How Stock Investor Came to Be — Part 1
“Of all the training programs I had ever developed to help people succeed in business and in life, this was more needed than anything I had ever done.”
– D. Scott Elder to Ross Jardine in 1997
It’s been more than 10 years since Ross Jardine taught me how to invest in the stock market using investing tools available on the Internet. We’ve come a long way in the past 10 years, so I thought you should know how and why Stock Investor came to be. It’s been a three-stage evolution to arrive at where we are today, so I’m going to talk about each part over three posts.
The first stage is about a personal experience that I had. It’s how I went from terrified about the thought of retiring with barely enough money to scrape by to completely confident and at peace that my wife and I will be able to one day enjoy financial freedom and an early retirement.
It started when I came face-to-face with reality when I read this statement from Senior Economic Advisor, Robert Goodman:
“To live a financially secure life in this changing economic environment, you will need a much larger nest egg than in any prior generation… you can earn $1 million… and you’ll need it.”
A million dollars! I thought, “How in the world was I going to have a million dollars by the time I retired?” The rate I was going, I was a long way from being close to accumulating that much money by the time I retired.
Then I read an article in U.S. News and World Report : “Millionaires in Every House.” This article was about Senator Bob Kerrey who was promoting the idea that Americans could do much better investing their own money in the stock market for their retirement than hoping Social Security will take care of them. Senator Kerrey used the example of Gladys Holm, a secretary who never made more than $15,000 a year but was able to leave an 18 million dollar gift to the Children’s Hospital of Chicago when she died in 1996 at the age of 86. Her secret, it turns out, was to save a little money each month and invest it in the stock market.
Over time, the magic of compounding returns – and good stock picks – made Gladys a very wealthy woman. This caught my attention. My first thought was: “Making money in the stock market is the way that I can build wealth and enjoy a financially secure retirement.” I figured that if Gladys Holm could do it, then so could I. My second thought was; “But how? I don’t know anything about investing in the stock market.” And then I remembered something I’ve told myself a hundred times, if not more…
“For everything there is a first time. And everyone who is good at something was poor at it when they first started. If you want to do well at something, find someone who is already doing well at it; learn from them; and then follow through on what you learn.”
After extensive research, I discovered the “secret recipe” to making money in the stock market. This recipe consists of two ingredients: Information and Knowledge. You need timely information about each stock and the market in general. You need the knowledge of what to do with this information. You need to know what criteria determines whether or not you should buy a particular stock; if so when should you buy it; and if you buy it, when should you sell it.
The challenge at that time was that the information and knowledge needed to make money in the stock market wasn’t easily available to the average person. Professional traders and Wall Street had a lock on this information.
An article in Forbes magazine stated:
“Investors who wanted to screen for stocks had little choice but to buy the rights to the Compustat database. Only big time investors could afford the cost of $50,000 a year.”
At $50,000 a year only the super wealthy could afford to pay for the information that helped you to make money trading stocks. And for these select few, even at $50,000 a year, it was worth every penny to them because they knew they could make enough profit from this information to easily justify the cost.
I had the good fortune of seeing this system in place in the home of a wealthy doctor who subscribed to this service. He had a satellite dish on the roof of his home that downloaded stock market data to his computer. He told me he was making more money trading stocks with this information than from his very successful medical practice.
But what about the rest of us who weren’t wealthy doctors… people like you and me? For a long time there wasn’t much we could do about it. But the personal computer and the Internet changed that.
A light when on in my head when I read an article in BusinessWeek that stated:
“A year ago, you couldn’t perform database searches for stocks on the Web. Today, for individual investors armed with a personal computer there is now an inexpensive way to sift through a universe of stocks and to isolate the few that meet particular criteria.”
It was this insight that changed my life forever and resulted in starting Online Investors Advantage. In 1996, I became frustrated that the mutual funds in my retirement account were not doing well compared to how the over-all stock market was doing. When I talked to the person assigned to my account he assured me I was doing just fine and right on track.
As I watched the stock market continue to rally and break records while my mutual funds lagged way behind, I decided to take matters into my own hands. I came to the realization that no one cared more about my money than me.
I made the decision that I could no longer leave my financial destiny in the hands people didn’t care about my money as much as I did. After months of reading books and magazines on investing, extensive research on the Internet, and picking the brains of successful investors, what I discovered both angered me and excited me. I was angered that I had gone this long trusting others with my financial security.
I was excited that I now knew better – and I knew what to do. Ross Jardine was one of the successful investors whose brains I had been picking. I had worked with Ross on an Internet-related training program and knew that he was an expert on the Internet. When I learned that he had been a broker and was trading his own stocks, I asked him if he was familiar with trading tools on the Internet. He was.
I asked Ross to teach me how to do what he was doing. At the time I had just experienced a serious financial setback and didn’t have enough money to open an account with an online stock broker. (My biggest client had filed bankruptcy.) So I opened a self-directed retirement account by transferring my “professionally managed” IRA to an online brokerage firm. And why not, in 10 years of “professional management” my account had barely grown beyond what I had put into it.
In a short time, armed with information and knowledge, I experienced a dramatic improvement in my retirement account. I had made more money in three weeks than the professional managers had made in 10 years.
Knowing what I then discovered from personal experience, it made absolutely no sense at all that anyone would settle for retiring with barely enough to pay the bills when they could instead retire wealthy. The difference between the two is simply choosing to take control of your financial destiny rather than leaving it in the hands of someone else.
Time would prove that my experience wasn’t unique. Here’s what an article in the December 27, 1998, issue of USA Weekend, titled, The Best Moves You and Your Money Can Make In 1999 stated:
“Do your own investing. Studies show individual investors do about as well as pros, there’s no doubt you can save big on commissions. Thanks to the Internet, individual investors have access to volumes of information, much of it as good as (or better than) the stuff brokers disseminate.”
This is exactly what I had discovered on my own. I was so excited about what I had discovered, and the difference it was making in my life, that I wanted to share it with anyone who would listen. So I approached Ross and told him that we needed to start a company to teach other people – ordinary people like us – everything that I had learned so that others could have the same experience I was having.
At the time I had a business that developed training programs for small business owners. I told Ross that of all the training programs I had ever developed to help people succeed in business and in life, this was more needed than anything I had ever done. Ross agreed that we could provide a tremendous benefit to many people if we were able to teach others how to take control of their own investing – just as I had done.
Ross and I started Online Investors Advantage and went to work developing a program to teach people how to use Internet-based tools to invest in the stock market. The online investing tool we were using was called Wall Street City. The founder of this service was David Brown, author of Cyber Investing. We worked out a deal with David to bundle his Wall Street City investing tool with our training. Ross and I developed a two-day workshop and a 12 hour video home-study program that incorporated David’s 5-Step Investing Formula from his book.
We held our first workshop in March of 1998. We intended to do this part time, as both Ross and I had other full-time businesses to run. However, within a few months we realized that there was a huge demand for our training. At the time we were the only company offering training on how to invest in the stock market using an online investing tool. We had a tiger by the tail and we had a decision to make.
Continued on next post…
Your Friend in Investing,
D. Scott Elder