Do you remember your first financial investment? Why did you act? Did you have help?
20 years ago I started my investment journey with no real knowledge of investments.
As a fresh-faced 17-year-old, I took my first real job in an accounting firm and discovered money. Each day I would travel into the city via train and make some hard earned dollars.
Soon enough the dollars that accumulated in my NAB bank account, were more than my train fare, lunch and weekend social expense, and the bank balance would build.
It soon became time to invest.
My only direct prior experience with investment was a small share portfolio that was purchased by my father of Telstra, Coles, Myers and Fosters coming to a total value of $12,000 that I did not yet own and was held on trust for me.
So with my first $5,000 saved I did what was logical to me, I purchased some shares. Why might you ask shares? Well, that that was my only experience with investments to date.
As time passed, more dollars accumulated, and once again a few years later the topic of investment came about.
This time my focus was on property. So after a long day at work, I approached the person who I could best trust, this being Mum.
‘Mum, I would like to buy a house, is now a good time?’, I asked.
‘Son, but what if you lose your job, how will you pay the mortgage’?, She responded.
So with my tail between my legs and with the answer I was not hoping for, off I went back to work.
Another year passed and more dollars saved.
In the meantime, I looked two desks across at my work, where another successful accountant, only a year older than me, slams his phone down. He had just got off the phone to his real estate agent.
‘Yes; he shouts, ‘That’s what I’m talking about!!!’
In the time that I was saving my pennies, this other accountant made a decision I was unable to make. He made a risk assessment that I could not comprehend, and he made a decision that I could not rationalise until that moment.
‘I just made $100K on my first property’ he said. A block of land I purchased plus the house I built has come to a cost of $140K and I have a real estate agent telling me it’s now worth $250K.
So why did this young accountant buy a property and I had not?
Why had he made the leap into a major investment and I had bought an asset that was much smaller (my $5K of shares)?
Why had I sought advice, received an answer I was not looking for and not acted any further when considering property?
Lesson learnt. Don’t let your personal experiences define your perception of risk.
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