Learning from loss

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tennisplyr
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Learning from loss

Post by tennisplyr » Tue Aug 29, 2017 8:43 am

Many of those here have experienced some significant investment losses over the years. What have you learned about investing, and maybe about yourselves from these financial losses?
Those who move forward with a happy spirit will find that things always work out.

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jfn111
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Re: Learning from loss

Post by jfn111 » Tue Aug 29, 2017 9:02 am

I learned to quit doing stupid stuff. I had invested in a small company, much more to the story, but it cost me about $100,000 to untangle myself. :oops:
Those simple 3 fund portfolios look pretty good after that.

staythecourse
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Re: Learning from loss

Post by staythecourse » Tue Aug 29, 2017 9:12 am

One consistent theme of major financial losses is that folks just had too much concentration in any one investment. If it was Enron, if it was Bernie Madoff, if it was LC growth in the late 90's, etc... No matter what happens to any one investment if one keeps it to a less concentrated position then it really doesn't matter what happens. Even if one had 20% with Bernie Madoff they are not poor as one can come back from 20% loss of net worth. What does folks in is having a LARGE stake in any one thing.

I call this the Curt Schilling syndrome. For those that aren't baseball fans Schilling is a retired baseball player who easily had 50+ million in lifetime earnings. He retired and decided to put the whole thing into a startup videogame company. Well guess what? It went bankrupt and took all his money with it. That is why he does ESPN every day now. If he put 20% of it in it would be a nightmare, but not a disaster. In short, don't do a Curt Schilling and everything else figures itself out.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

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oldcomputerguy
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Re: Learning from loss

Post by oldcomputerguy » Tue Aug 29, 2017 9:16 am

I learned not to risk my retirement on sector funds.
Anybody know why there's a 20-pound frozen turkey up in the light grid?

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prudent
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Re: Learning from loss

Post by prudent » Tue Aug 29, 2017 9:24 am

It wasn't significant but the timing was actually fortuitous for me.

When I first had scraped together a little money to start investing with, but hadn't yet done so, I got a cold call from a local small-potatoes broker with a proverbial hot stock tip. I bit. I lost. The broker ended up getting barred by the SEC some years later for shenanigans. I think I put in $3,000 and sold later for around $250.

What I did wrong:
1. I gave money to a broker who cold-called me because although I didn't know the guy personally, we were both from the same small town. His parents were actually on my paper route when I was a kid. Surely I could trust a homeboy!
2. I invested in something I didn't know anything about.
3. I did no due diligence. Turned out the guy had already been sanctioned by the SEC in the past.
4. I did not diversify.
5. I did not assess risk.
6. I did not independently verify the salesman's claims WRT the stock's future prospects.

The tuition I paid for my ignorance was pretty low fortunately and in the big picture it's good that it happened when it did or the stakes could have been much higher.

TRC
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Re: Learning from loss

Post by TRC » Tue Aug 29, 2017 9:41 am

I lost $150,000 when selling my last house. Bought it for $445K at the height of the market in 2006. Put 50K into it and decided to sell in 2012 to get into a better school district. Luckily we owned it free & clear so we didn't need to bring money to the closing table. We purchased our new house for 460K and now is worth about 615K. So in the long run, it's basically a wash.

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El Greco
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Re: Learning from loss

Post by El Greco » Tue Aug 29, 2017 11:03 am

I've learned that I am a diehard "Buy and Hold" type of personality, which makes it very bad for me to hold individual stocks. I've held stocks to zero, i.e. GM and Washington Mutual. Conversely, I've also lost out big couple of times when I broke my buy and hold rule. Netflix comes to mind. Bought it at 32. Held it for several years as it rode up and down to 32, then finally sold it in disgust at 32–one year before it went through the roof.

Don't get me wrong, I've had big winners, too, but when I analyzed my individual stock performance vs. the performance of my highly diversified mutual funds over the years, my fund performance was clearly better.

I've since decided to buy and hold low cost diversified stock and bond funds and stay away from individual stocks. A much better way to reward my "Buy and Hold " tendencies. I am still unwinding my stock positions, and even though it is difficult for me to sell, I feel much better about my investing behavior. I will probably still hold 5% or so of my portfolio in individual stocks, but that's a lot better than the 40% I used to hold.

Live, invest and learn. :moneybag

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Portfolio7
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Re: Learning from loss

Post by Portfolio7 » Tue Aug 29, 2017 1:32 pm

Luckily I've had mostly small newbie mistakes. Buffet and/or Munger (memory fails me) have said that the key to successful investing is to avoid the big, damaging errors. I try to emulate the spirit of that statement by implementing the basics of a strong AA, diversification, risk management, etc - and avoiding big gambles.

I started investing via a financial advisor recommended by my company, & assumed that it would be a decent deal. The advisor was with Ameriprise, and put us in a wrap account. Probably cost us a good $5k in unnecessary investment fees and poor fund choices, but once I figured out how thoroughly we'd let ourselves get taken, it lit the fire in me to learn more.

I've learned that I am not very averse to risk, that I have a big fear of missing out. Buy and Hold plays pretty well in that space. I also recognize that I'm a tinkerer... so I set aside 10% of my portfolio that I can use to overweight segments of the market if I want (EM, Int'l SC this year.) This practice keeps me aware of opportunities, where relative valuations lie, and I think that's all good... but it's NOT necessary. The most successful investors in a Fidelity study tended to be those with accounts that were simply left alone to accumulate returns/dividends.
An investment in knowledge pays the best interest.

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Artsdoctor
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Re: Learning from loss

Post by Artsdoctor » Tue Aug 29, 2017 2:06 pm

There were 3 investment hits for me: 1987, 2000, and 2008. I am so thankful that I have had those experiences.

I behaved very, very badly in 1987. I totally lost it when the market swooned over 20% in one day. We sold everything. Fortunately, we had very little money at the time so the dollar amount was inconsequential--although it was all the investment money we had. Clearly, it was a wrong move on every level.

I was "OK" in 2000 but not great. From 1997-2000, I followed the crowd and literally threw money at market, investing in individual stocks that seemed to triple and quadruple regularly. It was actually a ridiculous time and, in retrospect, was nothing more than gambling. I had no plan in place and was mesmerized by those statements. One day, I was rounding at the hospital when one of the janitorial staff was on the phone with his broker; I remember thinking, when everyone you know is investing in the market, it's time to get out, and that's what I did. That gentleman and I have remained acquaintances since and we both laugh about it now, realizing that it was an absurd time and there was no discipline whatsoever. I found the Diehards (now the Bogleheads) after that and learned to develop a plan. I read Bill Bernstein's book right around that time (it took me about 5 times to really understand it), and I made a plan that remains the basis of my investment plan today.

In 2008, I learned that a brutal bear market can be scarier than I had ever imagined, and that it made 1987 and 2000 look like a cake walk. However, the Bogleheads was full-formed by that time and provided a tremendous amount of solace and comraderie. I stuck with my plan, I worked overtime to save even more (so that I could essentially fool myself that the statements weren't dropping as fast as they really were), and I did everything right--I think. But I realized that my asset allocation was just too high because I was older, had far more assets, and didn't have the stomach to go through another bear market like that. I kept a diary at the depths of the market so I would never forget how terrified I was, and I refer back to it from time to time. I let my asset allocation drift down to a more manageable level during the past decade and I believe I'm now where I want to be.

When people talk about sequence risk, I now empathize and would like to think that I am one lucky investor to have experienced three major market shocks before retiring. I'm hoping that I learned from those experiences; I know that the last time I lost any sleep about investments was years ago, so I must to be doing something right.

GerryL
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Re: Learning from loss

Post by GerryL » Tue Aug 29, 2017 2:40 pm

As far as I know, I haven't had any SIGNIFICANT investment losses. That's largely because once I execute on a decision, I don't bother going back and worrying about what might have been if only ....

One experience: I had company stock that was up to $80/share. Had never executed a stock trade and was too busy and stressed at the time to figure out how to do it, so I decided I would wait until "later." During the next few months the stock sank and in the 17 years since has rarely if ever reached even $40. In the meantime I have acquired (and sold and exercised) more shares, but I have never gone back to try to figure out what might have been if I had cashed out some stock at $80 and invested it elsewhere, such as my VG taxable acct. What's the point?

More recently, shortly after I had taken a severance package, I exercised my remaining options. When I did my taxes I discovered I was subject to AMT. Don't know if the stock exercise tipped the scales. Maybe. No sense trying to go back and do what-if scenarios since it is a scenario that will never repeat in my life.

FrugalConservative
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Re: Learning from loss

Post by FrugalConservative » Tue Aug 29, 2017 2:46 pm

Take the loss and move on and take it as an expensive lesson, one that reinforces bogle minded investment thinking. Once sell I never look back, nor concern myself where it is in the future (either that be higher or lower then my sale price). As far as I'm concerned after I took the loss, the stock no longer exists. :D

Tamalak
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Re: Learning from loss

Post by Tamalak » Tue Aug 29, 2017 2:58 pm

I think people tend to rationalize losses as a "lesson" more often than actually learning a lesson from them. I remember when GTAT went belly up and people lost their life savings many were "oh but I learned so much". No you didn't, you already knew how foolish putting everything in one speculative stock was, you just ignored your knowledge. And the next time you are tempted you'll ignore your knowledge again.

There is such a thing as a loss without a gain. There is such a thing as a cloud without a silver lining. The whole point of wisdom is to avoid those clouds even the first time around.

KlangFool
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Re: Learning from loss

Post by KlangFool » Tue Aug 29, 2017 3:07 pm

OP,

I was 100% stock right before Telecom bubble. I believed that I had job security. I lost 50% and discovered that I had no job security. I do not have the ability to take the risk of 100/0.

KlangFool

gkaplan
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Re: Learning from loss

Post by gkaplan » Tue Aug 29, 2017 5:05 pm

I learned I had a high risk tolerance, because I kept on investing even after the loss.
Gordon

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k66
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Re: Learning from loss

Post by k66 » Tue Aug 29, 2017 5:32 pm

I learned that I did not know enough to take on the markets after I thought that I knew enough to take on the markets.
LOSER of the Boglehead Contest 2015 | lang may yer lum reek

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htdrag11
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Re: Learning from loss

Post by htdrag11 » Tue Aug 29, 2017 7:18 pm

Artsdoctor wrote:
Tue Aug 29, 2017 2:06 pm
There were 3 investment hits for me: 1987, 2000, and 2008. I am so thankful that I have had those experiences.

I behaved very, very badly in 1987. I totally lost it when the market swooned over 20% in one day. We sold everything. Fortunately, we had very little money at the time so the dollar amount was inconsequential--although it was all the investment money we had. Clearly, it was a wrong move on every level.

I was "OK" in 2000 but not great. From 1997-2000, I followed the crowd and literally threw money at market, investing in individual stocks that seemed to triple and quadruple regularly. It was actually a ridiculous time and, in retrospect, was nothing more than gambling. I had no plan in place and was mesmerized by those statements. One day, I was rounding at the hospital when one of the janitorial staff was on the phone with his broker; I remember thinking, when everyone you know is investing in the market, it's time to get out, and that's what I did. That gentleman and I have remained acquaintances since and we both laugh about it now, realizing that it was an absurd time and there was no discipline whatsoever. I found the Diehards (now the Bogleheads) after that and learned to develop a plan. I read Bill Bernstein's book right around that time (it took me about 5 times to really understand it), and I made a plan that remains the basis of my investment plan today.

In 2008, I learned that a brutal bear market can be scarier than I had ever imagined, and that it made 1987 and 2000 look like a cake walk. However, the Bogleheads was full-formed by that time and provided a tremendous amount of solace and comraderie. I stuck with my plan, I worked overtime to save even more (so that I could essentially fool myself that the statements weren't dropping as fast as they really were), and I did everything right--I think. But I realized that my asset allocation was just too high because I was older, had far more assets, and didn't have the stomach to go through another bear market like that. I kept a diary at the depths of the market so I would never forget how terrified I was, and I refer back to it from time to time. I let my asset allocation drift down to a more manageable level during the past decade and I believe I'm now where I want to be.

When people talk about sequence risk, I now empathize and would like to think that I am one lucky investor to have experienced three major market shocks before retiring. I'm hoping that I learned from those experiences; I know that the last time I lost any sleep about investments was years ago, so I must to be doing something right.
+1. I did not keep a diary in 2008 but obviously sweating it out. I did not learn from 1987 nor from the internet bubble, but I did not panic either but just feeling nauseous. DW truly loved me when I told her in 2008 that we lost over $1M on paper. She said just "ride it out" or something to that effect.

My current AA is close to 50-45-5 (stock-bonds-cash). This is after I had done a prime harvest recently, dropping from 70-30 since the "game is won".

feh
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Re: Learning from loss

Post by feh » Wed Aug 30, 2017 9:49 am

tennisplyr wrote:
Tue Aug 29, 2017 8:43 am
Many of those here have experienced some significant investment losses over the years. What have you learned about investing, and maybe about yourselves from these financial losses?
Are you referring to an actual loss (selling an asset at a price lower than you paid), or a reduction in value of an asset?

DrGoogle2017
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Re: Learning from loss

Post by DrGoogle2017 » Wed Aug 30, 2017 11:02 am

I learned that when I pay attention to the market, I was never caught by any surprise. In fact I had good instinct. Short the market in 1987, stayed in safe investment in 2008-2009. 2000 was the biggest loss because I spent 12 hours a day at a startup. I was greedy. Should have stayed at a big company with very good stock options. I was somewhat bored at work and maybe that's the problem. But had I stayed at that company, I would have sold my stocks in time. But I'm nearly recovering all my loss. It's just the money is now worth a lot less.

Dottie57
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Re: Learning from loss

Post by Dottie57 » Wed Aug 30, 2017 11:14 am

Loss 1). CEO got into trouble and espp purchased stock tanked. I learned a) sell stock as soon as possible after purchase. b). Sell even when it has gone down because it might take 8-10 years before you are positive again. I think I should have cut losses and gone with S&P 500.

Loss 2) 2008-2009. As my balances had gone up in retirement accounts, loss aversion went up. Should have had more in bondsmor CDs. Loss aversion changes with age and amount accumulated.

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tennisplyr
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Re: Learning from loss

Post by tennisplyr » Wed Aug 30, 2017 4:05 pm

feh wrote:
Wed Aug 30, 2017 9:49 am
tennisplyr wrote:
Tue Aug 29, 2017 8:43 am
Many of those here have experienced some significant investment losses over the years. What have you learned about investing, and maybe about yourselves from these financial losses?
Are you referring to an actual loss (selling an asset at a price lower than you paid), or a reduction in value of an asset?
Actual loss
Those who move forward with a happy spirit will find that things always work out.

Grt2bOutdoors
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Re: Learning from loss

Post by Grt2bOutdoors » Wed Aug 30, 2017 5:00 pm

Don't buy on a "tip". That cost me $2,000.

Buy on a "tip" - relative told me to buy some fruit, I ignored it, that cost me $160 for every $1 at risk.

It cuts both ways!!!!
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

financeguy88
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Re: Learning from loss

Post by financeguy88 » Wed Aug 30, 2017 5:38 pm

Biggest financial mistake was leaving a job when I was in my 20's that paid me well into the 6 figures because I was joining a start-up with my former boss. I thought my firm had become too corporate / bureaucratic and was looking for the fast path to megawealth. I took a big pay cut but got a lot of equity and was confident I'd significantly surpass my pay at prior company with in a year or two. The guy I left to start the firm with turned out to not be the best leader and the firm ended up failing after a few years. Had I stayed at my prior firm I would have been on a much different trajectory most likely. I'm doing well now but in all likelihood would have done much better had I stayed at prior firm. I try to not beat myself up to much because I was in my 20s, single and took a risk, but it still stings 5 years later. I learned to appreciate a good situation (even if it seems like the grass is greener elsewhere) and to not underweight the risk of an start-up.

Biggest investing mistake was making a sizable investment based on someone else (who i trusted) diligence. It went to zero in about a year and I lost about $150k. It felt like the end of the world at the time. I became much more skeptical (and I already was pretty skeptical) and learned to never trust anyone else's diligence, at least for any material investment.

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AllieTB1323
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Re: Learning from loss

Post by AllieTB1323 » Wed Aug 30, 2017 5:42 pm

During the 90's we had our one and only advisor. He had too much our money concentrated in the Munder NetNet B fund. That fund went sky high until it didn't We were caught when the bubble popped. We were lucky to get out with a small profit. We weren't his only victims; other clients were far less lucky. We fired the advisor and moved everything over to Fidelity and Vanguard and we have self-managed since then.

amythius
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Re: Learning from loss

Post by amythius » Thu Aug 31, 2017 9:21 am

From a young 30s professional, with about 8 years investing:

What I did wrong:
1. Fear kept me out of the market for some of the most prosperous years :shock:
2. Short term sight cost me long-term gains :annoyed
3. Inexperience, analysis-paralysis, rate chasing cost me over the years :(

What I learned (with regard to long term investing):
1. Pick an AA, tolerant of risk for age
2. Invest often and regularly
3. Ignore the noise, sit back and enjoy long term gains
-- Sounds a bit 'bogly' doesn't it.... :beer

Seriously... I chased this chased that. Stayed out of the market... tried to time ups and downs.. Feared stock fallouts....

If I would have just invested and rested my money, from then until now. I would have been getting 10-12% returns lets just say. I actually hampered myself and only gained 1-2% for the first 5-8 years of my investing lifetime. Sigh ... :oops: :oops:

Lesson: do the bogle-head thing -- and do it early! It works! :moneybag

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