The Cautious Investor
I'm really pleased to have a new Reader Profile for you today. N00bster (a prolific contributor to the forum) was kind enough to answer our questions and give us a look at his financial journey.
1. Tell us a little bit about yourself
Hi! I am N00bster on the RetireJapan forum. Initially from Western Europe, I came to Japan 9 years ago. I am now in my late thirties and employed at a foreign tech company.
2. How did you get started with personal finance?
I was not familiar with personal finance, since I used to live on modest paychecks and only save a little. Buying stocks or funds in particular would never have come to my mind.
But then I came to Japan and started my current job, and my salary income increased very considerably. I also started receiving equity which I did not care much about at first, but which after several years took a serious increase in value. So about two years ago I found myself with the problem of deciding how to manage this wealth, and that's how I started looking into personal finance. Doing so I realized that there was value in being more active managing my assets and that it could be more fun than I initially thought.
Most beginners do mistakes. Mine was to get involved with a financial advisor. Readers of RetireJapan should by now be familiar with this scheme. If you are not, read this article and understand that the reality is worse and that there are no exceptions.
After one year of involvement with that advisor, I realized that his plan was costing me, all charges considered, 5% of my invested assets per year, mostly in carefully hidden fees. On top of that his choice of funds made me quite dubious of his qualifications for managing wealth. Thankfully, I am cautious by nature and wanted to move gradually, so I did not sign up for a long-term plan. This has allowed me to cut ties quickly and limit the damage.
After that experience I decided to manage my finances myself. I read about personal finance, opened a Rakuten Securities account, and started pouring money into it. Then I stumbled upon RetireJapan and followed the regular suggested course: I now have NISA and iDeco accounts, invest monthly in Theo, and even opened another account with Interactive Brokers.
3. What are you doing at the moment?
I spend most of my daytime at my job, which I like very much. I am lucky enough to have a skill that is currently very valuable on the job market, so I plan to take advantage of this as long as I can and prepare for retirement and/or financial independence.
4. What books/websites/companies do you recommend?
Trying to be smart did not work out well for me so far, so I advocate applying the 20/80 rule and sticking to the basics. In that respect your site does a great job at giving a strong investment baseline (NISA/iDeco/Theo add up to a great start that does not require much involvment or knowledge). The Investor's Manifesto by William J. Bernstein is another great read, short and to the point.
Regarding companies, I don't have any particular recommendation outside of sticking to low-cost brokers and not ever getting involved with financial advisors who are just here to shave you.
5. What's your plan going forward?
Investing more of my assets! Right now more than 90% is still sleeping in bank accounts, waiting for the next market downturn to get a good entry point. I am probably being too cautious, but being cautious is what saved me from being scammed by advisors. My "strategy" is to keep investing consistently no matter what, but keeping reserves for when the market takes a blow. Investing a big lump sum in today's market is just too scary for me.
6. Any other thoughts?
You probably know my feeling by now, but let me reiterate that financial advisors are parasites without any valuable skill, which is why they help themselves on other people's wealth instead of fructifying their own. Avoid them at all costs.
All the same, financial news sites craft their "advice" in order to maximize the number of visits, not in order to dispense accurate information. In other words, they are clickbait. Don't waste your time with them.
The only way for us small investors to not get hosed and receive valuable advice is to group into communities of like-minded people with nothing to sell. That's why RetireJapan is a priceless resource for us foreigners living in Japan.
Finally, if you are new to personal finance, perform all your moves gradually so you can roll back if you realize you are doing a mistake. My financial advisor was pushing me to get more and more involved with him, and I am so glad I did not sign up for one of those 30 years plans or for an investment property as it would have been much harder to correct the course.
RJ: I am not as cautious as N00bster, but his approach of investing regularly and taking things slow is a very sensible one. FOMO is a danger in personal finance, and you should be very wary of things that seem too good to be true.
Particularly 'free' 'financial advisors'. We've written about them before on the site, and will do so again. If in doubt, ask in the forum if you are not sure about a potential investment or 'opportunity'.
William Bernstein is a great writer on investing, and you can read one of his short books for free from the link on the Further Reading page.
Finally, if you would be willing to be featured in a Reader Profile yourself, please get in touch. I find them really inspiring and would love to run more examples of how people are thinking and learning about money and life.