Since investing in mutual funds is one of my hobbies and it's a way I help finance my trips to visit waterfalls, I thought it would be helpful to others who want to learn more about this subject if I wrote about my investment experience.
I purchased my first mutual fund in August 1992 because I was tired of bank cds paying only 3% interest on my money. I also purchased it from an Investment Advisor at a bank who recommended I invest in Washington Mutual Fund AWSHX . I didn't know much about mutual funds at the time, so I took the chance and invested $6126 into the fund and paid the 5.75% sales load to the advisor.
I eventually learned more about mutual funds by listening to a local Detroit radio show called Money Talk with Rick Bloom. https://www.bloomassetmanagement.com/ He would talk about investments from the No-Loads fund families like Fidelity, Vanguard, T Rowe Price, Janus, 20th Century, etc. He stressed that mutual funds are better than individual stocks because they offer professional management and diversification for long term investors. I eventually found information about these mutual fund companies at the public library from Morningstar http://www.morningstar.com/ . Money magazine and Kiplinger's Personal Finance also have a lot of information about mutual funds.
I eventually decided to put the rest of my money into mutual funds from Fidelity, Scudder and T. Rowe Price by calling their 1-800 phone numbers. You just speak to one of their representatives about the funds you're interested in and they send you an application package along with a prospectus (fund objectives, performance, fees and risks). Then you study the prospectus, fill out the application and send the fund company a check to create an account. You can then look in the newspaper or internet for daily share price information and the fund company will send you monthly or quarterly reports.
In 1993 I invested in funds like Fidelity Asset Manager and Equity Income II after speaking with one of their investment representatives. In 1994, I convinced my mother to put her retirement savings into mutual funds, but I was more conservative with her money. For myself, I invested in Fidelity Emerging markets, Scudder Latin America, T Rowe Price International and International Discovery thinking I would benefit from the faster growing economies of countries that were starting to industrialize, but the returns the first two years were poor even though these funds did very well in 1993. I eventually sold them off in 1995 and invested in T Rowe Price funds like Science and Technology, Mid Cap Growth, Health Sciences, Small Cap Value, Scudder Greater Europe and Baron Asset. These funds performed better, but I was eventually intrigued with the returns of individual stocks, so I sold off about 80% of my funds to open a brokerage account in October 1997.
I was so interested in investing that I passed several difficult exams (Series 7) to be a Registered Representative to sell stocks, bonds and mutual funds. However, I didn't like the sales part of this business. If you can go through 5000 no's and still have a big smile on your face, then be my guest and start a career in outside sales. There are other jobs you can get retrained for like computer support that I'm much happier with.
I made my individual stock picks from researching Value Line Investment survey and Standard and Poor’s stock reports at my public library. I also subscribed to the Investors Business Daily. I decided to get a margin account thinking I can borrow money to buy stocks at an 8% interest rate and possibly make a 20% return on my investments.
At first, I stayed away from over valued dot com and technology stocks and tried to invest in smaller companies in different industries similar to running a mutual fund. At one time I got up to 30 different companies in my account, but the big name high tech stocks like Microsoft, Cisco, Dell, Intel, Sun Microsystems, Nokia, Qualcomm kept going up, so I decided to invest in them. Some them doubled and even tripled in value until the year 2000. Then they slowly started going down until they were less than what I paid for them. Thinking high tech is the future, I held on to them hoping it was a short term set back and they would go back up. However, their up coming quarterly sales didn't meet analyst expectations. We also had 9-11 terrorist attacks, the corporate scandals like Enron, WorldCom, Arthur Andersen, Adelphia, Tyco and others, which made the stock market really take a dive. The tech heavy NASDAQ, which reached a high of 5048 points in March of 2000, went down to a low of 1114 in October 2002 and lost about -77% of it's value!(1) The DOW reached a high of 11722 points and went down to a low of 7591 during the same 2000 to 2002 time period.(1) In early 2002, I started dumping my high tech stocks and took losses on them thinking I can write them off on my taxes and started looking for other stocks with growth potential that were not high tech, but in the end, I thought the market went down to such scary levels that I finally decided to close my stock brokerage account and put my money back into mutual funds in July of 2002.
In my almost 5 years of individual stock investing with a margin account I ended up breaking even with no gains. I had about 40% of my money in high tech stocks, but since I decided to invest in other industries, I didn't get hurt as bad as others who invested in only technology.