Andreas Gomer – From Rugs To Riches 

Guest Post by Andreas Gomer from MoneyIng.

In this article, Andreas gives an account of his own personal finance story. I am delighted that Andreas will be talking about his journey here on Wall St Nerd. Let's go in!

I think, it’s everybody’s dream to become rich. However, the exact amount of money to call yourself “rich” is quite individual. One may say, having ten thousand Dollars is rich, whereas even a millionaire could himself feel poor.

Anyway, becoming rich is a highly inspiring motivation for personal finance. I mean, all of us have different starting conditions, especially regarding education, job and heritage. But developing a dream, developing a strategy and developing a plan to execute this strategy to become rich, by whatever means, is key driver for our daily effort.

The Case of Andreas Gomer

My case is simple: I immigrated to Germany when I was eight. My parents were working class people and made the best efforts to pay the bills. Having three kids and two blue-collar jobs can be a challenge, though. Anyhow, they managed to get by and even had some savings at the end of the month. If so, they simply trusted their savings to the local bank, which paid them interest fees way below inflation rate and charged managing fees on top of that. Quite a s*%t#y situation.

So the time I got old enough to understand my parent’s struggle, I made a pledge: I wanted to become rich one day. Unfortunately, I have bad physics and hated hard labour. So the best way was to use my mind. I started reading about economy, finance and how the stock & bonds markets work. I admit, it took quite a while, as I was starting from scratch and had no mentor to guide me (which, I must say, is the only thing I did wrong in the past: asking for guidance & advice from somebody with good heart and great experience is gold).

Around the time I was in my early 20es, I finished my theoretical education on the finance market and headed for the trial-and-fail-phase. I decided to by my first stock. Back then, I had savings of $4.000, and I wanted this f*c#er to make me rich. So I invested. In one stock. All of it.

Guess what happened? The stock went south and I lost 30%. Terrible start to become rich, isn’t it? Even today I can remember the stomach pain I had, seeing me loosing a third of my equity. What I did? I puked. I physically puked because of the pains caused by my loss.

My next mistake

Unfortunately, I made a second mistake right afterwards. After finishing puking, I decided to sell my stock and get the remaining money off there. Quick as possible. As I did so, I felt a slight relief, as I knew I left the roller coaster. It took me some weeks to realize, what a fool I was. Not only was I buying a stock I did not analyse yet, did I also spend all my on only one investment. And when things did not work out like I expected, I ran away like a little girl.

Oh, gosh. Becoming rich will be quite a challenge, I understood back then. Luckily, I didn’t give up.

Now, being in my mid 30es, I must admit that this experience was the best thing ever happened to me. My loss of $1.100 gave me wisdom and guidance. Looking in the rear-view-mirror, this loss gave me the highest “return” of all my future investment. 

Why? Because I learnt from it. I took the lesson, that investing is not gambling. Buying a random stock and waiting to become rich is utopic (although some guys on Facebook and Instagram tell you so). Instead, picking stocks is linked to work, discipline and – a bit of – luck. But the focus is clearly on work and discipline. It will take you some time to gain fundamental knowledge on reading balance sheets and earning statements. And for sure searching for a stock, analysing and finally buying it takes some time, too. But, what most people do not understand: Becoming rich will not happen overnight – instead, your wealth will grow over time.

This is where reality hits Social Media. In Social Media, they tell you, you can become an Investor in a couple of minutes by simply following advices from certain influencers and buying A or B. B*llsh%t. For sure, you can take advices from somebody, but those advices shall always be only an addition to your personal work. In most of the time, those advices make them rich, not you.

So where am I now? 

So where am I now? Following my three simple rules (Know what I buy; Hold for a long time; Care about value, not prices) helped me to develop quite a nice portfolio of approx. 25 different stocks. I invest globally and diversify regarding business sector, currency & risk classification. Since many years, I did not withdraw any assets or cash from my portfolio. Instead, I reinvest received dividends and help my income to grow over time. Furthermore, I sell stock as seldom as possible. The only time I sell a stock (or the company behind the stock, though) is, when the fundamentals, on which my decision to invest was former based on, changed dramatically. There are stocks in my portfolio, which I did not touch for more than 10 years – and do not intend to do so.

Coming back to the question if I succeeded to become rich. The answer is clear: Yes, I did. If you read my introduction carefully, I explained that my definition of “being rich” is not measured in absolute numbers generally, but with highly individual values. I must admit, that I do not have a million dollars. Yet I am rich. Why? Because through my personal finance story, I understood how to deal with my money. I learned to make the best of my pay checks and adjusted my monthly spending accordingly. Furthermore, my stocks' portfolio provides me an additional income and will help me over time to become independent of my pay checks. As I make my own decisions to invest, I do not need expensive bank advisors or their products. Every dollar in fees saved, will provide future income. Cheers.

Author - Andreas Gomer