Wednesday, June 11, 2008

My first money mistake

While I am new to this self-imposed self guided financial education, I have been investing for a while. Not very well, mind you, but trying.

I decided to open a ROTH IRA in 2005 and I had been hearing a lot on TV about emerging markets being hot. (Indeed they were- making 55.4% 2003, 23.7% in 2004, 31.7% in 2005 YMYB*)

So I went looking for a mutual fund that specialized in a less-developed country than our own.

I found Fidelity Japan Smaller Companies ( MUTF:FJSCX ) and it had lots of stars by it (courtesy of the impressive looking website called MorningStar). I also researched the country of Japan. Lots of national growth while I was a tot, but it had been in recession since the 1990’s. I found somewhere on the internet that recessions normally lasted about 10 years. So, Japan was due to come out and start having rampant growth. I thought I’d sleep on the idea of buying the fund.

Sounds fairly rational, to sleep on it, right?

The next time I looked at the fund again, and discovered that Fidelity was closing the fund to new investors. Today.

So I bought into it. At about $17 per share it seemed cheap- less than a meal out!
Using all the money I had, I met the $3,000 minimum to get into the fund. I was up for a while. I checked it daily, thinking how smart I had been to get in.

Then, it tanked. Over the next year it lost 20+%.

I was crushed. The news was still saying emerging markets were soaring. I then discovered something called BRIC (Brazil, Russia, India, China) and that these were the emerging markets with all the buzz. (Why hadn’t I found that out sooner?)

Japan was still in recession (and still is three years later…). I had really thought I researched this, that I was buying low and going to sell high. Just like everyone said. As if me buying into the stock would stop a national recession.

Good intentions, but not enough money savvy. I had a lot to learn.

*Your Money & Your Brain by Jason Zweig

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