How I Became Interested In Investing
So I thought I would use my first blog post to explain in a little bit greater detail my background and how I became interested in investing.
I finished my four years of university at the end of 2010 and graduated with a science degree majoring in geology. During my time at university I managed to wrack up a sizable student loan (approximately $45,000) as a result of too much fun and not enough (paid) work. I did have an awesome time though.
For some reason I decided that my first financial goal should be to pay off my student debt. This may or may not have been a wise financial decision considering that, while I remained in New Zealand at least, that loan was interest free. For some reason the idea of being saddled with debt just made me feel like I wasn’t totally free to do what I wanted so I embarked on my journey to find gainful employment and to start chipping away at the loan.
I found myself with a job at an engineering consultancy in Auckland. The work was good but the pay was just, well, average. Don’t get me wrong, I was earning a pretty typical wage for a university grad of about $50,000 a year. However, it didn’t take me long to figure out that after tax man took his keep in conjunction with paying for life’s essentials such as the landlord (not cheap in Auckland), the local grocer, transport, insurance, clothing, Friday after work beers etc there wasn’t a lot left to chip away at my student debt, let alone think about saving for “responsible” things like a house deposit or less financially sensible but oh-so-more desirable luxuries such as a trip overseas.
O.k. so I probably can’t put Friday after work beers in the essential column and I definitely didn’t live a life of simple subsistence, but I am by no means a big spender. In fact most of my friends would probably throw me fair and square in the “tight ass” category. I tried my best to minimize all unnecessary expenditure (including forgoing the nice car and opting for a 20 year old Toyota Corolla) and tried to save as much as I could.
I wont bore you with an in depth analysis of my initial budget other than to say I found I was very disappointed with the amount I found I was able to save over the course of my first year working as a professional. The numbers weren’t entirely clear thanks to my compulsory student loan repayments and tax complications however I managed to save somewhere between $3,000 and $5,000 which went straight towards my student loan. At that rate, assuming a slight pay rise a year, it would take seven to eight years of slaving away to pay off my student loan before I could even think about saving for that house deposit or overseas trip.
To make matters even worse, the loan remained interest free whilst I remained working in New Zealand, but I was hungry to explore and work/live elsewhere, something which would mean paying interest on the loan. The default interest rate on student loans in New Zealand is something like 6.5% so initial annual interest payments when I moved overseas were going to be something like $2500. I knew that if I wanted to go exploring overseas I needed to pay off the loan as soon as I could so that it didn’t grow while I was away traveling, likely earning pittance behind the bar of sum UK pub.
I knew there was one guaranteed way to dramatically increase my income.As a geologist I was well aware of the mining boom raging over the ditch in Australia. At university I had always vowed never to sell out and whore myself to the big Australian mining companies – it just wasn’t something I was interested in. However, turns out money is a big motivator and something like half of my class ended up moving over there after graduating. In the words of Lil’ Wayne I could see how much “cash money” they were making and I realized a move to Australia might be the best way to achieve my short to mid term financial goals. After a short period of deliberation I decided to quit my job in new Zealand and move to Perth, Western Australia in June 2012.
I landed a job with one of the top engineering consultancies in Australia and before I knew it I was shipped off to the mines for weeks at a time. Contrary to what I thought before heading over I actually loved working on mine sites – I’m a bit of a nature nut so being out in the middle of nowhere had it’s appeal, particularly when I got to work out in the bush on greenfields sites away from existing mines. I was working my ass off and the work involved flying out to site in the middle of piss ass nowhere, living in a converted container (colloquially termed a “donga”) for anywhere from eight days to four weeks at a time without a day off. The working day usually consisted of getting at up 4am for breakfast at the mess before leaving camp for the mine around 4.30am. I’d work a full day, often completely outside in 45°C+ (113°F) temperatures and be back at the camp by 5:30pm to 6pm.
I was definitely earning my wage, but I was getting paid overtime and making serious dollars (at least compared to my New Zealand wage). To top things off, when I was on site I wasn’t spending a dime as all my expenses are covered. Turns out it was a great way to save money and I managed to pay off my entire student loan in a little over a year of diligent working and saving, even with a few big nights out and a ski trip to Japan in the mix. All of a sudden I had transitioned from barely making enough to pay for the bare essentials to having multiple thousands of dollars of disposable income at the end of every month.
I’d long known that people made serious money investing in the sharemarket but a) I had never had any disposable income and b) I knew nothing about it. My parents had never been interested in investing bar one failed attempt with investment property, however I was influenced by my Grandad who was a prominent New Zealand businessman in his day. He sold his business back in 1987 and was offered stock options from the company that brought him out. He declined and requested to be paid in cash. Three months later the 87 market crash happened and markets world wide (none more so than the New Zealand sharemarket) were decimated. Turns out he would have lost everything if he’d taken the stock options as the company eventually went under. He always told me to be very wary of the sharemarket and preferred the bricks and mortar security property offered, so I was coming in with a skeptical frame of mind.
However, I had developed a keen interest in macro economics through reading a range of books from so called market gurus (more on this in future posts). I was thoroughly enthralled reading about the causes of the recent financial crisis, the great depression, fractional reserve banking and the theory behind quantitative easing. I was constantly reading and my thirst to grow my financial knowledge was insatiable. According to my parents this thirst for knowledge had always been part of my persona – as a young child I used to drive them nuts asking questions all day long about anything and everything.
It was actually whilst out at the mines where I was first introduced to the sharemarket and the world of investing in stocks. Banter about the latest up and coming mining explorer on the the Australian sharemarket (ASX) was rife. Everyone from co-workers to drillers to geologists to mine managers had little birdies giving them tips from their mates working in the mines down the road. It all sounded exciting and the allure of making many 1000’s of percent from an “investment” in quick time did sound exciting. I was told about recent finds such as Sirius Resources which had recently discovered a massive copper deposit and it’s share price had risen from 5c in June 2012 to a peak of over $5 six months later.
You see the ASX is full of “penny dreadful” mining exploration companies. I wasn’t completely clueless and I knew that 99.9% of these stocks would never amount to anything other than draining shareholders bank accounts. But as an absolute newbie it sure sounded a lot more exciting having a punt on speculative mining stocks than buying blue chip utility companies that might make you 10% a year in capital growth plus a few dividends for beer money. The chance of adding an extra zero to that savings account balance sure did appeal and besides, I was a geologist, I knew what to look for in a deposit so surely I’d have a better chance than the average mug punter at picking a winner.
With the loan now steadily being paid off I decided it was time to dip my toes into the murky world of investing in the sharemarket and signed myself up for an online stock broker. Before I knew it I had dropped a couple of grand on my first investment which signaled the beginning of my “trial by fire” education in investing in the stock market.
To sum it all up in a couple of bullet points, the main factors which led me to becoming interested in investing in the stock market included:
- A desire to better myself financially and realizing that the best way to do this was to put the limited money I did have to work (i.e. grow).
- Moving to Australia which allowed me to dramatically increase my disposable income. This meant I had money spare at the end of the month to “do something” with, i.e. see bullet point above.
- An over arching desire to learn new things and master new skills.
- An innate interest in economics and markets.
- Being heavily influenced by those around me who were constantly talking and discussing the stock market.
I have certainly come along way in the last couple of years and have learnt and continue to learn more than I ever imagined every single day. I have certainly made pretty much every single investing balls-up a beginner investor can make and through this blog I hope to share with you what I have learnt and what I continue to learn in the hope that I can help you make better investing decisions for yourself.
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Keep it real,
The Nude Investor.