My name is Michael Guzzo. I’m a pharmacist, but I also have a passion for personal finance, investment, and the stock market. However, I didn’t always have this passion.
It wasn’t until after I became a pharmacist, when my first employer required that I rollover my 401k-plan, that I became motivated about becoming financially savvy.
I had no idea what the term “rollover” meant, much less how to conduct one! It was then that I decided to take a hands-on approach towards becoming more financially literate.
After going online, I serendipitously discovered Morningstar.com, and the Vanguard Diehards forum. It was these experienced, knowledgeable and generous group of people sharing their insights that initially guided me down the right path towards financial success. Thank you Bogleheads!
I then spent a lot of time at the library, read everything I could get my hands on, and proceeded to correct the financial mistakes that I’ve been making all my life. I learned about the importance of living below my means, saving, investing and soon became even more interested in all things financial.
Most importantly, I then incorporated these concepts into my lifestyle and with a little time, effort, and persistence eventually attained what I consider “financial nirvana” – being debt-free.
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How did I do it?
Personal finance and investing is a lot like pharmacy school.
To attain your pharmacy degree, you start off at the bottom with introductory biology, mathematics, and chemistry classes. With each continued semester, you build upon this foundation by increasing your knowledge in a step-by-step process. You progress from basic inorganic chemistry, organic chemistry, biochemistry, pharmaceutics, medicinal chemistry, pharmacokinetics, and so on.
With continued effort and persistence you eventually reach your goal: graduation. You’re now capable of practicing your craft in the real world.
These same principles can be applied to become a successful investor.
First, you build your foundation through the concept of personal finance. You learn about budgeting and frugality and take steps towards reducing spending and eliminating unnecessary debt. From there you’ll progress into saving and creating an emergency fund. Once your income continuously exceeds your expenditures and you’ve created a buffer to cover any unforeseen circumstances, you’re now ready to progress into investment, and even speculation.
With continued education, you’ll learn about risk, asset allocation and become more knowledgeable concerning mutual funds, annuities, stocks, bonds, commodities, and other types of investments, and whether they’re appropriate for your individual circumstances. You’ll learn how to evaluate the many vehicles used for investment purposes, such as 401k, 403b and 457 plans, IRAs, brokerage accounts, and more.
As time goes on, you’ll have learned your tolerance for risk, developed your own investment style, and will have created an investment portfolio. You’ll have learned to trust your instincts and will have gained confidence in your own decision-making abilities. You’ll now be capable of effectively managing your own investments. In essence, you’ve graduated!
So, what happens after graduation?
It would be to continue on your quest to conquer the markets.
In my case, I’m not rich, but I’m debt-free, appropriately insured, have an emergency fund in place, some fixed assets, and continually contribute the maximum amount into my individual retirement plans. I’ve even created a charitable gift fund in order to give back to my local community.
Realizing that over 80% of high-fee, actively-managed mutual funds under perform their respective benchmarks, I passively invest my retirement savings into low-cost index mutual funds through The Vanguard Group, using the principles of Modern Portfolio Theory and asset allocation.
I also ascribe to Burton Malkiel’s Random Walk Hypothesis and Eugene Fama’s Efficient Market Theory, but I don’t believe that the markets are as quickly transparent as suggested. So, using a small portion of my non-retirement portfolio, I actively attempt to profit from that narrow window of opportunity by trading in individual equities.
Yes, I speculate on stocks.
We’re all aware that market speculation is risky, and some investors even consider it gambling. However, I believe that speculation should not be considered purely a form of gambling, as rational speculators do make informed decisions before choosing to acquire the additional risks.
To accomplish my speculative goals, I don’t limit myself to only one type of analytical discipline. I’ll evaluate potential opportunities based on various aspects, but will attempt to limit my risks using fundamental analysis. Experience and intuition will also factor into my decisions. As such, I may also attempt to capitalize on market psychology and trends caused by irrational investor behavior.
You can usually find me following the markets with a contrarian point of view and evaluating arbitrage opportunities, searching for cigar butts, wallflower stocks, and other undervalued equities on a daily basis.
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So, why not get started on your own quest? All it takes is just a little time, effort, and persistence. Anyone can do it. Don’t wait until it’s too late!
