One bad decision - examples?
- drgenefish
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One bad decision - examples?
I learned of Taylor’s Gems from the latest podcast and I’m starting to read them all.
I ran across this advice:
"It takes only one bad investment decision to wipe out years of prudent saving and investing."
(This was from Rick Ferri but saw similar advice a few times already and I’m just getting started.)
What would be examples of bad decisions that could have this type of impact? Would love to not learn the hard way
P.S. for anyone new: https://www.bogleheads.org/wiki/Taylor_ ... tment_Gems
I ran across this advice:
"It takes only one bad investment decision to wipe out years of prudent saving and investing."
(This was from Rick Ferri but saw similar advice a few times already and I’m just getting started.)
What would be examples of bad decisions that could have this type of impact? Would love to not learn the hard way
P.S. for anyone new: https://www.bogleheads.org/wiki/Taylor_ ... tment_Gems
Re: One bad decision - examples?
Timing the market or otherwise trying to “play” the stock market.
Moving to all cash or fixed income out of fear, following a big market correction/crash/dip, whatever you want to call it.
Moving to all cash or fixed income out of fear, following a big market correction/crash/dip, whatever you want to call it.
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Re: One bad decision - examples?
one of my parent's friends inherited a lot of money which took years of prudent investing. This person's husband talked her into investing in a golf course in Puerto Rico and the investment wiped out that accumulation.
John Bogle: "It's amazing how difficult it is for a man to understand something if he's paid a small fortune not to understand it."
- whodidntante
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Re: One bad decision - examples?
The stock market is a road of bones. A lot of people were ruined because they were too concentrated in their employer stock. Enron, Lehman, and MCI employees are obvious examples, but it doesn't take total failure to ruin your plans. Try being too strong a believer in IBM, GE, etc. And even if you don't get ruined by working for "great" company that becomes a disaster, you might still seriously underperform the market. And there are a lot of small business owners who never set aside much money for investment in capital markets.
If you diversify, you might not get rich. But you don't need to get so lucky, either.
If you diversify, you might not get rich. But you don't need to get so lucky, either.
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Re: One bad decision - examples?
A few examples with the top three being the most damaging.
1. Market timing.
2. Making emotional investment decisions based on fear or greed.
3. An investment decision that leaves you with a concentrated position.
4. Thinking you are smarter than the crowd.
5. Acting on stock tips from experts.
6. Excessive trading.
7. Using leverage.
8. Performance chasing.
9. Having too much trust in one person.
10. Letting your world view dictate your investment choices.
1. Market timing.
2. Making emotional investment decisions based on fear or greed.
3. An investment decision that leaves you with a concentrated position.
4. Thinking you are smarter than the crowd.
5. Acting on stock tips from experts.
6. Excessive trading.
7. Using leverage.
8. Performance chasing.
9. Having too much trust in one person.
10. Letting your world view dictate your investment choices.
- firebirdparts
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Re: One bad decision - examples?
If you really are going to wipe out something, you need individual stocks to do that. Companies go bankrupt all the time. I could list some examples of bankrupt companies that have huge market caps, but you probably already know who they are. Past examples listed above. They don't have to be publicly listed, or course, like the golf course in Puerto Rico. You could instead just give your money to your brother-in-law or Bernie Madoff.
Bonds can also go into default and become worthless. If you loan somebody money, there may well be other lenders who are senior to you. So again, individual bonds have some risks of the same risks associated with individual stocks.
These days, we have available to us extreme diversification at very low prices.
Bonds can also go into default and become worthless. If you loan somebody money, there may well be other lenders who are senior to you. So again, individual bonds have some risks of the same risks associated with individual stocks.
These days, we have available to us extreme diversification at very low prices.
This time is the same
Re: One bad decision - examples?
I agree with two things already mentioned —
“Selling low” after a crash.
Lack of diversification — whether too concentrated in an individual company or a specific sector, like tech.
“Selling low” after a crash.
Lack of diversification — whether too concentrated in an individual company or a specific sector, like tech.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
Re: One bad decision - examples?
The sad saga of GTAT is the one I always think of. GTAT was a $2 billion company that was a big supplier to Apple. Between the two (especially the "Apple" thing) it had a golden halo around it. It went bankrupt literally in a single day with no real warning.drgenefish wrote: ↑Sat Jul 20, 2019 8:26 pm "It takes only one bad investment decision to wipe out years of prudent saving and investing."
Some stories from the forums as people melted down and realised they had lost it all:
He later breaks down his losses, which amount to $750,000 in stock and $140,000 in options. Because he used borrowed money to fund part of the transactions, he not only lost everything, wiping out 15 years of savings, he owes his brokerage firm $107,000, which they are going to demand or else they’ll throw him into bankruptcy court.
May God look after you and your family. My entire family (wife, son and myself) were totally invested in GTAT. We lost everything and I am retired (my life's savings)!!!!!!!!!!!!!!!!!!!!!!!
Look at daughter, think in my head I'm sorry I just lost your college tuition.
I think it is easy to read stories like that and go, "Pft, what a bunch of dummies putting everything into a single stock! I am so much smarter than that. I would never be so dumb." But I think that's the wrong lesson to learn. If behavioural finance has taught us anything it is that we're all dumb almost all of the time. It is a constant struggle to barely rise above that level and not fall back to it. One of the great virtues of Boglehead philosophy is that by having simple rules & bright lines, sure maybe you miss out on some optimal something or other, but you also avoid lots of mistakes.I have just lost all of my retirement and all of my son's savings. My son has special needs and I have failed him in the biggest way [...] I am totally numb. Just got home after working. I saved this money for over 25 years and it is gone in a day. This is so hard for me to take in because my son has special needs and this was for him and his future, especially when I'm not here any longer. [...] I will most likely have to sell our home and struggle with this only because change is so difficult for my son. I apologize for venting but I am too ashamed to share this with my family or friends.
https://www.moneyaftergraduation.com/th ... -and-lose/
Re: One bad decision - examples?
Such sad stories. It is easy to get smug, but must of us have blind spots in one way or another. If not about finances, then something else.AlohaJoe wrote: ↑Sat Jul 20, 2019 10:12 pmThe sad saga of GTAT is the one I always think of. GTAT was a $2 billion company that was a big supplier to Apple. Between the two (especially the "Apple" thing) it had a golden halo around it. It went bankrupt literally in a single day with no real warning.drgenefish wrote: ↑Sat Jul 20, 2019 8:26 pm "It takes only one bad investment decision to wipe out years of prudent saving and investing."
Some stories from the forums as people melted down and realised they had lost it all:
He later breaks down his losses, which amount to $750,000 in stock and $140,000 in options. Because he used borrowed money to fund part of the transactions, he not only lost everything, wiping out 15 years of savings, he owes his brokerage firm $107,000, which they are going to demand or else they’ll throw him into bankruptcy court.May God look after you and your family. My entire family (wife, son and myself) were totally invested in GTAT. We lost everything and I am retired (my life's savings)!!!!!!!!!!!!!!!!!!!!!!!Look at daughter, think in my head I'm sorry I just lost your college tuition.I think it is easy to read stories like that and go, "Pft, what a bunch of dummies putting everything into a single stock! I am so much smarter than that. I would never be so dumb." But I think that's the wrong lesson to learn. If behavioural finance has taught us anything it is that we're all dumb almost all of the time. It is a constant struggle to barely rise above that level and not fall back to it. One of the great virtues of Boglehead philosophy is that by having simple rules & bright lines, sure maybe you miss out on some optimal something or other, but you also avoid lots of mistakes.I have just lost all of my retirement and all of my son's savings. My son has special needs and I have failed him in the biggest way [...] I am totally numb. Just got home after working. I saved this money for over 25 years and it is gone in a day. This is so hard for me to take in because my son has special needs and this was for him and his future, especially when I'm not here any longer. [...] I will most likely have to sell our home and struggle with this only because change is so difficult for my son. I apologize for venting but I am too ashamed to share this with my family or friends.
https://www.moneyaftergraduation.com/th ... -and-lose/
I have never even heard of GTAT.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
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Re: One bad decision - examples?
“This time it’s different”
- climber2020
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Re: One bad decision - examples?
The GTAT example above is great. I remember following that discussion in real time as it was happening after someone here pointed it out (the forum at contrarianinvestor is shut down now so unfortunately no more access to those old posts).
I know a few people nearing retirement age who panicked and bailed out of stocks in 2008 and never got back in. One mistake and 50% of net worth gone.
I know a few people nearing retirement age who panicked and bailed out of stocks in 2008 and never got back in. One mistake and 50% of net worth gone.
Re: One bad decision - examples?
I interviewed with Dell computer in the late 90s in their hey day. The HR person said she had all of her 401k in Dell stock, because her buddies in finance told HR that is what she should do. At the time the stock was doubling every year or two. Years later their fortunes reversed. I often wonder what happened with themwhodidntante wrote: ↑Sat Jul 20, 2019 8:40 pm The stock market is a road of bones. A lot of people were ruined because they were too concentrated in their employer stock. Enron, Lehman, and MCI employees are obvious examples, but it doesn't take total failure to ruin your plans. Try being too strong a believer in IBM, GE, etc. And even if you don't get ruined by working for "great" company that becomes a disaster, you might still seriously underperform the market. And there are a lot of small business owners who never set aside much money for investment in capital markets.
If you diversify, you might not get rich. But you don't need to get so lucky, either.
I have friends that had large amounts of equity positions in their tech employers around 2000 and lost much of what they had after 2000.
- hagridshut
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Re: One bad decision - examples?
I've seen way too many of these "one bad decision" disasters.
Borrowing (margin) to Gamble: During the Dot Com bubble, I knew someone who took out a lot of margin to speculate on Internet stocks just as the market was reaching its peak. I am sure that many others tried this. When the bubble collapsed, they got margin called and lost everything.
Sector Concentration: About the same time as the above example, one of my friends put all their money into actively managed technology heavy funds. When the Dot Com bubble burst, they lost 80-85%.
Panic Selling: In 2008-2009, a number of co-workers and acquaintances sold their stocks during the Financial Crisis. Many of them sold near the bottom and never bought back in, which caused tremendous and permanent losses.
The scary thing is that all of these people were all intelligent and well educated. The common thread in these disasters was lack of long-term or contingency planning. I have maintained the same basic investment strategy for the past two decades: (1) Invest at regular intervals in small amounts over time (2) in a diverse, low-cost group of index funds with age-appropriate allocations, (3) regardless of market conditions or what the "herd" is doing. I never chase what is "hot", and I don't borrow money to speculate in the markets.
This sounds simple, but I think it is in practice hard for many people to do. People are by nature generally social pack animals. Following the "herd" and keeping up with the Joneses seem to be inherent instincts.
Borrowing (margin) to Gamble: During the Dot Com bubble, I knew someone who took out a lot of margin to speculate on Internet stocks just as the market was reaching its peak. I am sure that many others tried this. When the bubble collapsed, they got margin called and lost everything.
Sector Concentration: About the same time as the above example, one of my friends put all their money into actively managed technology heavy funds. When the Dot Com bubble burst, they lost 80-85%.
Panic Selling: In 2008-2009, a number of co-workers and acquaintances sold their stocks during the Financial Crisis. Many of them sold near the bottom and never bought back in, which caused tremendous and permanent losses.
The scary thing is that all of these people were all intelligent and well educated. The common thread in these disasters was lack of long-term or contingency planning. I have maintained the same basic investment strategy for the past two decades: (1) Invest at regular intervals in small amounts over time (2) in a diverse, low-cost group of index funds with age-appropriate allocations, (3) regardless of market conditions or what the "herd" is doing. I never chase what is "hot", and I don't borrow money to speculate in the markets.
This sounds simple, but I think it is in practice hard for many people to do. People are by nature generally social pack animals. Following the "herd" and keeping up with the Joneses seem to be inherent instincts.
Taking a break as of 2 Mar. 2021; First Principles: (1) Diversify (2) Low Cost (3) Stay the Course | 3-Fund Index Portfolio
Re: One bad decision - examples?
A coworker of mine invested her years of savings in her new husband's business and then the business went down the tubes.Vanguard Fan 1367 wrote: ↑Sat Jul 20, 2019 8:30 pm one of my parent's friends inherited a lot of money which took years of prudent investing. This person's husband talked her into investing in a golf course in Puerto Rico and the investment wiped out that accumulation.
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Re: One bad decision - examples?
Sometimes these bad decisions are based on advise from financial advisors and only look bad in retrospect.
A colleague of mine shifted all of his bond allocation to Tax Free municipal bonds ... in Puerto Rico.
A colleague of mine shifted all of his bond allocation to Tax Free municipal bonds ... in Puerto Rico.
- firebirdparts
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Re: One bad decision - examples?
And sometimes they are just lost opportunity only. If you go to cash at any time you forego the alternative but I’d say it’s december 2008 the lost opportunity is more harmful.
This time is the same
Re: One bad decision - examples?
I have a friend who quit his good engineering job around age 40 to start his own business. He borrowed about $100k, put in $100k from personal savings, and remortgaged his house to buy into a franchise.
Within a couple years, he blew through all the money. Sold is beloved Porsche. Then to make his mortgage payments, he had to withdraw cash from his 401k and pay the tax penalty on it.
He eventually threw in the towel and went back to work as an engineer. Since he had been out of the industry for a while, he had to start at a salary quite a bit less then he had been making earlier. He avoided bankruptcy, although that might have been a better option for him, in hindsight.
So he essentially started over at age 44 with no 401k or other savings, all the compounding gone, very little home equity, no Porsche, a lower salary, and he missed out on probably $400k in salary. Ouch!
Within a couple years, he blew through all the money. Sold is beloved Porsche. Then to make his mortgage payments, he had to withdraw cash from his 401k and pay the tax penalty on it.
He eventually threw in the towel and went back to work as an engineer. Since he had been out of the industry for a while, he had to start at a salary quite a bit less then he had been making earlier. He avoided bankruptcy, although that might have been a better option for him, in hindsight.
So he essentially started over at age 44 with no 401k or other savings, all the compounding gone, very little home equity, no Porsche, a lower salary, and he missed out on probably $400k in salary. Ouch!
Time is what we want most, but what we use worst. William Penn
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Re: One bad decision - examples?
I'm proud to state I was dumb, but it was well before I had much to lose. I am a quick study, so the lesson wasn't that expensive.
Losing money when you don't have much still hurts, though.
Broken Man 1999
Losing money when you don't have much still hurts, though.
Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven then I shall not go." - Mark Twain
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Re: One bad decision - examples?
bhsince87 wrote: ↑Sun Jul 21, 2019 2:00 pm I have a friend who quit his good engineering job around age 40 to start his own business. He borrowed about $100k, put in $100k from personal savings, and remortgaged his house to buy into a franchise.
Within a couple years, he blew through all the money. Sold is beloved Porsche. Then to make his mortgage payments, he had to withdraw cash from his 401k and pay the tax penalty on it.
He eventually threw in the towel and went back to work as an engineer. Since he had been out of the industry for a while, he had to start at a salary quite a bit less then he had been making earlier. He avoided bankruptcy, although that might have been a better option for him, in hindsight.
So he essentially started over at age 44 with no 401k or other savings, all the compounding gone, very little home equity, no Porsche, a lower salary, and he missed out on probably $400k in salary. Ouch!
That was a trap. Once you start using personal funds for your business, then you know it is time to fold. You burn through the cash you had set up for the business and at the end of that (which should not happen anyway) you throw your personal money into the losing business?
That's a trap you can stay out of if you plan and stick to the plan.
I am not immune to loss, but I like to keep it finite. Back in the day before Internet I followed a mutual fund newsletter (forgot the name). They had a convention in Las Vegas and I went. I was a novice. Sat through a presentation for something or other. A pitch. Slick. Investment was $25,000. Did not want to do that. Managed to get in, hahaha, for $5k.
Lost it down the road. Kaput. $5k. Worthless.
A hard lesson.
Hell, I'd be a millionaire today plus that $5,000. Still irks me.
Re: One bad decision - examples?
Illiquid investments...before discovering this forum I "got sold" several including non-traded REITs, BDCs.
Initially, higher yields than traded investments, but the yields drop over time...which lowers the value, but you're stuck until a liquidity event or you sell & take a huge haircut (1/3 or more)
Not the end of the world but an expensive lesson.
Initially, higher yields than traded investments, but the yields drop over time...which lowers the value, but you're stuck until a liquidity event or you sell & take a huge haircut (1/3 or more)
Not the end of the world but an expensive lesson.
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Re: One bad decision - examples?
After the market crashes, you sell out and purchase an annuity that an insurance person sells you.
Re: One bad decision - examples?
I mentioned my friend's expensive decision, so I guess it's fair I mention one of my own. Although my choice was not nearly as devastating.
I was one of those folks who foolishly invested too much in my company's stock. At one point it was over half the value of my 401k, plus I owned some through an ESOP. It was one of the hottest stocks of the time, and I "was on the inside", so I thought I knew what was going on, and never rebalanced out of it.
And then it hit a rough patch and fell in value by about 50%. I lost about $75k at the time.
And then I got a lay off notice!
That was actually a blessing in disguise though. When I got the notice (90 days), I immediately sold all equity I owned, in my 401k and out, and went to cash. I thought I might need that as a buffer.
That was in mid 1999. So I got very lucky with that timing and missed the Tech Crash completely.
But I learned the lesson: diversify!!!!!
I was one of those folks who foolishly invested too much in my company's stock. At one point it was over half the value of my 401k, plus I owned some through an ESOP. It was one of the hottest stocks of the time, and I "was on the inside", so I thought I knew what was going on, and never rebalanced out of it.
And then it hit a rough patch and fell in value by about 50%. I lost about $75k at the time.
And then I got a lay off notice!
That was actually a blessing in disguise though. When I got the notice (90 days), I immediately sold all equity I owned, in my 401k and out, and went to cash. I thought I might need that as a buffer.
That was in mid 1999. So I got very lucky with that timing and missed the Tech Crash completely.
But I learned the lesson: diversify!!!!!
Time is what we want most, but what we use worst. William Penn
Re: One bad decision - examples?
I can tell you a few stories about investing in our 401k during the dot com bubble. At the time the 401k had only 6 options: Common Stock (A), Fixed Interest (B), Stock Index Fund (C), Government Securities (D), Aggressive Growth Fund (E), and Balanced (F). All of them were private funds so you had to wait for the plan to publish the share prices which they did once per month.drgenefish wrote: ↑Sat Jul 20, 2019 8:26 pm I learned of Taylor’s Gems from the latest podcast and I’m starting to read them all.
I ran across this advice:
"It takes only one bad investment decision to wipe out years of prudent saving and investing."
(This was from Rick Ferri but saw similar advice a few times already and I’m just getting started.)
What would be examples of bad decisions that could have this type of impact? Would love to not learn the hard way
P.S. for anyone new: https://www.bogleheads.org/wiki/Taylor_ ... tment_Gems
In 1999, the aggressive growth fund was up over 90% for the year. In 2000 it lost between 10 - 15% and then in 2001 it lost another 35% or so.
I remember having a discussion with some work colleagues about our 401k after the dot-com bubble burst. Many of them had moved their funds into the most aggressive fund after it had started to take off and then after the crash they exchanged everything that was left into the most conservative fund. A couple of the people even cut back their 401k contribution to only get the match (5% contribution) because they were turned off by the volatility of the stock market. These colleagues ended up buying high and selling low. And some of them missed out on a good buying opportunity after the crash.
In hindsight, I can say that I had too much money invested in this aggressive fund, but at least I got concerned by its meteoric rise and moved money out of that fund several times rebalancing back to my target allocation.
Last edited by cherijoh on Sun Jul 21, 2019 3:23 pm, edited 1 time in total.
Re: One bad decision - examples?
That's why Bogleheads is great. It will help reinforce "good" behaviors like LBYM and investing in low-cost index funds.hagridshut wrote: ↑Sun Jul 21, 2019 5:55 am I've seen way too many of these "one bad decision" disasters.
Borrowing (margin) to Gamble: During the Dot Com bubble, I knew someone who took out a lot of margin to speculate on Internet stocks just as the market was reaching its peak. I am sure that many others tried this. When the bubble collapsed, they got margin called and lost everything.
Sector Concentration: About the same time as the above example, one of my friends put all their money into actively managed technology heavy funds. When the Dot Com bubble burst, they lost 80-85%.
Panic Selling: In 2008-2009, a number of co-workers and acquaintances sold their stocks during the Financial Crisis. Many of them sold near the bottom and never bought back in, which caused tremendous and permanent losses.
The scary thing is that all of these people were all intelligent and well educated. The common thread in these disasters was lack of long-term or contingency planning. I have maintained the same basic investment strategy for the past two decades: (1) Invest at regular intervals in small amounts over time (2) in a diverse, low-cost group of index funds with age-appropriate allocations, (3) regardless of market conditions or what the "herd" is doing. I never chase what is "hot", and I don't borrow money to speculate in the markets.
This sounds simple, but I think it is in practice hard for many people to do. People are by nature generally social pack animals. Following the "herd" and keeping up with the Joneses seem to be inherent instincts.
Re: One bad decision - examples?
Here’s an example for you:
In the year 2000 the company I worked for closed and I moved $72k from the 401k to rollover IRA .With all the investment options that became available, I invested into a leveraged mutual fund that doubled the performance of Nasdaq. Being a smart young man, I figured it would be in millions by the time I am 50.
My investment was up exactly one day. Dotcom bubble burst and that thing went down at double the speed. Or faster. By the time the stupid fund was closed I had $9k left in it. I invested into something else, but the recession was far from over and soon the balance fell to less than $6k.
Almost 20 year later that account grew to $53K. You live, you learn.
In the year 2000 the company I worked for closed and I moved $72k from the 401k to rollover IRA .With all the investment options that became available, I invested into a leveraged mutual fund that doubled the performance of Nasdaq. Being a smart young man, I figured it would be in millions by the time I am 50.
My investment was up exactly one day. Dotcom bubble burst and that thing went down at double the speed. Or faster. By the time the stupid fund was closed I had $9k left in it. I invested into something else, but the recession was far from over and soon the balance fell to less than $6k.
Almost 20 year later that account grew to $53K. You live, you learn.
Re: One bad decision - examples?
Sector funds (in my case, energy).
Never again.
Never again.
"The broker said the stock was 'poised to move.' Silly me, I thought he meant up." ― Randy Thurman
Re: One bad decision - examples?
Most of them start with "pulling money out." (I think we would consider "never putting money in" as multiple decisions; otherwise it would count too.) A retired relative-in-law, for instance, pulled her money out of her 401k to invest in a coffee shop with family. They work all hours and there's no sign of a profit after several years.
Re: One bad decision - examples?
There's probably a bias on this board towards revealing a certain type of bad decisions though, so I'll play the devil's advocate and say that apart from market timing, which has cost me a few thousand dollars, and buying stock on the recommendation of some famous person a long, long time ago, I've lost the bulk of my money from investing - as this board has suggested - in broad based international equity funds. My Europe/Emerging market funds have made a pitiful amount of money. Now, if all of that had been in Amazon, or Facebook.
Re: One bad decision - examples?
My worst decision - though I didn't "lose" money on it - was selling Apple when I did.
I bought 100 shares of Apple for ~ $14 a share in c. 2002-2003 (Can't remember the exact date). I subsequently sold it within 12-18 months or so (again, can't remember the exact timing of it all) when it was around $24 or $25 per share. At the time, I was 22-23 years old, and thought, "hey, made $1,000 +/- in a relatively short period of time. Why not sell?"
Ultimately, sold out before iPod revenues really hit, and obviously this was several years before the iPhone came out.
Had I kept it all until now, following the 2-for-1 split, and the subsequent 7-for-1 split, I would be sitting on 1,400 shares valued at about $288,000 at today's prices.
I like to tell myself I would have sold after the 2-for-1 split when it got back to about $80 or so, but that is probably just to make myself feel less bad.
You can't go broke making a profit, but man that one still hurts to this day.
I bought 100 shares of Apple for ~ $14 a share in c. 2002-2003 (Can't remember the exact date). I subsequently sold it within 12-18 months or so (again, can't remember the exact timing of it all) when it was around $24 or $25 per share. At the time, I was 22-23 years old, and thought, "hey, made $1,000 +/- in a relatively short period of time. Why not sell?"
Ultimately, sold out before iPod revenues really hit, and obviously this was several years before the iPhone came out.
Had I kept it all until now, following the 2-for-1 split, and the subsequent 7-for-1 split, I would be sitting on 1,400 shares valued at about $288,000 at today's prices.
I like to tell myself I would have sold after the 2-for-1 split when it got back to about $80 or so, but that is probably just to make myself feel less bad.
You can't go broke making a profit, but man that one still hurts to this day.
- alpine_boglehead
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Re: One bad decision - examples?
That's it. One way you can view the human mind is as a huge collections of reaction patterns. If you are able to establish the bogleheads philosophy as your patterns of thought for investing (and don't have these overridden by others, like fear or greed), you'll do well. The simplicity of the rules helps a lot.
This also sums it up pretty much. If you start from that thought, you'll arrive at a diversified portfolio with an appropriate amount of risk-taking, i.e. not making the "One Bad Decision (TM)" .Harry Browne, Fail-Safe Investing wrote:Don't assume you can replace your wealth
As for the OP: The mother of all bad decisions is probably choosing the wrong significant other. This will do as much financial and more emotional harm as a very bad investment decision.
- firebirdparts
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Re: One bad decision - examples?
Same here. I sold it for $20 a share. At the time, I would never have believed that Apple would make a product (the ipod) that would be popular. I loved their products, but I didn't expect the sort of market penetration they had after that.NativeTxn wrote: ↑Mon Jul 22, 2019 12:42 pm My worst decision - though I didn't "lose" money on it - was selling Apple when I did.
I bought 100 shares of Apple for ~ $14 a share in c. 2002-2003 (Can't remember the exact date). I subsequently sold it within 12-18 months or so (again, can't remember the exact timing of it all) when it was around $24 or $25 per share. At the time, I was 22-23 years old, and thought, "hey, made $1,000 +/- in a relatively short period of time. Why not sell?"
Ultimately, sold out before iPod revenues really hit, and obviously this was several years before the iPhone came out.
In happier news, I am cured of individual stocks.
This time is the same
Re: One bad decision - examples?
Listening to a Wall Street banker friend and buying into leveraged funds. Specifically - VXX and TVIX
This was before I ran into Bogleheads and I am not friends with this person anymore.
This was before I ran into Bogleheads and I am not friends with this person anymore.
Re: One bad decision - examples?
Replace Apple with Netflix & Chipotle and I made the exact same error. In 2009-ish I sat next to a day trader at work who would come over to my cube every day with all kinds of updates on all of his trades. He was selling his Netflix and shorting Chipotle so I sold mine, both were sub $100 at the time.
He did get me to open a Roth IRA so there was a silver lining to somewhat costly lesson. I also stopped messing with individual stocks after that too.
"...the man who adapts himself to his slender means and makes himself wealthy on a little sum, is the truly rich man..." ~Seneca
Re: One bad decision - examples?
Wasn't this a second error? If you fail to make your mortgage payments, you can get foreclosed on and lose your house. However, they cannot go after your retirement accounts, even in bankruptcy.bhsince87 wrote: ↑Sun Jul 21, 2019 2:00 pm I have a friend who quit his good engineering job around age 40 to start his own business. He borrowed about $100k, put in $100k from personal savings, and remortgaged his house to buy into a franchise.
Within a couple years, he blew through all the money. Sold is beloved Porsche. Then to make his mortgage payments, he had to withdraw cash from his 401k and pay the tax penalty on it.
He eventually threw in the towel and went back to work as an engineer. Since he had been out of the industry for a while, he had to start at a salary quite a bit less then he had been making earlier. He avoided bankruptcy, although that might have been a better option for him, in hindsight.
So he essentially started over at age 44 with no 401k or other savings, all the compounding gone, very little home equity, no Porsche, a lower salary, and he missed out on probably $400k in salary. Ouch!
He'd still be starting over, but he'd still have a retirement account. He had no need to withdraw from his 401k and pay the tax penalties on it.
Re: One bad decision - examples?
You are probably correct.wolf359 wrote: ↑Mon Jul 22, 2019 1:55 pmWasn't this a second error? If you fail to make your mortgage payments, you can get foreclosed on and lose your house. However, they cannot go after your retirement accounts, even in bankruptcy.bhsince87 wrote: ↑Sun Jul 21, 2019 2:00 pm I have a friend who quit his good engineering job around age 40 to start his own business. He borrowed about $100k, put in $100k from personal savings, and remortgaged his house to buy into a franchise.
Within a couple years, he blew through all the money. Sold is beloved Porsche. Then to make his mortgage payments, he had to withdraw cash from his 401k and pay the tax penalty on it.
He eventually threw in the towel and went back to work as an engineer. Since he had been out of the industry for a while, he had to start at a salary quite a bit less then he had been making earlier. He avoided bankruptcy, although that might have been a better option for him, in hindsight.
So he essentially started over at age 44 with no 401k or other savings, all the compounding gone, very little home equity, no Porsche, a lower salary, and he missed out on probably $400k in salary. Ouch!
He'd still be starting over, but he'd still have a retirement account. He had no need to withdraw from his 401k and pay the tax penalties on it.
But maybe his first (and worst) bad decision was not getting proper legal/financial advice on how to structure his business before he dove into it.
Time is what we want most, but what we use worst. William Penn
Re: One bad decision - examples?
Happily, looking back, I can't say I had any bad or horrible financial decisions. Had some regrets along the way, but with the passage of time what may have been perceived as a bad financial decision, mostly was softened by the market going up or down (such as missing out on some the the tech craze of the late 90's, only to watch it implode a few years later).
I would say some of the worst financial decisions I saw made by others over the years was chasing what appeared to be fatter paychecks at new companies every 1-2 years, only to be laid off when things sour because of not having the seniority within a company to weather an economic downturn. I saw many folks living spending most of what they made of lavish living, only to watch their lifestyle evaporate quickly due to changing fortunes.
I would say some of the worst financial decisions I saw made by others over the years was chasing what appeared to be fatter paychecks at new companies every 1-2 years, only to be laid off when things sour because of not having the seniority within a company to weather an economic downturn. I saw many folks living spending most of what they made of lavish living, only to watch their lifestyle evaporate quickly due to changing fortunes.
Re: One bad decision - examples?
I didn't know, or perhaps more honestly was too lazy to learn, about investing when I had my first job, so I just let my earnings accumulate in a close-to-zero interest checking account for several years.
Last edited by Ricchan on Mon Jul 22, 2019 4:26 pm, edited 1 time in total.
Re: One bad decision - examples?
A relative of mine, nearing retirement, who enjoyed investing when times were good, panicked and sold huge amounts of stocks near the bottom in 2009. I don't know the exact amounts, but he had lost several million dollars when it was all over, devastating that family's nest egg. His wife let him manage the investments, and she was oblivious to what was going on. He is a sad, defeated-looking guy even today. And his wife will probably never forgive him. They will have a much, much less comfortable retirement because of it. His wife has had to stay in the workforce, and probably will until they kick her out. A cautionary tale about staying the course and behavioral finance if I've ever heard one.
We don't see things as they are, we see things as we are.
Re: One bad decision - examples?
I have an older retired relative who told me sometime in 2017 that most of her investments were in GE stock because it is a safe company that has been around forever. Haven't spoke to her recently, but I imagine she is not saying that anymore.
Lesson to me is: don't confuse safe with familiar, and concentration can make you very wealthy or very poor very quickly.
Lesson to me is: don't confuse safe with familiar, and concentration can make you very wealthy or very poor very quickly.
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Re: One bad decision - examples?
Wipe out doesn't necessarily mean it goes to zero. Lets say you've been timing the market and have actually had success and beaten the SP500 by 1% for the last 10 years. That would be a huge advantage but if you mess up once you can wipe out the 10% benefit and be back to plain old index returns.
Re: One bad decision - examples?
Choice of spouse is probably the most important decision most people make. Your husband/wife can be worth millions or negative millions.
Other cases:
Someone I know invested in a Ponzi scheme and lost $2 million (some of which was recovered).
Another person got into a tragic motorcycle accident and was paralyzed.
My wife declined Harvard Law School admission, and she married me instead (sucks for her).
Someone else had $3.5 million in Ripple when it was trading at its peak. He refused to sell.
A lot of people bought multi million dollar houses in Westchester 10 years ago.
Other people just don't buy stocks.
Other cases:
Someone I know invested in a Ponzi scheme and lost $2 million (some of which was recovered).
Another person got into a tragic motorcycle accident and was paralyzed.
My wife declined Harvard Law School admission, and she married me instead (sucks for her).
Someone else had $3.5 million in Ripple when it was trading at its peak. He refused to sell.
A lot of people bought multi million dollar houses in Westchester 10 years ago.
Other people just don't buy stocks.
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Re: One bad decision - examples?
Individual stock picking
Re: One bad decision - examples?
Leverage can really cause problems. A member detailed his voyage into leverage - think it was market timer.
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Re: One bad decision - examples?
Back when I was just out of college, I enrolled in the company 401k. But, didn't even contribute enough to get the full company match. Instead, on advice from co-workers I bought company stock with borrowed funds which was hot in the 90s and has gone nowhere since. That decision has cost me many 100ks.
Never panic. Stop looking so much.
Re: One bad decision - examples?
Spending current income due to an expected future inheritance.
Tim
Tim
Re: One bad decision - examples?
I am disappointed in some of these posts that consider regret over not holding certain individual stocks as "One bad decision". Yes your stock would have grown to a huge sum, but it was still a more prudent decision at the time given the knowledge you had to shift the funds to a total stock market index or something similar.
Someone mentioned "Marrying the wrong person" which is not an investment decision. This community skews a little older but the new mistake that is almost as bad as that one is "Going to the wrong university / getting the wrong degree". This one isn't strictly a financial investment decision but it is an investment in your human capital. Maybe some of you older folk will be aware of this if you send your children to university because tuition prices have only increased drastically over the last decade or two. Out-of-state tuition and private universities are very expensive, and not all degrees have the same job prospects. The average student loan debt is $37,172 per borrower, so kids who went to private or out-of-state universities may have much more than this. I wonder just how much 6-figure debt that is not dischargeable in bankruptcy rivals "marrying the wrong person" as the "one big mistake".
Someone mentioned "Marrying the wrong person" which is not an investment decision. This community skews a little older but the new mistake that is almost as bad as that one is "Going to the wrong university / getting the wrong degree". This one isn't strictly a financial investment decision but it is an investment in your human capital. Maybe some of you older folk will be aware of this if you send your children to university because tuition prices have only increased drastically over the last decade or two. Out-of-state tuition and private universities are very expensive, and not all degrees have the same job prospects. The average student loan debt is $37,172 per borrower, so kids who went to private or out-of-state universities may have much more than this. I wonder just how much 6-figure debt that is not dischargeable in bankruptcy rivals "marrying the wrong person" as the "one big mistake".
I'm just a fan of the person I got my user name from
- Portfolio7
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Re: One bad decision - examples?
Investing in a wrap account, with high fees that were front loaded. Even though I was somewhat forewarned by reading I'd done, I just didn't understand what I was getting into. I have had a long-standing animosity towards Ameriprise, for sales practices that I felt were misleading at best.
I did avoid investing in a Variable Universal Life Insurance product. I read a book by a guy who claimed to have invented the product, and it scared the heck out of me. In particular, if I remember correctly, what can happen if you fail to fully fund it is frightening. Huge tax penalties late in life are not something I want to fool with. Most of my peers who did buy VUL policies do not appear to be happy with the returns, even.
I did avoid investing in a Variable Universal Life Insurance product. I read a book by a guy who claimed to have invented the product, and it scared the heck out of me. In particular, if I remember correctly, what can happen if you fail to fully fund it is frightening. Huge tax penalties late in life are not something I want to fool with. Most of my peers who did buy VUL policies do not appear to be happy with the returns, even.
"An investment in knowledge pays the best interest" - Benjamin Franklin
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Re: One bad decision - examples?
+1Broken Man 1999 wrote: ↑Sun Jul 21, 2019 2:08 pm I'm proud to state I was dumb, but it was well before I had much to lose. I am a quick study, so the lesson wasn't that expensive.
Losing money when you don't have much still hurts, though.
Broken Man 1999
j
Re: One bad decision - examples?
I bought $40,000 worth of bonds think that they would earn the coupon rate 4% when they actually were going to earn the yield to maturity rate 2%.
I also sold etf shares from my taxable account instead of my ira, generating a capital gains tax.
I also sold etf shares from my taxable account instead of my ira, generating a capital gains tax.
Re: One bad decision - examples?
Trusting, but not verifying.
Years ago I started investing with the husband of a work friend who was an advisor from an investment firm. Since he was a professional financial advisor I figured he'd be trustworthy (!) . He was very personable and reassuring. Wound up investing in VULs(!!). When I asked him straight out if there were any front-end fees he said 'absolutely not', and I took him at his word (!!!). It took me years (!!!!) to sit down and read through all the actual paperwork, at which point I discovered that there was actually a 6% front-end load plus some other fees that were not mentioned in the presentation package. Painful process but it did get me to get serious about learning more and taking real responsibility for investing, so it was an expensive but invaluable lesson.
Years ago I started investing with the husband of a work friend who was an advisor from an investment firm. Since he was a professional financial advisor I figured he'd be trustworthy (!) . He was very personable and reassuring. Wound up investing in VULs(!!). When I asked him straight out if there were any front-end fees he said 'absolutely not', and I took him at his word (!!!). It took me years (!!!!) to sit down and read through all the actual paperwork, at which point I discovered that there was actually a 6% front-end load plus some other fees that were not mentioned in the presentation package. Painful process but it did get me to get serious about learning more and taking real responsibility for investing, so it was an expensive but invaluable lesson.