How To Get Serious About Investing Your Own Money, According To A 26-Year-Old Adventure Capitalist
Turning a little money into a fortune is essentially a dream for most, and for those with an eye for investing (and a hefty dose of luck), the fantasy can come to fruition overnight. And although this kind of wild success isn't common, it's not impossible to make your cash grow over time. In fact, investing is the smart thing to do once your financial priorities are in place, the key being to find investments that make your money. You may not become an instant millionaire (although, nothing's impossible), but with some preparation, strategy, and that elusive luck, your nest egg can and will start to grow.
Of course, some have a special knack for the game, and that includes Catharine Dockery, a venture capitalist at 26 years old. While most her age are still climbing the ranks in their post-college jobs, the finance guru already has a series of successful investments, as well as a venture capital fund company called Vice Ventures under her belt.
If you're wondering how she did it (and, what venture capitalism actually is), read on; she delves into her story of achieving financial success well before the age of 30. Then, learn tips from NerdWallet investing expert Arielle O'Shea, who breaks everything down and shares her best tips for making smart money moves in your own life.
Ready to get serious about investing, but not sure where to start? Read this first.
How Catharine Dockery Did It
How Catharine Dockery Started Her "Venture"
For those new to the game, venture capital, or VC funds, are comprised of money from multiple investors (more on VC funds below). The "venture" is that the money is invested in startups or smaller businesses, and it's generally considered high risk, high reward. As if that's not audacious enough, Dockery has a particular interest in traditionally taboo industries like sex tech, cannabis, and CBD — hence the "vice" part of her ventures.
So, at barely a quarter-of-a-century in age, how did she do it? "I made my first chunk of money working on Wall Street, where I was a research analyst on a High Yield Credit Desk," she tells The Zoe Report. "To me, this chunk of money was FREEDOM. I'd never been paid like that, and I had no illusions of staying on Wall Street forever. Coming out of that experience, I took a roundabout path into the world of venture.
"Working for a high-profile founder/investor [Andy Dunn, co-founder of the men's clothing brand Bonobos], I was immersed in a constant stream of early-stage deal flow. I remember coming across Bev, a canned rose business, and thinking that we absolutely had to invest in it. I had such a strong conviction that I asked for permission to invest personally, and did so with the last money I had remaining from that Wall Street bonus of several years before. It's proved very successful so far, with the founder Alix Peabody being (along with Ben Witte of Recess [a canned CBD-infused sparking water]) one of the most successful brand visionaries and evangelists I've seen. A more personal measure of success was when I went to a happy hour and actually saw the product 'in the wild.'"
Taking A Chance On "Taboo"
"Even on Wall Street, I had a soft spot for a good company and product story," Dockery says. "Taboo businesses often have some of the most exciting backstories. I also really think that many of these businesses aren't just in taboo areas, but are in verticals which won't seem quite so taboo or niche in 10 to 20 years. In investing, non-consensus ideas are seen as bigger opportunities — playing for the consensus doesn't reward you nearly as much. Finding an area which many investors aren't able to even touch is often a hallmark of a great potential investment."
On Founding Vice Ventures
"To some degree, the real inspiration came when I found just how prevalent vice clauses are, and found these requirements that some major investors insist on," the financier recalls. "Vice clauses are terms often found in VC fund limited partner agreements, typically banning investment in areas such as tobacco, cannabis, alcohol, pornography, etc. Even funds without specific vice clauses tend to look at the vice world a bit sideways. I spoke with some investors who felt the area was better suited to generating PR opportunities than long-term returns.
"Getting involved in venture investing is a major challenge, and one I consider myself fortunate to have been very fortunate in. Often the easiest way into the industry comes through founders; they often have a really incredible picture of the local VC landscape, and naturally connect with other founders. VC is an industry where you need to be constantly building your network, and the easiest way in is often from that direction too."
How You Can Start Making Money With Investments
Arielle O’Shea, an investing and retirement specialist at NerdWallet, points out that Dockery's success isn't typical of someone her age, so if you've passed the mark, don't beat yourself up. But for those who've reached a point of financial stability — that is, their debt is paid off, they have a solid 401k and IRA and a hefty savings account— she has some tips for wading in.
Mutual Funds vs. Venture Capital Funds
"You don’t need to get involved in a venture capital fund to invest in a public company," O'Shea clarifies. "If you want to invest in venture capital funds, you generally need to be an accredited investor, which means you’ve earned income of at least $200,000 over the last two years and have a net worth of more than one million dollars, not including the value of your primary residence."
For those who don't hit that criteria, the finance expert recommends looking into mutual funds, in which everyday investors can contribute to a chunk of money that's managed and invested, through the purchase of stocks, by the mutual fund company. "[These] allow you to buy a wide selection of stocks within one investment," says O'Shea. "For example, you could invest in all the companies in the S&P 500 – essentially, [500 of] the biggest companies in the US — with an S&P 500 mutual fund."
Diversifying Your Portfolio
O'Shea points out that the stock market is, notoriously, unpredictable, so diversifying your investments is key to making sure you don't lose all your money in one fell swoop. "When you don’t diversify, [meaning to] spread your money across many investments, you’re taking a lot of risk – if that investment goes south, your entire portfolio does, too. But if you’re diversified across many companies and industries, if one turns bad, the others will keep your portfolio from taking too big of a hit. A mutual fund will give you that diversification."
However, if a particular company piques your interest — as Bev caught the attention of Dockery — O'Shea says to follow your gut, but cap the amount you're willing to risk. "If you’re going to take a chance on an individual company — or an alternative investment like, say, cryptocurrency — you should set a limit for how much you’re going to invest, and that limit should generally be five percent to 10 percent of your overall portfolio (or less)."
Dockery adds her personal rule of thumb for investing without being reckless. "My baseline for investing is to only invest money that wouldn't ruin my finances if I lost some portion of it," she says. "In equities, I think of 50 percent losses, in VC that number is far closer to 95 percent (especially on a small portfolio of only a few private investments). Additionally I'm a big advocate of emergency savings accounts — my husband and I have one at an online bank that pays great interest and is available to transfer to our main account on a rainy day."
How To Place Your Investment
So, you have your money and you know where you want to invest it — now what? "You’ll want to open a brokerage account, deposit the amount you want to invest, and then place the order on your broker’s website," instructs O'Shea. "The broker acts as the middle man between you and the stock market – you tell the broker what you want to buy, the broker relays that message, and you then own that investment. The broker takes a small cut — called a commission — for its role. At most discount brokers, that means paying between $5 and $7 to buy or sell a stock, in addition to the stock’s share price." (Check out NerdWallet's list of the best brokers for beginners and article on how to buy stocks to help narrow it down.)
Some Final Advice From Catharine Dockery
"The biggest advice I can give is to play to your strengths," the young entrepreneur says. "The world of investing is full of randomness, and there's no golden rule on how to beat the market 100 percent of the time. Expecting to do so is unproductive.
"If you're someone who has a fantastic eye for design, maybe invest in a brand that you love. While I'm not against rolling up my sleeves to size a potential market, I'm not the most quantitative person in the world. I am however, a very good judge of founders and product-market fit, and so I hunt for investments where those criteria are best represented."