Six years ago I became self-employed when I established a service business. We, along with six independent contractors who worked project by project, supervised the transfer of film to videotape for commercial production companies.
Originally I had a partner, who I subsequently bought out in the spring of 2000. With no investment capital to tap into, we ran the business from a tiny back bedroom in our house for the first four years. A computer, fax machine, cell phone, and pager were all we needed to get started. Carrying low overhead was a clear decision and we were pleased with our virtual office, where a twenty-four-hour service outside the house handled our calls.
A real person answered the phone with the name of our business, took the message, and paged me. I returned the call right away. I took care of everything from sales and billing to scheduling, from training to mailing out holiday cards. Doing the bulk of supervising the session was also my responsibility. It was exhausting. A couple of years ago we hired a part-time office person to take over the day-to-day operating functions such as billing and data entry. But even with the roster of associates, who supervised the sessions, I found that I was still required to make a lot of the daily decisions regarding scheduling, personnel, and finances. The question I heard more than any other was, “What do you want me to do about. . .”
Hitching a ride on the dot.com express, we took advantage of the advertising dollars available. We did well and figured that we should take advantage of the boom that was taking place in the stock market.
After my grandparents died and left me a few thousand dollars, we invested the money in mutual funds. Five years ago, thinking we were finally taking control of our financial destiny, we converted our mutual funds to individual stock positions.
During the first two years of “investing,” our portfolio grew pretty much no matter what we did or bought. At one point it rose 30 percent overall. Over a period of three years, our investments, which included five IRA accounts, totaled $80,000. After doing some rudimentary research we thought we picked solid, reliable companies. We bought shares in companies such as AT&T, Dell, General Electric, DuPont, Kodak, GM, Berkshire Hathaway, Microsoft, Lucent, WorldCom, and a few smaller riskier stocks as well.
Complacent, I didn’t monitor our portfolio nearly enough. Nor did I follow closely the financial information the companies were sending me. I didn’t possess the education to invest in stocks safely-for instance no trailing stops, that is, an order to automatically sell a stock if it goes below a certain price, were in place. Without an advisor to provide accurate information and insight, we put our money and ourselves in a precarious position.
When the market started to collapse in 2000, I wasn’t paying attention. A few months went by and when I next looked at our portfolio it was down between 30 percent and 40 percent. Still I did nothing because I was waiting for the market to recover. I hadn’t done my homework, and still hung on to the long-term buy-and-hold mentality. It was a big mistake.
Now our total stock portfolio value is about $46,000, which represents almost a 50 percent loss. This experience taught us a tough lesson. To be successful in any investment strategy, one needs to access correct and current information and constantly monitor the situation. It is also vital to hire an advisor one trusts.
The old saying applies: When the student is ready, the teacher appears. Visiting a friend’s home four years ago, we noticed a copy Rich Dad Poor Dad sitting on the kitchen counter. I admit that I didn’t immediately react to it although Terry picked up on it right away. She bought a copy and we started reading it.
Three years ago, after we began playing CASHFLOW 101, we attended a seminar on Veterans Administration (VA) foreclosures. The seminar provided a network of brokers and agents in place to help students buy these homes. All were small deals type of housing. When we saw the financial breakdowns, they looked exactly like one of the small deal cards from the game. We said, “Hey, this is a small deal card. We have been doing them for months in the kitchen, why not do it now for real?”