wondering if I should try to follow in their footsteps and fast-track my savings. But my tech stock is now worth many times that original investment, and I’ve made over $20,000 in total gains on it, so I feel good about my investing prowess. It may not be the way to earn the most possible money in the market, but it’s the best approach for my individual needs.
My takeaway from the ups and downs my retirement savings have seen since that initial investment is that while I want to be aware of what’s happening so that if, say, an investment is stagnant for a whole quarter, I can make an educated decision about whether to sell it or not, I don’t want to micromanage my money. I want to be able to not check my balance for a week and feel as assured as I can be that nothing catastrophic will have occurred.
Even though I’m investing in midlife rather than in my 20s, I would rather stay with slow and steady growth than chase quick hits that may or may not pan out. I’ve also learned that a flat year, or even occasional losses, are not the end of my financial world. I can recover from them as long as I keep my end goal in sight and act calmly, not out of fear.
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