What's the smartest financial decision you ever made? Was it a great investment, a major purchase like buying your first home, or was it simply deciding to save more?
Source: 401kcalculator.org via Flickr.
We asked three of our analysts about the smartest financial decisions they ever made; here's what they had to say.
Todd Campbell: In 1995, Boston Beer Company's (SAM 1.70%) founder Jim Koch made customers an intriguing offer. Anyone who sent in a check for $495 would receive 33 shares in the company's upcoming IPO. Only a few short years out of college, let's say I was quite familiar with the company's product, so I jumped at the chance.
Buying shares in a company that makes a product that I understand, with loyal customers, and that remains led by someone who is very passionate about his product, has proven to be one of my best investments. My initial $495, or $15 per share, looked like a bargain when shares traded at more than $30 following the IPO, and appeared pricey when shares fell below $10 in the late 1990s. Since I never intended to sell my shares, thankfully, I never paid too much attention to the market's inevitable fits and starts. As a result, my long-haul approach has paid off. Boston Beer's shares are trading at about $268, which means my return is about 1,687%. The investing lesson this experience taught me is simple: spend time worrying about the company, its products, and its management, rather than the market's whims and whispers.
Selena Maranjian: The smartest financial decision I ever made was to start thinking about exactly where my money was sitting. In my 20's, I was quite naïve when it came to money, and though I was living well below my means, my excess cash was just accumulating in a bank account, earning very little. I hadn't realized I could do better. It was an HR presentation on a workplace retirement account available to me that opened my eyes, and I began contributing to the account.
A few years later, I stumbled upon The Motley Fool and began reading and learning about investing -- this was before I began working with the company. Soon, all my excess cash was being plowed into stocks, and though I made many mistakes, such as being impatient and buying without regard to valuation, I learned from them and got better at it.
Nearly 20 years later, I'm on track to eventually be able to retire with some financial security. I still occasionally invest in exciting, fast-growing stocks that I hope will reward me handsomely, but I've come to appreciate the solid, dependable growth and income of dividend-paying stocks. Eventually, those quarterly payouts will be helping to support me in retirement.
George Budwell: Before you can even invest in stocks or bonds, you first have to learn how to save. A recent poll by AARP found that the average retirement account balance for working-age households in the U.S. is a mere $3,000. Backing up this estimate, I commonly hear from friends and family that, "there isn't anything left over after paying bills," or that "stocks are for the rich." While I sympathize with the fact that wages have stagnated of late, I think the real problem lies in not making a commitment to regularly saving money.
Fortunately, I learned very early in my professional career perhaps the biggest key to financial success: paying myself first. After landing my first professional position following college, I decided to contact a financial advisor with Morgan Stanley. Instead of discussing which mutual funds to buy, he promptly taught me the virtues of allocating a set amount from each paycheck toward savings. That is, I put money into savings before paying bills or buying the latest iPhone. Over the years, this simple strategy has allowed me to buy stocks like Gilead Sciences, which continues to gain value to this day. My first iPhone, on the other hand, is long gone.