The very first two pieces of advice I received for investing was more than 30 years ago and they still apply to today. The advice came from my Father who knew truly little about the investing world but had two qualities that were invaluable. While my Father had no experience in the world of investing, he did have a lifetime of experience and a strong saving habit.
What You Can’t See..
In August of 1987 I started my first full-time job, and I had the decision to sign up for the company 401K. Being 18 I had no idea what a 401K was and when I asked my Father, he said “just signup and save 10%, if it is never in your paycheck you will never miss it.”
He could not have been more right. Years after that decision I made a lot of dumb financial mistakes and at times struggled financially to make ends meet. However, not once did I ever think about reducing my 401K contribution because to me it was just another deduction on my paystub, so I never saw it as a source to increase my paycheck. Those early years I had horrible saving habits and I could not imagine where I would be today if I did not follow his advice. I look back now and cannot believe I maintained this savings habit for 33 years.
Just Ignore It
The second piece of advice came more out of frustration. To this day I still remember my very first 401k contribution of $60 on September 15th, 1987. Back in 1987 we did not have the internet where we could check our 401K balance regularly and had to wait for your quarterly or annual statements. I received my first statement that following January and I noticed that the total value was less than the contributions I made; I was losing money! At the time I was oblivious to the Black Monday crash of 87 and how it affected me.
I was so frustrated with this 401K thing, my Father overheard me complaining and said just ignore it and it will grow. Losing money bothered me so I diligently read every quarterly report and by the end of 1988 my account balance was larger than all my contributions. I made back all my lost money and then some. Unfortunately, my Father passed away in the summer of 1988, and I never had the opportunity to thank him for the advice.
Decades later I can look back at how those two experiences shaped my financial life and how powerful that advice was when I look at my portfolio and it is still applicable today. Regardless of how much knowledge I have attained about investing my two biggest wealth builders is the knowledge that markets always recover and consistent savings is the easiest path to building wealth. It shows that financial behavior (in this context) is more important than financial knowledge.