In the tumultuous year of 2020, the world witnessed the rampant spread of the Coronavirus, a crashing stock market, and widespread chaos. During this challenging period, I found myself compelled to isolate not only physically but also professionally and personally. The solitary confinement began to take a toll on my sanity. It was amidst news reports detailing the stock market’s downward spiral that I resolved to transform this adversity into an opportunity. This marked the start of my journey into the realms of investing, an arena previously foreign to me.
Youtube to Index Funds: My Journey in Investing Education
My investing journey started with delving into countless YouTube videos, combed through numerous websites, delved into Investopedia, and engrossed myself in my first finance read, “Rich Dad, Poor Dad” by Robert Kiyosaki – a gift from my grandfather who had discovered my newfound interest. It’s intriguing to note that some of the small YouTubers I found during this period have now emerged as prominent figures in the financial influencer domain.
It led me to discovering how the stock market works in the basic sense. It provides people with a way to buy ‘portions’ or ‘shares’ of companies in order to gain a piece of their profit, or sell for profit if the price of the share climbs higher. My education extended to the brokerage app – a tool for purchasing shares – No more calling stockbrokers – technology had ushered in an era of accessibility. Learning to compare brokerage fees also became part of my education. Moreover, my exploration led me to the realm of ‘Index funds,’ an innovation attributed to Jack Bogle in the 1970s. These funds gained popularity due to their capability to diversify investments across multiple companies, rendering an ‘average market’ return. I marvelled at the tale of Warren Buffett’s bet, where a professional investment company fell short of outperforming the market average, solidifying the notion that even experts faced challenges. This newfound knowledge prompted me to make my first investment in an index fund.
Stocks Vs. Property
While reading about investing and building wealth, I had come across the equities vs. property debate. From what I could identify, the returns from equities and property are pretty comparable, but the high entry barrier, more hassle (in terms of dealing with repairs, tenants, and agents), and fear of debt led me to avoid investing in property. Another reason was that property prices have skyrocketed over the years in my country. In the 1980/90s, house prices were only about 2.5x the average wage, yet now we are at 6.5x the average wage. I find it difficult to accept that purchasing property should be so expense, whereby people are sacrificing huge portions of their wages to secure a ‘paper profit’, which they can only collect when they sell. I’m not a fan of property being utilized as a vehicle of investment, mostly because I believe that housing should be a right that is within everyone’s reach, and so I plan to try to avoid incorporating property in my investment portfolio.
The FIRE Movement and 4% Rule
With a clear goal in mind, I embraced the FIRE (Financial Independence, Retire Early) movement. The audacious target of $2 million shimmered on my horizon, paving the way for passive income. This ambitious goal, tied to the 4% rule, seemed both monumental and attainable. The rule suggested that withdrawing 4% of my investment balance would be sustainable, given the historical average market return of 10%. It was a calculation fraught with potential – a financial equation that, if solved, would transform my life.
As I look back, I stand proudly by my journey’s progress. Since 2020, I’ve invested nearly $100,000, primarily in index funds with occasional bets on specific companies. Every cent represents a step toward my ultimate goal. While the road ahead appears long, I find solace in the fact that I’ve embarked on a path less taken – a journey of financial education and empowerment. In life, time is the most precious currency. Every investment I make, I am claiming more time in my future. It’s a reminder that resonates deeply, encouraging me to push forward, strive harder, and make every penny count. So, here’s to navigating the intricate dance of stocks and shares, of dreams and dividends. Amidst the chaos of the world, I’ve found a semblance of control and purpose – and that, my friends, is an investment that pays dividends beyond measure.
