On Saturday, in advance of Father’s Day, I published a column discussing the best investing lesson my dad ever taught me. He actually taught me what not to do.
I also learned a few things from my grandparents.
My two grandfathers had very different investing styles.
One played the market. He used to watch Nightly Business Report when it first launched. (I once thought to myself, “Who could just sit and watch stock symbols go by?” Little did I know that 10 years later, I’d be mesmerized by the ticker scrolling along the bottom of the screen.)
Grandpa B worked in his family business, which was started by his older siblings. They manufactured lingerie.
While I’m quite happy with my life, it’s hard not to wonder what might’ve happened if they hadn’t gone out of business when I was 6 years old. I could’ve been the women’s underwear king of New York!
Grandpa was not a gambler, but he did make some smart speculative bets.
About 70 years ago, he was presented with an opportunity to invest in an office building in Manhattan. By today’s standards, it wasn’t a lot of money, but for the 1950s, it was. He had a tough time deciding to do it, but thankfully, he did.
My mother still receives checks every quarter as a result of that chance my grandfather took during the Eisenhower administration.
He was able to take the risk because the rest of his investments were diversified in various stocks and bonds. Had the real estate investment tanked, while he wouldn’t have been happy, my grandparents’ standard of living would not have been affected.
I always recommend that before investors speculate with options, penny stocks, crypto, or other high-risk/high-potential-reward trades or investments, they should make sure that their long-term investments are taken care of.
Invest for the long term. Be certain that you’ll have enough income coming in before rolling the dice and hoping for the big score.
My other grandfather, Grandpa J, actually owned a seat on the New York Stock Exchange. Like Grandpa B’s lingerie company, his firm closed in the early 1970s.
Despite being around traders all day, Grandpa J was more conservative when it came to investing.
He primarily invested in bonds and dividend stocks.
He grew up very poor and started working when he was a little kid (he got littler and littler with each telling of the story). He went to high school, college, and graduate school all at night while holding down full-time jobs during the day.
He worked incredibly hard to pull himself out of poverty, and he was not going to risk his hard-earned money on the whims of panicked investors who sell and drive the prices of stocks lower.
When I started investing in my early 20s, I had very little money and was trying to turn it into a lot of money in a short amount of time. I didn’t know what I was doing, and after recording many more losses than wins, I thought more about what my grandfather had taught me: Invest in quality.
I started buying dividend stocks and never looked back.
Owning dividend growth companies for the past 30 years has made all the difference in my financial life.
Lastly, even though this is a Father’s Day-related column, I can’t ignore my grandmother.
I don’t know to what degree she was involved in the family’s finances. She was a stay-at-home mom and, in many ways, a traditional wife and mother.
After my grandfather died and I became involved in the market professionally, she and I would talk about the market regularly. I was surprised that in her 80s and 90s, she knew not only every stock in her portfolio and what it did, but also how macro events may affect her stocks and the market in general.
Those conversations are some of my favorite memories of her.
She had an honest financial advisor who took very good care of her. But you’d better believe that if he had wanted to, he wasn’t going to slip anything past her.
Grandma reminded me that even if you are working with a financial professional, you should understand why you own each of your investments.
You don’t have to know exactly what every company does and what its financials look like, but you should be able to articulate what purpose a stock, bond, or fund serves in the overall portfolio, whether it’s giving you exposure to the tech sector, generating income, diversifying outside of the United States, etc.
If you don’t know why you own something, it may be time to sell it − or, if you’re working with an advisor, ask them to explain it to you.
As I often say, no one cares more about your money than you do.
Pay It Forward
I’ve worked hard in my career and for the investing success I’ve had over the years, but I’ve also been blessed to be able to build on the strong foundation set by my grandparents.
Be that parent, grandparent, uncle, or aunt who helps the next generation be successful. Talk to your kids, grandkids, nieces, and nephews about your investing life. Describe your victories and your mistakes.
And if by some chance you own a lingerie business, try to hang on to it. Trust me, your grandson will thank you.