What was your worst investment?

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What was your worst investment?

Postby jimmy » Sat Jun 29, 2013 11:10 am

I figured this is a good forum to learn from others mistakes.. What was your worst investment and what did you learn from it?
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Re: What was your worst investment?

Postby rayout » Sat Jun 29, 2013 11:17 am

My first year out of college,trying to figure out what to invest in my IRA. I listened to Mad Kramer in buying "value" bank stocks 2008/2009. Cheap lesson though, became a boglehead right afterwards.
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Re: What was your worst investment?

Postby dhodson » Sat Jun 29, 2013 11:20 am

Whole life

I learned how to value professional advice which is to say be skeptical of any non boglehead idea.
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Re: What was your worst investment?

Postby surfer1 » Sat Jun 29, 2013 11:26 am

Buying my first house. Peak of the market (who knew?), so many problems with it. Sold it and took a big loss. Lessons learned: Don't buy a house in 1 day. Take the inspection report seriously. Consult family before making an offer (no one else is looking out for you). :)
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Re: What was your worst investment?

Postby burgrat » Sat Jun 29, 2013 11:35 am

dhodson wrote:Whole life

I learned how to value professional advice which is to say be skeptical of any non boglehead idea.


I sure hope you mean whole life insurance! :shock:

My worst investment, or should I say worst financial decision, was to purchase a house in Reno, Nevada in April 2006. This was my pre-Boglehead days and I did very little research into purchasing a home. Financed with a 5/1 ARM, no money down. I normally spend way too much time before I buy any big ticket item (tv, car, road bike, etc.), but for some reason I thought I had to rush things as I felt I would be priced out of the market. I swear I bought on the exact day everything tanked. In hindsight, I had no business purchasing a house and I should have rented until I had my career and financial house in order.
Paid $355,000. Current estimated home value is $175,000. Good times! :oops:
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Re: What was your worst investment?

Postby Simplegift » Sat Jun 29, 2013 12:03 pm

In 1998, I transferred some assets out of my diversified stock funds into a "New Economy" Index Fund. This index fund consisted of 40 companies from eight different sectors, all supposedly representing the new blue chips of the information age economy. Hey, what could go wrong, it's an index fund?

Well, I rode this fund all the way up and then all the way back down during the tech crash — losing about half my investment in the end. Lesson: This time is never "new and different" when it comes to investing! The old principles always apply.
Cordially, Todd
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Re: What was your worst investment?

Postby hoppy08520 » Sat Jun 29, 2013 12:19 pm

My worst investment was Legg Mason Value Trust - LMVTX, which puts me in a very large club of other people who lost a lot of money with this investment.

This is one of the most notorious mutual funds, and it's brought up in virtually any argument in favor of mutual funds and against actively-managed funds. Google LMVTX or "Bill Miller" (the fund manager) and you'll read plenty about it.

Not only did I lose money on the investment, but I paid a sales load to the broker (who was also my 401(k) administrator at work) who sold me on it. I had no idea what I was doing.

On the bright side, the losses weren't big. I probably only put $3,000 to $5,000 in the fund. If I had put it into a total market index fund, maybe I'd be up another $1,000. So I didn't lose my shirt, but it was painful nonetheless.

And the bitter experience I had with this investment was what motivated me to learn more about investing...which eventually led me to discover indexing and Bogleheads. Today I have a much better portfolio, and ironically I can thank Bill Miller for that.
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Re: What was your worst investment?

Postby jimmy » Sat Jun 29, 2013 12:34 pm

hoppy08520 wrote:My worst investment was Legg Mason Value Trust - LMVTX, which puts me in a very large club of other people who lost a lot of money with this investment.

This is one of the most notorious mutual funds, and it's brought up in virtually any argument in favor of mutual funds and against actively-managed funds. Google LMVTX or "Bill Miller" (the fund manager) and you'll read plenty about it.

Not only did I lose money on the investment, but I paid a sales load to the broker (who was also my 401(k) administrator at work) who sold me on it. I had no idea what I was doing.

On the bright side, the losses weren't big. I probably only put $3,000 to $5,000 in the fund. If I had put it into a total market index fund, maybe I'd be up another $1,000. So I didn't lose my shirt, but it was painful nonetheless.

And the bitter experience I had with this investment was what motivated me to learn more about investing...which eventually led me to discover indexing and Bogleheads. Today I have a much better portfolio, and ironically I can thank Bill Miller for that.


Yes, I remember this one... Bill Miller was known for beating the S&P500 15 years in a row, I believe he was "manager of the decade" at morningstar, only to become one of the biggest failures in the great recession which ultimately cost him his job or I believe they said he "retired." Glad to hear you became a better investor because of it..
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Re: What was your worst investment?

Postby CABob » Sat Jun 29, 2013 12:44 pm

Listening to cold calling brokers and investing with a couple of them. One recommended Apple back in the 80's. It might have turned out well if I had just held, but, I didn't. Broker left the firm, broker-dealer went out of business, account when to another broker-dealer, stock didn't do much so I eventually sold it and closed the account. Holding might have given me 150X.
Then there was the fast talker that talked me into something that I have now forgotten. The broker changed firms (I followed) churned the account a few times and I eventually ended up with stock of a company that went bankrupt. When I think about the bad old days I sometimes get the stock certificate to remind myself.
This was about the time I learned about looking up a brokers history on FINRA. I wished I had learned sooner. When I read about the broker's history I was amazed he was still in the business.
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Re: What was your worst investment?

Postby bottomfisher » Sat Jun 29, 2013 12:48 pm

I veered off course for a little while. Was placing a few side bets on certain sectors when it appeared opportunities existed. Overall actually did fine. But Vg Precious Metals and Mining fund is the exception. I started gradually purchasing shares through my Simple IRA as it was sinking from its recent mid 2011 highs. Its actually still sinking. Fortunately, its only about 1% of my portfolio. I've since decided to stick with a simpler portfolio. At 1% its just clutter in my portfolio at this point. But I'm reluctant to sell and lock in losses - no capitulation here! I'm gradually liquidating my other sector holdings too. However, I'll probably hang on to my Vg Global REIT.
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Re: What was your worst investment?

Postby Toons » Sat Jun 29, 2013 1:04 pm

US Surgical Stock I bought 2 purchase back in the nineties over a hundred a share,went to less than 10.
limited partnerships from Prudential in the eighties,,,,Cable,real estate ,did not lose all the money but quite a bit. :happy
Its all part of the investing experience,no regrets ,regrets are a waste of valuable time and energy, :sharebeer
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Re: What was your worst investment?

Postby nisiprius » Sat Jun 29, 2013 1:14 pm

hoppy08520 wrote:My worst investment was Legg Mason Value Trust - LMVTX, which puts me in a very large club of other people who lost a lot of money with this investment.
What year did you invest?

There are several interesting things about the Bill Miller story. His fund beat the S&P every year, 15 years in a row, and inspired adulation, e.g. this book:
Image

However, on closer inspection, the really significant gains really only occurred during a small number of years: 1996-2000 and 2002-2003. So, his reputation was inflated by the Wall Street habit of viewing investment performance in athletic terms, where winngers get the same gold medal whether they won by an inch or a furlong.

The second interesting thing is that anyone who invested in before about 1996 and held, in theory doesn't have much to complain about, since (depending on the exact starting point) they roughly tied the S&P. The problem is that only tiny amounts of dollars were invested in the fund before the big runup. So, you have the phenomenon of the fund whose long-term hypothetical returns were OK, but whose actual average investor returns were awful because most investors put their money during the years of fame--when it was high on the chart below, and the fund's reputation was being sustained by continuing to edge out the S&P by tiny amounts every year. Overall, the fund was a great engine of wealth destruction.

The third interesting thing is that Miller was revered as a true value investor when his fund was beating the S&P, if a somewhat unorthodox one, and when he continued to buy his favorite stocks as they fell, was perceived as "value investing" and the reason for his success. After the collapse, the same behavior was now recast as "doubling up on his bad bets" and given as the reason for his failure.

Image
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Re: What was your worst investment?

Postby IlliniDave » Sat Jun 29, 2013 1:41 pm

jimmy wrote:I figured this is a good forum to learn from others mistakes.. What was your worst investment and what did you learn from it?


A friend of my dad's had a couple of patents that he was trying to develop and sell to one of the big athletic shoe companies. Talked me and my dad into giving him $3000 apiece (this was 25 years ago and a lot of money to me at the time) to help him start up a business to do so. I think he just drank the money. So I swore off "helping" people I know with capitalizing small private businesses
Don't do something. Just stand there!
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Re: What was your worst investment?

Postby arthurdawg » Sat Jun 29, 2013 1:49 pm

Prime Money Market... dang thing has earned me 10 cents in the past few years!!

:D :D :D :D :oops:
Portfolio: TSM / SCV / FTSE Big World / FTSE Small World / TBM / REIT
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Re: What was your worst investment?

Postby pennstater2005 » Sat Jun 29, 2013 1:50 pm

Franklin Templeton fund. High expense ratio coupled with a front load and poor performance. And my adviser also recommended some individual stocks to supplement this at an $80 commission fee for each buy/sell :oops:
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Re: What was your worst investment?

Postby Bounca » Sat Jun 29, 2013 2:07 pm

arthurdawg wrote:Prime Money Market... dang thing has earned me 10 cents in the past few years!!

:D :D :D :D :oops:


That made me laugh. Times may be a changin :greedy
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Re: What was your worst investment?

Postby Bungo » Sat Jun 29, 2013 2:10 pm

Worldcom, sometime in early 2000. :oops:
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Re: What was your worst investment?

Postby BigFoot48 » Sat Jun 29, 2013 2:37 pm

Bought land and built custom home in rural area with little growth potential and low demand. Lost a boatload when sold after four years. :oops:

But wait, there's more. Sold house in Scottsdale to move to above property and said Scottsdale property doubled in value since then, even after housing pricing readjustment. :oops: :oops:

Location, location, location.....
Retired | Two-time Top-10 Diehard S&P500 Picker; Nine-Time Loser
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Re: What was your worst investment?

Postby WhyNotUs » Sat Jun 29, 2013 3:01 pm

OEX calls October 1987
I own the next hot stock- VTSAX
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Re: What was your worst investment?

Postby travellight » Sat Jun 29, 2013 3:09 pm

Also whole life. I was very young and sought advice and no one steered me away from it. I had to pay to get out of it.

China dot com. I heard someone at work raving about it as a sure thing and put $2000 into it. It disappeared. Pre-Boglehead days.

Buying an investment property in a bad neighborhood. I was not up to that task. I sold it though for a good price and did seller financing and get 8% interest so it turned out well.

Bought a house in 1991 at high interest rates (11-13%?) and lost money in that deal. I have had far more winners than loser though in real estate by 3:1 ratio.
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Re: What was your worst investment?

Postby retiredjg » Sat Jun 29, 2013 3:10 pm

Another vote for my first house. I was young and didn't know what I was doing. I had a less than adequate agent to guide me along (or perhaps he was just a slease). For example, I noticed there was evidence of water damage on the ceiling of one room. My agent not only didn't suggest an inspection he hinted that there are ways these things get worked out after the sale. I didn't know any better. Moved in during a rain storm. It wasn't even a little drip. It was a deluge. The only good thing is the deluge was falling onto a tile floor. The whole thing was pretty much a disaster.

I suspect my other worst investment was an elliptical trainer. I did use it some over the years, but not enough to justify what I paid for it.
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Re: What was your worst investment?

Postby bottomfisher » Sat Jun 29, 2013 3:30 pm

arthurdawg wrote:Prime Money Market... dang thing has earned me 10 cents in the past few years!!


Reminds me of reporting taxes on checking account. A while back earned something like $13. Using tax preparer was initially charged something like $25 per income document to report $13 interest.
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Re: What was your worst investment?

Postby scrabbler1 » Sat Jun 29, 2013 4:42 pm

For a few years I was in the Dreyfus Short-Term Bond Fund. What a dog of a fund it was. In the 3 1/2 years I was in it, the NAV went mainly down while the monthly dividend yield also went down, defying the so-called inverse relationship between yield and NAV. The other bond funds I owned at the time had their ups and downs, NAV and yield. This one did not.
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Re: What was your worst investment?

Postby Jim180 » Sat Jun 29, 2013 4:56 pm

Back in the late 1990's I bought EMC stock for about $21 per share. Then the dot.com bubble burst and EMC plunged. I ended up selling it for about $8 per share. Now many years later the stock is up above the price where I had bought it.

Lesson learned:
Don't own individual stocks because there is absolutely no way to know when to buy, sell or hold.
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Re: What was your worst investment?

Postby just_trailing » Sat Jun 29, 2013 5:00 pm

Company stock, through employee purchase plan. It is still down 65% after 6 years.
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Re: What was your worst investment?

Postby Greenie » Sat Jun 29, 2013 5:15 pm

Most of my investments until I discovered the Boglehead way of investing in 2009. My first experience in 1994 was a loaded Dreyfus stock fund that was a total dog recommended and sold to me by someone in a bank. Next experience, another sales person at a different bank (Wells Fargo) sold me a variable annuity within a SEP IRA! :oops: Waited five years each to get out of those terrible mistakes and lumped sum in Janus Tech funds(pre-2000 tech crash). Moved everything to Vanguard in 2000 but still had no clue with 100% in stock funds such Vanguard Health Care, Vanguard REIT, Capital Opportunity, etc. I thought I was diversified investor. God thank I stumbled into this site and starting reading Bogle, Bernstein, Ferri, Swedroe, The Boglehead Guide to Investing, and The Boglehead Guide to Retirement Planning four years ago! :sharebeer
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Re: What was your worst investment?

Postby Atilla » Sat Jun 29, 2013 5:29 pm

My worst (and by far the largest) investment is federal income taxes paid. Learned nothing since I don't have a choice. :P
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Re: What was your worst investment?

Postby Van » Sat Jun 29, 2013 5:38 pm

When I was doing a postdoc and had absolutely no money, I borrowed $1000 from a credit union to buy "furniture". I invested all of the money in a sure thing stock called National Data Communications. When it started tanking, I tried unsuccessfully to sell it. Lost the whole shibang. What fun it was paying off that loan over the next several years!

What an idiot I was. :oops:
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Re: What was your worst investment?

Postby Greenie » Sat Jun 29, 2013 6:36 pm

If I paid a lot federal income tax in a specific year then I had a good year. The glass 3/4 full.
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Re: What was your worst investment?

Postby SVariance1 » Sat Jun 29, 2013 6:52 pm

My worst investment was in emerging markets funds circa 1993 . I did not lose any money but I chased hot markets without a good reason for making the investments.
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Re: What was your worst investment?

Postby aaplhpq » Sat Jun 29, 2013 7:09 pm

2 bad money choices
1) Not buying a house in 2012 when the market was down. Instead ended up buying in 2013 and paid about 20% higher
2) Transfered money to an Indian CD in 2011 for a "safe" 10% return. By the time I pulled it out in 2013 currency ended up depreciating about 35% against USD
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Re: What was your worst investment?

Postby peppers » Sat Jun 29, 2013 7:44 pm

Federal Mogul....back in the early E-trade days. It went bankrupt not long afterward. It ended my fascination with chasing individual stocks.
"..the cavalry ain't comin' kid, you're on your own..."
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Re: What was your worst investment?

Postby GainfullyRetired » Sat Jun 29, 2013 8:12 pm

Well, I'm older and wiser now. As a youth, I was impressed by a high-flying broker who put me in Oil and Gas options. Here was a "sure bet". She had "inside information" that this oil well being completed was going to be a gusher and make huge returns.
I lost everything, all my savings at the time, on that one transaction. :oops:
But I had time to recover from that loss. I dropped that broker, and went with six other brokers :twisted: in turn, who fared a little better. Disappointed, I finally decided to do all my own research and go with something called "no load" mutual funds. (note: This was all long before Morningstar and before the Internet. )

But in February last year, I was absolutely horrified to get an email out of the blue from an old college friend, who wrote this ...

Now that I am retired, I've had more time to read, surf the net, and dabble in the stock market (the latter with mixed results, until I discovered why, below). (The next paragraph cites several "gold bug" books and web sites on hyperinflation, supercycles, etc. )
Right now, I'm taking every dollar of my savings and investing in silver (90%) and gold (10%), because I believe with the coming US dollar collapse my savings will become worthless if left in US dollars. To ensure my precious metals are safe, I have done extra due diligence on potential gold/silver institutions... (investing 1/3 in each of these three)
1) silver coins (American Eagle one ounce), bought from Goldsilver.com, and stored in a Brinks vault in another state.
2) Sprott Physical Silver (PSLV), bought through my brokerage account.
3) digital silver and gold, purchased from and stored by GoldMoney.com located in Jersey, The British Channel Islands,


I desperately tried to talk them out of it, but only found deaf ears. Since February last year, PSLV is down 47% or so, sunk in parallel with the precious metal index. None of these "investments" pay any dividends. There are management fees and storage costs. Now, I'd call that one of the worst investments, considering the age of the investor and all the nest egg being in one unfortunate place.
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Re: What was your worst investment?

Postby Yipee-Ki-O » Sat Jun 29, 2013 8:22 pm

Investing in an LLC which made a down payment on a note for a parcel of raw land in southern Utah just before the real estate bubble burst. The syndicators had put together several successful LLC's previously for select parcels across Las Vegas and had expanded to other locations scattered around the West. All of those turned quickly and made great profits for their investors, a fact which was much bragged about at the syndicator's lavish annual gatherings of all the LLC's.

I put up a sum of money (not huge but the same as I paid for my first house) which was far below what most of my more deep-pocketed fellow investors were fronting. I told myself at the time when they start looking to small fish like me for funds the party was just about over. And I was right. I not only lost my investment, I failed to read the fine print well enough to understand I was on the hook for my proportionate share of the annual payment interest payments on the note and taxes. It only took about a year to realize the value of the property would never rise above water so for another 4 long years I dutifully waited for the LLC to default and the property to revert back to the original owner who had carried the note.

Next time I'll listen to that voice in my head telling me this investment is too good to be true! All those "free" drinks and hors d'oeuvre's I enjoyed at the investor parties at posh venues turned out to be very pricey....
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Re: What was your worst investment?

Postby steve roy » Sat Jun 29, 2013 9:26 pm

Some timberland limited partnerships that cost me a small fortune over time. Then, when I got rid of them, the corporation in Delaware that held them, kept charging me $35 per year for "administration." And they were administering exactly NOTHING. I got my broker -- the one that was charging me 2% off the top -- to get the $35 fee cancelled, but it took a few years.

Back in the day, I was (apparently) enamored with giving money away.
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Re: What was your worst investment?

Postby z3r0c00l » Sat Jun 29, 2013 10:23 pm

ABWCX - not that terrible really, and I quickly dumped my adviser after learning that he made commission on it and never offered the superior funds that did not offer him a commission. He lost his job in the last recession, and I lost a few thousand in fees and lost performance before vanguarding.
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Re: What was your worst investment?

Postby nedsaid » Sat Jun 29, 2013 10:41 pm

Ethanol stocks and a Biofuels stock. Purchased in 2006. Dumb, dumb, dumb.
A fool and his money are good for business.
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Re: What was your worst investment?

Postby grabiner » Sat Jun 29, 2013 10:43 pm

Vanguard Long-Term Corporate (now named Long-Term Investment-Grade), in a taxable account, which was wrong for three reasons:

Bonds should be tax-deferred if possible (and I bought this fund in 1997, when yields were much higher).
Long-term bonds are particularly bad in taxable accounts because they have higher taxable yields.
Long-term bonds are inferior for diversification.
(It was not a mistake to hold corporate bonds, because I was in a 15% tax bracket at the time.)

I sold the fund in 1999 for a capital loss, and have held my bond holdings in tax-deferred ever since then.
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Re: What was your worst investment?

Postby Peter Foley » Sun Jun 30, 2013 12:28 am

I bought QQQ (the NASDAQ 100 ETF) in about 2001 thinking that I was buying a diversified index fund.
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Re: What was your worst investment?

Postby Kalo » Sun Jun 30, 2013 1:00 am

The first stock I ever bought was 100 shares of American Motors at $10 per share. (This was some time after Chrysler had gone from about $2 to the $30's per share during the Iacocca era). I figured AMC should also go way up. I think I sold it at about $3.45 per share. I did not participate in the Chrysler recovery.

This was an inexpensive lesson. But I made other boo boos too.

I'm still amazed how stubborn I was over the years and how long it was after I first read John Bogle's Common Sense on Mutual Funds that I finally saw the light.

I'm grateful for Bogleheads.org for continuing to reinforce the concepts that I know will be in my best interest. I still struggle with AA but my portfolio is in much better position than it was before I discovered this site.

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Re: What was your worst investment?

Postby heyyou » Sun Jun 30, 2013 1:17 am

Real estate limited partnerships: Made money on the first one, then rolled the entire amount plus all of my savings into a 10x larger one, and lost all of it. That money invested in the S&P500 then, would now double my net worth, but I did learn from my greed and my lack of diversification. I became a serious saver in order to continue with my goal to retire early, and was successful there. These days, I'm glad that I learned that lesson in my early 30s, when I see others making similar mistakes in their 50s.

Many small business owners go broke once or twice before they become successful. Some investors have a similar path before they learn what to avoid when investing.
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Re: What was your worst investment?

Postby jaekwilson » Sun Jun 30, 2013 6:36 am

Luckily, I only lost a few thousand dollars, but I learned a lot.
A friend, who by the way has written two books on penny stock investing, recommended buying stock in a Canadian sub-prime mortgage company in about 2006. This company was offering something like 40 or 50 year mortgages. At 22cents per share, I thought - "What a bargain".

Its at about .004 cents per share now. I think it would cost more in commissions to sell than it is worth.

Lessons - don't listen to friends who claim to be experts on penny stock investing and run away from any company pushing sub prime mortgages at the height of a real estate bubble (or anytime for that matter).
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Re: What was your worst investment?

Postby narenv » Sun Jun 30, 2013 7:55 am

I did a big mistake buying coal 1000 shares for Alpha Natural Resources (ANR) at 22, it kept falling and came to 11 so I bought another 1000. Now I am stuck with 2000 shares at value of $5, loss of $22000. I have not sold it because I feel that I am defeated. [OT climate policy and political comment removed by admin LadyGeek]
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Re: What was your worst investment?

Postby Professor Emeritus » Sun Jun 30, 2013 9:18 am

Worst investment DECISION was holding on to COMPAQ as it sank. Compaq was the first and only individual stock investment I ever made. I owned the machines and I thought they were fabulous. I made real money on the stock. I failed to watch as they fell further and further behind. Finally sold the stock at 25% of the peak. Proceeds now in Vanguard.
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Re: What was your worst investment?

Postby hoppy08520 » Sun Jun 30, 2013 9:41 am

Professor Emeritus wrote:Worst investment DECISION was holding on to COMPAQ as it sank. Compaq was the first and only individual stock investment I ever made. I owned the machines and I thought they were fabulous. I made real money on the stock. I failed to watch as they fell further and further behind. Finally sold the stock at 25% of the peak. Proceeds now in Vanguard.

Good lesson. Contradicts the "buy what you know" advice that Peter Lynch (Fidelity superstar fund manager) made famous. It's easy to fool yourself into buying a bad stock from a good company just because you know the company.
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Re: What was your worst investment?

Postby mcblum » Sun Jun 30, 2013 9:44 am

Someone earlier wrote about the '98 tech crash. Shear greed led me to invest about 10k in the Fidelity Tech Fund. I lost about 70% of it in several month before I sold. I wont do sector funds again.marty
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Re: What was your worst investment?

Postby InvestorNewb » Sun Jun 30, 2013 10:00 am

My worst investment was buying AIG stock several years back. I saw it reduce by half and waited a couple years for it to break even. It was only $1000 and I came out even, so I really can't complain. Hopefully that will stay as my "worst investment".
Current Holdings: VTI, VXUS, VNQ, VCE (largest to smallest)
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Re: What was your worst investment?

Postby Scooter57 » Sun Jun 30, 2013 10:53 am

My worst mistake was refusing to sell a dot com I owned in 1997 when a larger company showed interest in it, because I was having too much fun running it and figured I could sell it in a few more years when it would be even more valuable. It ended up worthless by 2002.

If we get a respectable offer for either of our going concerns in the future we'll give it a lot more consideration.
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Re: What was your worst investment?

Postby sambb » Sun Jun 30, 2013 11:37 am

honestly, it was being with the wrong people in my life. Finding the right friends/spouse/etc is a great investment. The wrong ones are poor investments in time and money.
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Re: What was your worst investment?

Postby sperry8 » Sun Jun 30, 2013 11:44 am

I bought Gold late last year. Close to the highs. Not even sure why I bought it, I was just scared of all the talk of the US dollar going down the drain to inflation. I learned to turn off the talking heads, again. Hopefully this time it sticks!
Certainty is a requirement of ignorance.
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