My investing story takes me back to sometime in elementary school. My family has always had a sizeable collection of books and during one of my searches to find another book on World War II I came across The Motley Fool Investment Guide by the Gardener brothers. I was quickly intrigued by the idea of making money “grow.” I found additional Motley Fool books at the library and using some of their basic principles identified about a dozen stocks worth following. I do not recall any of the specific stocks however I vividly remember that each day after reading the sports section in the newspaper I would flip to the back (where the business section was) and record the closing prices of “my” stocks. I would duly track these prices on a color-coded chart that I constructed on graph paper. At this time my knowledge of the stock market was very simple: higher prices were good, lower prices were bad.
Fast forward to 2001 (following a period where I lost interest in the stock market due to having no funds to invest and it falling prey to the competing influences of sports and girls). I found myself re-reading the Gardener books and through some very basic Internet research I came upon a company called Alliant Technologies (ATK). Among other things it made ammunition and other defense related products and I remember it having a very visually engaging homepage. I notified my grandfather of my find, he being the family member most involved with the market, and proceeded to sit back and watch the stock through its ups and downs. As it happened there were many more ups than downs because after September 11th ATK took off and quickly doubled on the price I had picked it at. This was my first real lesson in the concept of events and future expectations driving the price of a stock.
I started at my first paying job (page at the local library) the summer following my sophomore year of high school when I was 16. I held that job through the summer before my freshman year of college. The work was part time (I averaged about 10-12 hours a week during the school year and 15-20 hours a week during the summer). It paid above minimum wage, the building had air conditioning, and was located right in the middle of the village of Fairport: frankly I couldn’t think of a better job to be had. One of the perks of the job was that I did not have to pay late fees. While I will not admit to abusing this privilege I will say that it was not uncommon for me to have 6-7 books checked out at a time. I spent very little of the money that I earned and what I did spend went for what I considered productive uses: more books to read and movie dates.
My first car was purchased in partnership with my dad the summer before I went to college. I took every dollar I had saved up at the local Credit Union and went 40/60 with my dad on a used 2003 Honda Civic with a manual transmission that we bought from a guy who lived in our town (this was in 2005). The total cost of the vehicle was about $13,000. It had been previously used by the guy’s daughter who lived in Maryland. Now as anyone who has lived in upstate New York knows the winters, especially the salt on the roads, can be murder on vehicles. Acquiring this vehicle, which had spent the majority of its short life in a much warmer climate was, if not a stroke of luck then at least an exercise in wise market research. Admittedly credit for this has to go to my dad as I had been searching for something with a V-6 or V-8…
The point of the car story is not that I spent every dollar I had on it (not a great example of living below your means) but rather that I still drive that car six years later. It is now pushing 75,000 miles, still gets 35-40 mpg on the highway and 30-35 around town, has been cross country twice, and is currently in storage in Hawaii awaiting my return from Afghanistan. I maintain the car properly and fully intend to drive it into the ground and to then honor its memory with the purchase of another used Civic.
It took another two years of working for a economics professor at college to bring my bank account back to the level it had been at when I purchased the Civic. I had a full tuition scholarship and my parents only had to pay room and board. Frankly without the scholarship I would not have attended this private college and would have gone to one of the SUNY schools instead. During the summer of my sophomore year I volunteered to join ROTC. I attended a four-week training course at Fort Knox, Kentucky to bring me up to speed on the two years of material that I had missed and when I returned to school I was offered a four-year scholarship. The terms were simple: The Army would pay for my tuition for four-years of college and in turn I would owe the Army four years of active duty service and another four years to be served in the active force, the National Guard, or the reserves after that. My school sweetened the offer by covering my room and board (and reimbursing my parents for the previous two years).
I want to make clear that my motives for joining the Army were not financial. However the purpose of this blog is to document my investing journey and my time in the Army has been an important chapter in that story so that is why it is mentioned here. The discussion of my motives for joining and the experiences that followed, while infinitely rewarding, are better saved for another time and another place.
While a cadet I was paid a monthly stipend, untaxed, to be spent however I saw fit. This stipend was I believe $450 a month as a junior and $500 as a senior. Additionally I was paid a book allowance once a year of approximately $600. While some of my fellow cadets who were pursuing science majors had to commit all of this allowance and then some to their textbooks I, as a political science and urban studies double major, was able to purchased use books as well as taking advantage of the college bookstore’s buyback program to pocket some of this additional cash. I found myself again returning to reading books about the stock market, particularly those about the style of Warren Buffet, whom I had recently discovered.
I commissioned in May 2009 as a Second Lieutenant assigned to the Field Artillery one day before graduating summa cum laude from college. My assigned unit was the 3rd Infantry Brigade Combat Team, 25th Infantry Division, based at Schofield Barracks, Hawaii. Part of the way the branching system works for ROTC cadets is that we put in preference lists for both branch and duty station. In general the higher you rank nationally (my commissioning class had more than 5,000 cadets nationwide) the more likely you are to get what you want. I was fortunate enough to get both my #1 branch and my duty station. I could have traded an additional year of active duty service to guarantee each, and even an additional year for the Army to fund my graduate education (meaning a possible commitment of seven years on active duty) however I had elected to keep my options open. When you are 22 a four-year commitment is a significant chunk of time perception wise!
Before reaching Hawaii I first spent two months at Ft.Lewis, Washington (where I first enjoyed the benefits of being paid as an Army officer) and then spent nine months at Ft.Sill, Oklahoma where I attended my basic officer course and then artillery school. While in Washington I opened up an account with USAA which is an excellent one-stop shop for service members and their dependents for financial services and is an organization which has incredible customer service. I set up small automatic deposits ($50-$100) for a couple of their mutual funds including a bond fund, a GNMA fund, a precious metals fund (gold was at about $900 at the time), as well as a money-market. When I reached Oklahoma I opened up a brokerage account with Fidelity (with the assistance of a 0% interest load from my dad for $2,500 which I promptly paid back over the next four months) and purchased positions in Coca-Cola and Johnson & Johnson, the first individual stocks I had ever owned.
I fell victim to over-eagerness while in Okalahoma. I had started working on a Excel spreadsheet that did a respectable job of identifying attractive growth stocks however I found so many I liked I hurt my returns significantly by buying miniscule amounts of shares. In one case I bought a single share of Qualcomm where the commission cost was about 25% of the value of the stock! The stock market was still in its climb out of the depths of the financial crisis though so there was plenty of green on my screen to cover my mistakes: it would take my own research to find out where I had gone wrong. My bumpy interaction with growth stocks would continue with positive results (less attributable to skill than to the general market direction) up until the time it came for me to deploy to Afghanistan.
I deployed to Afghanistan as an artillery platoon leader in April of 2011 for a one-year tour. We were tasked with base defense of our small FOB as well as providing fire support to patrols outside of the wire. Incredibly, although perhaps not so incredible as the war had been going on for almost 10 years at that point, Internet was available for private use on the FOB, even wirelessly! I am currently still stationed at the FOB so I will remain silent on its location until I return to the United States but suffice it to say we were on the forward edge of coalition controlled territory in our area of operations. While my duties as platoon leader severely restricted my free time (as my girlfriend and family can attest to) I did do my best to research stock investing during the hours where no one was awake back home. This is how I found the value and power of dividend investing while simultaneously deciding to put growth investing on the back burner until I returned home and had more time to devote to stock research.
This brings us to today: my taxable brokerage account is anchored by Coca-Cola and also includes Apple (which I first purchased below $200) and Ford (a position I recently cut in half). The remainder is populated by a collection of dividend payers which I add to each month (in future posts I will outline how I divide up my deployment pay in order to take maximum advantage of having less than $200 a month in expenses while over here). I also have a Roth IRA over at Vanguard that consists of an S&P 500 Index Fund and a small-cap index fund. Next year I will open a Fidelity Roth IRA and fill it with dividend stocks.
In all I have been invested in individual stocks for about two years. I am currently 24 with plans (to be further detailed in later posts) to be financially independent by age 45. I have a long-term investing horizon and intend to take advantage of that through maximizing the power of compound interest as well as taking risks on growth stocks while I have the time to recover from any miscues. While my investing philosophy continues to develop (as does my investing discipline) I am anchored by a simple axiom that has served me well as an Army officer: Don’t be afraid of making mistakes; learn from them and never make the same mistake twice.