My first experience with investing began with a financial advisor. Prior to beginning my career in the financial services industry, the idea of personal finance overwhelmed me. Saddled with student loan and credit card debt, the idea of investing money felt like an unattainable dream. Since I didn’t understand investing, my attitude toward it was less than positive. Nevertheless, at one point in time, I had money that I felt that I could invest. 

I knew nothing about investing so I reached out to a financial advisor. He opened an account for me and invested my money. Since I was in my twenties, he said I should invest aggressively. I didn’t feel comfortable with that idea. However, I felt like he had experience, and I needed to trust his advice. Over time, during periods of volatility, I would contact him in a panic. Rather than remind me of my goals and time horizon, he acknowledged my panic, sold my securities, and collected a commission. Then, when the market shifted, he would contact me to invest and collect his commission again. This behavior loop became a cycle. People may say that I knew what I was getting into and the financial advisor provided me with the proper disclosures. But I would point out that though the disclosures and prospectuses for the investment program and securities were shared with me, I had no real understanding of how investing worked. 

Looking back, there are several lessons learned from my experiences of working with a financial advisor. First, if I choose to work with a financial advisor, I can learn about their background via the FINRA Broker Check website or the Securities and Exchange Commission (SEC) website. It is free to research any financial advisor or registered representative through FINRA or the SEC and learn about their education, experience, and whether any actions (AKA disclosures) have been filed against him or her. I can also use free resources via the Certified Financial Planner (CFP) website and National Association of Personal Financial Advisors (NAPFA) website to interview potential financial advisors prior to deciding whether to work with one. 

Second, in today’s world, I can choose how to invest: with a person or via an AI-driven investment program (AKA robo advisor) or on my own (AKA self-directed). A variety of investment platforms are available and I am empowered to use whichever platform I choose. My decision may be based on cost of trading, cost of advice, ease of use, and add-on services like free webinars on personal finance topics like investing. 

Third, before I invest, I can either work with a fee-only financial planner or read books about financial planning to gain an understanding of how to manage my personal financial situation in a way that supports investing. By working with a professional or reading books about financial planning, I can learn about the importance of understanding my cash flow, using a budget, having an emergency fund, protecting my credit, responsibly managing my debt, and saving for retirement. In this way, I can learn about how investing does not provide guarantees so the money I need to support my lifestyle (i.e., living expenses, debt repayment, emergency savings) must not be used for investment purposes. 

My second experience with investing involved a 401(k) plan. A few months ago, I wrote about what I wish I had known in my 20s on personal finance. One bit of knowledge involved saving for retirement. I shared how I delayed investing in my 401(k) because I didn’t understand how it worked and missed out on two years of my employer matching my contributions (also known as free money) because of my ignorance. 

After that experience, I learned to look for opportunities to work for employers who include a retirement plan and matching contribution. When I have access to a retirement plan offered by an employer, I intend to take advantage of it. If I am already working for an employer, I will contact the Human Resources (HR) Department (or, if I work for a small company, my direct manager) and ask about available retirement plans. Does my company offer a 401(k) and do they match the money I put into it? If yes, by how much? How do I participate in a 401(k) plan through my employer? I will ask for help with accessing the 401(k) website and find out whether a representative of the custodian supporting my employer’s retirement plan is available to answer my questions about the 401(k) plan. If not, I will ask HR or my manager where I can find information about the plan and get help signing up.

My third experience with investing involved self-directed investing online. In other words, I chose investments on my own, without the help of an investment professional and with limited investment knowledge, using an online platform. Without getting into too much detail, I will say, “If I only knew then what I know now!” 

Here is what I know now. Investing without a plan is akin to gambling. Therefore, I invest with a plan. This plan is also known as an investment policy and it is driven by my Investment Policy Statement (IPS) which is informed by my personal financial goals. My IPS lists my preference on the types of investments I choose, including how much I spend on my investments, and my performance expectations for my investments. I also have preferences around when I choose to buy and sell my investments as well as a list of mitigating circumstances. As a result, when I consider investment opportunities, I consult my IPS to determine whether to invest or stay the course with my current selections. 

Through all of these experiences, I learned to trust myself and my ability to learn. I experienced these lessons long before pursuing a career in finance, however they informed my understanding of personal finance in a way that textbooks and coursework could not. 

Our experiences shape us. Though we may not understand the weight of their meaning at the time, we may later reflect on our experiences and lessons learned. For my experiences and lessons learned, I am thankful.   

Wendolyn Forbes is a CERTIFIED FINANCIAL PLANNER™ with Wealth Transition Finance, A Member of Advisory Services Network, LLC, where she offers financial planning and investment management services for either a one-time or on-going cost. Wendolyn is a fee-only financial planner and member of the National Association of Personal Financial Advisors (NAPFA). For more information about Wendolyn’s financial services practice, please visit her website at www.wtf-asn.com.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™ and federally registered CFP® (with flame design) in the US, which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.