Thursday, April 02, 1998

Spurned by the Wise
By Michael Pizolato ([email protected])

Early in my career, I left a "nice, secure" job to pursue a risky opportunity with huge potential rewards. This left me a 401(k) to deal with. I was a real financial novice, never having made any other investment before. So I shopped various full-service brokers because I believed, as the full-service brokers will tell you, that investing wasn't something I should do on my own. Unfortunately, or so I thought at the time, most of the brokers didn't seem interested in my piddly $25,000. One even said, in effect, "Come back when you have a quarter million and we'll talk." Still, I thought I'd be back soon enough once the new business took off, but I needed a place for my 401(k) money.

I was discouraged, but I still thought a broker was the way to go. Then I met a guy who told me that LA Gear was hot (selling at about $33 at the time), and he'd put most of my money there. I was mostly clue-free, but I understood the value of diversifying, and I was growing more and more uncomfortable with the brokerage mindset. He was the last straw; I decided to do it myself. After all, Charles Schwab had told me in a TV commercial that I could. Besides, if I could make an intelligent decision, on my own, to risk my career on an unproven business venture, I could learn how to manage my money too. So I rolled my 401(k) money into a discount brokerage IRA, didn't buy LA Gear, and started my education.

Some time later, just for fun, I checked the price of LA Gear: two dollars.

Oof.

Grin.

Chuckle.

As of this morning, I can't even get a quote for LA Gear at any of my favorite quote sites. I have no idea what's happened to them, and, since they have no place in my current investment plans, for now I don't care.

Reward is proportional to risk, and not everything goes the way we want. My business opportunity went bust, as new ventures often do, and today I'm in a different job. But I'm proud of how far I've come in my investment life, mostly riding index funds and dollar cost averaging my way to a really nice pile of dough. Now I'm ready to move on, confident in my ability to understand the "next level" of investment strategies (like the Foolish Four) and make it, on my own.

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