Thursday, November 15, 2007

My First Investment

A year ago, on November 12, 2006, I purchased my first mutual fund. At the time, only about 300,000 Russians out of 140 mln population were buyers of stocks and mutual funds. My family and friends were suspicious about stock market, but I was interested in mutual funds and determined to buy one. I’d been contemplating for half a year. It was so difficult to choose the right company and the right fund! But finally, I picked an index fund of the subsidiary of my bank. One day after classes, when I was alone, I braced myself and went to the nearest office, which happened to be five minutes’ walk away from my dormitory. It was Friday, about 7 p.m., and already dark outside. I was nervous and scared. It seemed like I was doing something shameful, as I didn’t want anybody see me and ask me where I was headed. I probably just didn’t want anyone try to discourage me.

People in Moscow usually buy mutual funds in big, expensive offices in downtown. The small office near my dormitory, which is situated very, very far from the center of the city, usually processes loans and savings accounts. So, it turned out I was the first person in the district who had an idea to buy mutual funds there. The manager was able to sell me funds, but she didn’t know exactly how to do it. Luckily, she didn’t send me to another office or ask me to come some other time. The manager couldn’t call the main office to consult, because it had closed at 5 p.m. She used her cell phone to call someone, and then called somebody else. She was the only manager in the office. A man lined up after me and stared at me intensely, wondering why I took so much time. I think I spent there more than half an hour, nearing an hour. But when I came out of the office and breathed in frosty air, I felt a surge of excitement and pride.

It seems incredible that a whole year has passed, and my first investment has grown by 27.92%. Now, looking back, I laugh at myself. Buying funds is not a big deal anymore. It’s now a simple operation like depositing money in a savings account. I’ve even learned to do it online. Now I feel I can be more open about my investments in real life, because I’ve grown more confident about them. I’ve gotten a lot of experience and knowledge during this year.

4 comments:

E.C. said...

I haven't made the foray into mutual funds, but this brings back memories of when I went to my local bank to purchase a savings bond. I guess they must not sell many in my small town since the bank manager had to go hunt for the forms and then read them to find out what to do. She seemed rather confused.

Brip Blap said...

Having lived in Russia for several years in the mid-90s I could imagine exactly the scenario you described. Congratulations on managing to invest, and congratulations on a nice "little" return. Pozdravlayu!

Logan Flatt, CFA said...

Olga,

Such a great story!

Now that you've bought a mutual fund (thankfully, an index fund instead of an actively managed mutual fund with its higher management fees and low probability of beating the index fund anyway), what's next? A bond? A stock? A royalty trust? A piece of real estate?

There's no rush, of course, but I encourage you to read, read, read as much as you can about stocks, bonds, royalty trusts, and real estate as direct investments (instead of through a mutual fund). The reason being, investing truly begins when you can invest in an asset at a bargain price (i.e., at a price below the asset's intrinsic worth or value). You cannot do that with an index mutual fund, since it is a manufactured financial product that is sold to you by a salesperson and you purchase it at the price the salesperson says you must pay. Real investing doesn't work that way - there is no manufactured product, no salesperson, but most importantly, there is an opportunity to pay a bargain price compared to the asset's true worth.

If you interested in learning more, I encourage you to pick up any book on how Warren Buffett invests his billions. Alternatively, you are welcome to visit my site at www.PowerWealth.com to learn more; however, Warren Buffett is truly the master at all this. I learned much of what I know about investing from him through his writings. You can easily do the same.

Keep up the great work you are doing here and in your investment experiences!

Logan.

vivid trader said...

For comparison,less than 1,000,000 Indonesian out of 210 mln population were buyers of stocks.
Congratulation for your first investment and Good Luck!