How I Tripled My Return In The Stock Market

Have you ever seen one of those compound interest charts that say if you invest $100 every month you’ll be a millionaire?
 
I first saw one of those charts when I was getting my undergraduate degree and it seemed easy enough if you used an average of 12% (historical average is 10% and from 1957 - 2018 the average is 8%). 

When it came time for me to start investing that is not how it went. It was more like a rock you try to skip along a lake. Just boppin along the surface and any growth I made eventually came back to the surface.
 
With this one change, and less work, I more than tripled what would have been my return in the stock market over the course of a year.

Stock Market Attempt Number One: Trying To Hit A Home Run
 
While getting my graduate degree I had a friend let me borrow Ramhit Sahit’s Let Me Teach You To Be Rich and that had another compound interest chart, something along the lines of this. 

Source - teachingismypassion.com. This is for a 12% return.

I dog eared the page so I could come back to it when I had the money. It recommended doing a target date retirement fund. They are a cool fund option that adjusts the ratio of stocks to bonds based on your age and adjust accordingly (it is actively managed so be aware of the fees). I remember thinking, ‘Okay, when I get to the point I can invest I’m going to do this. It’s so simple!’.
​
4 months after getting my first big person job I finally had enough to open a Roth IRA and make the minimum payment to get started with the retirement fund. Millionaire status here I come!
 
Since I was already going to be rich off of this I was also interested in stocks. Plus, it’s the grown up thing to do! I read a couple basic books to get some understanding. Testing it out was important to me just incase I was sooo wealthy in the future I needed a financial advisor.  I wanted to be prepared for those future discussions on what to do with my millions. Plus, my older brother is big into stocks and always gave me the analogy that it is like fantasy football. Figured let’s give it a shot!
 
Every month I put $50 into a Robinhood stock trading account. Side note - if you are looking for a place to invest I recommend them, they don’t have trade fees.
 
The whole concept was going to be easy, buy low, sell high. I got that!
 
Spoiler alert, that’s not how it went. I lacked any real buying power so I was stuck trying to buy stocks in the $5-$15 range and hoping they would take off. I would check multiple times a day and eventually got out with a loss of around $25.
 
When I gave up on stocks I moved all that money into my Roth IRA and into that target date retirement fund.
 
Stock Market Attempt Two: Mo’ Money, Less Problems
Okay, the first attempt did not go as planned. I was also no closer to being a millionaire.  The problem was I did not have enough money to get the good stocks. If I had things like Facebook, Google, Amazon, etc. it would have gone better. Also, more diversification would have helped.
 
I asked around, read articles like ‘Best 5 Stocks to Buy in 2018”, and was going to use $1000. This time was going to work! I bought stock in Facebook, Pfizer, Verizon and more big brands like that.
 
This time I lasted about 2 months, took a $100 loss, and figured out picking stocks is just not for me.  I watched the market too much and became obsessed with how my money is doing. I also didn't research it enough to know when to buy or what the deals are.
 
Again, all that money went to my Roth IRA.
 
My Roth IRA was not getting me any real returns either so I started moving my money around to find something better. I sampled a high dividend yield account with half my money and put the other half in the S&P 500. Figured that would be the easiest way to get my 8%.
 
Stock Market Attempt Three:  Show Me The Money!
Picking stocks still isn’t my thing and I’ve maxed out my Roth IRA each of the past two years.
 
I recently passed the one year mark of when I gave up picking stops for good and was interested what would have happened had I held.
 
As I sat to pull up the stock charts I was surprised to find that if I held not only  would I have gotten all my money back, I actually would have made money! The return on my money would have been 3.22% (Not that 12% I needed) and was less that what the market was doing over that time. You can see for yourself!

My Roth started to have growth when I switched to the S&P 500 and slowly transitioned all my money over to both that and the Vanguard Total Stock Market (VTSAX).  This eventually gave me a return of 18.6%. That is quite the difference over the course of a year!

If you compare the results over the past year of the things I’ve tried at any point, VTSAX had the best result. 
​
From 2/5/18 – 4/25/19
 
Stocks – 3.22%
Target Retirement 2060 -3.5%
S&P 500 (VOO) – 6.8 %
Total Stock Market (VTSAX) - 10.18%
 
What really helped me was my timing. I maxed out my Roth at the beginning of 2019 when the market dropped and I bought all I could and the market eventually came back up and I got all that growth. Looking at these numbers makes me want to focus on only buying VTSAX from now on.