When I first started investing, my first investment in buying some shares was a major decision. Here’s the most important thing about that first investment.
My first investment
In April 2011 I bought my first shares ever! I bought 1 share of GOOG, 8 shares of MSFT and 1 share of AMZN.
My ~$1,000 portfolio looked like
This purchase was a big deal at the time. I worried about which stocks to buy. And worried what might happen to the price in the future. I worried if I had made the ‘right’ choice. Plus, I watched the prices change daily and worried about that too.
Putting it into perspective
Now let’s fast-forward about 70 months from April 2011 to January 2017. I’ve been investing monthly over the last five years and my portfolio has increased from $968 to $284,146.
On average I’ve saved about $3,700 a month but along the way I cashed out a pension plan I’d forgotten about and invested that for more savings.
So, my first investment purchase has been supplemented by around 70 additional monthly purchases. And that changes the picture from one coin to something like:
My initial investment is about 0.5% of my portfolio now.
OK DL, so get to the point already. What’s the point here?
The most important thing about your first investment is…
Simply that you made the investment and took that step.
With a long enough investment horizon, it doesn’t really matter what you buy since it’ll be a tiny portion of your future portfolio. Within reason of course, since you shouldn’t just buy anything. But if you purchase shares in an index or some large-cap stable company, your first investment will be lost in the noise by the end of your investing career.
If you’re twenty now and investing for the next forty years, then that’s 480 monthly purchases. Each monthly purchase based on the quantity is about 0.2% of your cost basis. But you’d likely be increasing the size of the purchases over time due to higher income. If you invest twice a month, then there are 960 purchases ahead of you.
With some caveats, of course
If you’re investing a big lump sum as your first investment, then you do need to be more careful in your initial purchase as you’ll have to diversify from the outset. For this article though, I’m really just considering someone who’s starting to invest with regular monthly contributions over a long period.
First purchase post-mortem
Since I was here and I had dug up the details of my first purchase, I thought it’d be interesting to see what happened next.
Somewhere in an alternate universe…
Here’s how it would have looked today in an alternate universe where I still held all three stocks.
|Stock||#||Cost Basis||Value||% Increase|
Microsoft have paid about $42 of dividends from those eight shares since I bought them. I added that to the market value above. The market value would really be a little higher still from re-invested dividends.
Still, the initial purchase more than doubled in value and increased to over $2k, about 0.76% of my portfolio.
What happened in reality…
Well, I sold some of those stocks along the way. I switched over to dividend paying stocks and sold GOOG and AMZN about a year later. I still own the MSFT shares.
The Value column in the table below is the sales price I received for AMZN and GOOG, plus the current market value of the eight MSFT shares.
|Stock||#||Cost Basis||Value||% Increase|
In hindsight, I should have stuck with the non-dividend paying Amazon (I sold it for $10 above purchase price), but I still did pretty well holding Microsoft. In selling, I lost out about $770 today.
It’s not a very accurate current value estimate however. I can’t know how much extra I have since earned from the proceeds of selling the two shares. But as a reference, $1,395 represents about 0.5% of my Income Fund today.
Anyway, the point is still that these percentages from that first investment are a small portion of my Income Fund after five years, and will be even smaller still in ten or even twenty years’ time.
If you’re starting out investing, what you buy isn’t such a critical decision, although it may seem so at the time. The biggest factor in your investing performance is how much money you’re able to invest and how much time you have, rather than a carefully picked initial purchase.
Don’t sweat the details as much in trying to find that ‘best’ purchase. Let the stocks (and time) do all the work so you don’t have to.
What was your first ever investment / purchase? A curious DL would like to know!
Quote of the Day
Start where you are. Use what you have. Do what you can.