As a lifelong finance nerd, there was nothing more exciting than stepping foot into one of the biggest investment banks in the world as a full-time employee.
I was right out of school, as green as they come, and working on Wall Street! What I learned about money and investing over the next several years could fill books. But the lessons that stuck with me most aren’t what you would expect.
A little bit of background
I started my career on Wall Street as an intern in the summer of 2009 working on a trading desk at a major bank. The company was still adjusting from the mass layoffs and walkouts of the global financial crisis. It was an-eye opening and scary intro to the world of finance.
The following summer I moved to equity research at a top investment bank and accepted a full-time position for post-graduation. After graduating from a small liberal arts school with a double major in economics and mathematics, I moved to New York City for my new job.
As an analyst in equity research, I had the opportunity to interact with other analysts, traders, investment bankers, corporate management teams, and portfolio managers from around the world. It was like spending three years trying to drink from a fire hose. Then I moved to a hedge fund in Boston to begin investing actively. In my career, I’ve had amazing mentors, made mistakes, and learned incredible amounts about the market and investing. But I think the most valuable knowledge I’ve gained has been from observing my colleagues.
The expertise needed to win at stock picking is measured in years, not days
Most retail (personal) investors that invest in single stocks say that it isn’t risky if you take the time to understand the company. While this is probably true, it takes years of experience and expertise to actually understand a company and how that company’s stock trades. (And years to figure out that a company and its stock can be different things.)
Over the past seven years, I’ve spoken to dozens and dozens of investors who have been in the game for decades. But I know only one person who has consistently beat the index trading stocks. He is incredibly intelligent, focuses on his portfolio full time, and his path isn’t easy to follow.
This individual started his career in private equity, became an investment banker focused on mergers and acquisitions, then worked as a proprietary trader for a top bank investing their cash for profit. When I talk to him about a company, he can give me a 20-year history of their management, acquisitions, performance and initiatives.
To this day, when he buys a stock he has read all the regulatory filings, spoken to researchers, met with the management team, and has typically visited at least one of the company’s locations. He’s spent decades watching market cycles and understanding what moves a stock day to day. Even if you researched for weeks on a single company, you couldn’t replicate his knowledge.
This man has become one of my closest mentors. I value his insight immensely. But I will never invest like he does. I’m not willing to put in the years and years of time. I won’t commit my life to it.
Income is not the same as wealth
On Wall Street, well over half of your annual income comes in the form of a bonus. And every year at bonus time someone was unhappy. In fact, most years, a lot of people were unhappy. It didn’t matter that most bonuses were in the six-figures. It didn’t matter whether the number went up or down from the year before. In general, people just wanted more.
In my second year, one of my more senior colleagues had his first seven-figure year, and he complained. He was disappointed that more of his bonus wasn’t cash as opposed to stock. I was floored listening to his 1% problems. I knew income and wealth were different things, but I didn’t understand how anyone could lose so much perspective where they are disappointed with a seven-figure income.
Over the years, I have seen many situations like this. I have had more than one colleague that lives paycheck to paycheck. I have had colleagues that can’t afford their mortgages without their annual bonus. Multiple people didn’t contribute enough to their 401k to get our full match! There was even one person who had seven storage units around New York City. Seven storage units were full of expensive crap he couldn’t even fit in his apartment.
These people were amazing investors and well educated, intelligent individuals. But they were also terrible budgeters. Many of them allowed an expensive lifestyle they didn’t even enjoy become a necessity. Their high salary right out of school convinced them they didn’t need to worry about money, so they ignored their spending until they actually did have to worry.
Working in this environment was a real lesson in keeping up with the Joneses. I had the chance to see exactly why more people in the Millionaire Next Door weren’t bankers and lawyers. Bankers, at least, feel the need to live like bankers.
We were exchanging our health for money
In my third year on Wall Street, I was sitting at my desk one morning when I suddenly couldn’t feel my left hand. An hour later, I had lost feeling in my entire arm and the left side of my face. I didn’t want to make a fuss, so I headed down to the company’s clinic. (Yes, we had doctors in the building. It was a bit like Hotel California.) At 23, the doctors thought I might be having a stroke and sent me to the hospital.
It took a week of CT scans, ultrasounds, blood tests, and MRIs to get an answer. My now-husband and I had only been dating a few months, and he was more than a little freaked out. I’ll never forget sitting across from a neurologist and being told that my symptoms were stress induced. The doctor even had a cute name for it, “stockbroker’s syndrome.” I wasn’t the first he had seen with my symptoms, and I probably won’t be the last.
The cause of ‘stockbroker’s syndrome’
Before I moved to my current job, where things are a bit less crazy, I worked 15-hour days six, sometimes seven, days a week. My colleagues and I got yelled at by clients and managers. As a second-year analyst, the head of the department spent 15 minutes screaming at me in front of a room of VPs. For no real reason. When you made a bad trade, you weren’t just losing the money of the ultra-wealthy. You were impacting returns of pension and retirement funds.
I knew three people in my department of maybe 65 that were in their forties and diagnosed with rare forms of cancer. One of my peers collapsed at their desk at 8 pm on a Friday night. We sat on an open floor plan and listened to colleagues fight with their spouses about not being home for dinner again. One of my desk mates missed Halloween with his kids six years in a row.
The stress was real and had a very real impact on my life, and the life of my colleagues. But we weren’t curing cancer or saving lives. We were making money into more money, for ourselves and our clients. Seeing what that took, the money wasn’t worth it for me.
How my experience changed how I think about money
Today I take comfort in the fact that long-term I can’t beat the market trading stocks. It means one less thing to manage actively, more time with my family, and a whole lot less stress. I automate my family’s investments into low-cost index funds and forget about it. Less stress means better health and that is the best I can hope for.
No matter how my compensation changes, I focus on living well within my base salary and keeping my bonus a bonus. I never want to be dependent on something I can’t control. My husband and I do our best to keep perspective and appreciate what we have. Each year at bonus time, we first discuss what charities we want to donate to. I remind myself that money can’t buy happiness.
Most importantly, I am in full speed pursuit of FIRE. Sitting in a New York City hospital room with no feeling in half my body was a terrifying experience and not one I want to face again. It taught me to place joy ahead of money and learn to chase the life I want. “Stockbroker’s syndrome” can kiss my a--.
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Chelsea is a mother, wife, investment professional, and personal finance nerd. She founded Mama Fish Saves, a personal finance blog for families to provide simple answers to all the money questions we didn’t get answered in school. She hopes to help parents feel empowered about their finances so they can achieve their dreams and raise financially smart kids! Sign up for her blog and follow along here.
Read the original article on Budgets Are Sexy. Copyright 2017.
