Self taught investor … does it work, especially as markets tank?

Self taught investor, Diane was heavily invested in stocks right before the Great Recession. Worried about an impending downturn, she yanked all her money from the stock market and put it in cash.

“I decided to sell in a panic,” she says. “That was in January 2008 before everything went to hell.”

Making that decision went against every instinct the former librarian had developed over the years. She was a “buy and hold” kind of investor who prided herself on patience and a long-term focus … a trait here at the WFA we strongly agree with and admire.

In fact for decades, she put her money into growth-oriented mutual funds.

Her Self Taught Investor Hunch Paid Off

That decision allowed self taught investor Diane to avoid the worst of the downturn. She later got back into the market. Her portfolio now provides a quarter of her retirement income, allowing her to retire early in 2012.

Of her decisions Diane says, “All my life, I’ve been a 100% stock-invested, buy-and-hold kinda gal, but after watching my life savings drop by nearly half from 2000 to 2002 and take another three years to get back to their 1999 level, I just wasn’t able to see that close to a 500-point drop without my stomach dropping as well.”

Before she had always stayed put, remaining in the market even after the dot-com crash in 2000. In fact, her portfolio only recovered from that downturn in 2005, so it was scary for her to abandon everything in a gamble to save her funds.

She ended up parking her savings in money market funds, which were experiencing their own turbulence, though not quite as bad as the stock market.

“I didn’t have another five years to waste getting nothing out of my money,” she said.

As a Self Taught Investor Early Retirement Was Important

Self taught investor Diane Bronson never considered herself much of an investor. In the early days of her career, she had little to play around with.

Books Can Help You Become a Self Taught Investor

Be a Self Taught Investor: Start by Reading Books

Then she began to take her retirement and savings funds more seriously. A librarian for more than two decades, it figures that her introduction to the world of investing started with a reference book on mutual funds.

She went through four or five books per week many have been how-to investing books. It’s how she became a self taught investor. One of her favorites, is the value investing classic “A Random Walk Down Wall Street.”

She still uses her local library’s resources to better understand the markets. She also checks the market daily, reads a lot and looks over research notes from Vanguard, which operates the funds she uses.

Steady Returns in Her Golden Years As a Self Taught Investor

Mutual funds are still her preferred form of investing, because she doesn’t like trying to time the market. She dabbled a bit early on by trying to pick individual stocks, but her returns were underwhelming.

Since the financial crisis, it’s been a bit of an adjustment for her to diversify. Sometimes she compares investing notes with her father, and she gets envious that he’s kept all his money in cash and stocks.

“I would never buy bonds before, and I never understood why people make any money in bonds,” she said. But now as a self taught investor, she has a quarter of her money in bonds. She’s also moved into larger-cap stocks in a quest for stability.

She counts herself fortunate that her gambit allowed her to retire two years early. As a self taught investor, her investments have provided a nice supplement to her pension. Had she not had that safety net, she would have been a lot more fearful during the downturn.

She’s not as worried about timing the top of the market this time. All she wants is peace, calm and steady returns to carry her through her golden years.