Lesson in economics – the hard way

In my 20s I was never really interested in economics as an intellectual pursuit.  The closest I came to it was to make sure my checkbook was balanced and that bills were mostly paid.  It wasn’t until the company I worked at offered 401k plans that I began my long lesson in economics and its impact on my personal life.

I left the company in 1999 and had a sizeable chuck of investments in the stock market.  I decided I was going to do a 401k-to-IRA rollover.  That part went swimmingly.  It’s the next part that started me on my road to learning.  When I rolled over from the 401k to the IRA, I also had to make choices with the new set of options regarding mutual funds.  Individual stocks can be moved, but not all the mutual funds were available to the IRA from the old 401k.  I naively listened to the the broker behind the desk explain to me that I should go majorly into technology funds, because they were the “BOMB”.  My words.  Not his.  But the language was very close.  There was a lot of enthusiasm on his part and later on mine. Recall that 1999 was around the height of the dotcom boom and the soon-to-come bust.

For the first year, things were great.  The price of the funds I bought went up significantly enough for me to happy about it.  The following year was when the roller coaster really got started. Everything dropped and I was not happy about it.  At one point I realized what the term “putting all your eggs in one basket” meant.  That broker who convinced me to go majorly in with technology funds had me do the equivalent of betting everything on black at roulette wheel in a casino.  The most galling thing about it all is that I bet on the most volatile thing available at the time.  If I’d just spread my risks around different areas then my losses could have been reduced.  Don’t get me wrong.  Many people were losing in the stock market at that time, but the ones who did the best were the ones who lost the least by spreading their risks.

After this I re-assessed my goals and focused on what I wanted.  To that end, I began reading as much as I could about the market and economics.  Wherever I could gain knowledge, I’d go learn.  Eventually, I reached a point where I learned enough to make economic decisions without regret.  I didn’t lean on anyone to make the decision for me.  I made the decisions myself and lived with it whether it went well or badly.  I stopped blaming that person who sold the bill of goods.  I am captain of my own life and I haven’t looked back with regret.