We’ve all made an investment decision we’ve regretted. Sometimes we’ve bought high and sold low, other times we’ve sat on the sidelines during a surge in the market. Personally, my biggest mistake was failing to prepare an exit strategy for a stock that went way up, stagnated, and eventually dropped out of the sky.
Bruce Bower from SMB describes in this article how these mistakes actually make us better traders:
In fact to trade well, we need to tolerate failure. We will have some trades that lose, even if we are running well. We will have some losing weeks or months, even if we have a good year. We will do some stupid things from time-to-time, even if we end up profitable in that timeframe. In fact, given that we are taking calculated financial risks, it is inevitable that we will experience losses and setbacks. To paraphrase Van K Tharp, taking risks without experiencing the occasional loss or setback is like breathing in without breathing out. This reinforces the need to prepare for losses and failure in our trading.
So what’s the worst investment decision you’ve ever made? On that note, what do you think are the most common mistakes investors make? Finally, how do you bounce back after a big loss?
college
Girlfriend(s)
See that's why I don't have a girlfriend, I'm a savvy investor. Now I have something to tell my parents.
+1 for college - 2 years and $90k worth of bullshit before I even started learning anything closely associated to my major. I knew what I wanted to do by sophomore year of highschool yet I still had to wad through 2 years of english/science and history bullshit.
Says a stupid college-educated kid... Pathetic
Says guy who can't figure out quotes
Wasting my time by not studying harder and not getting a better education.
Half the time I trade instead of invest it's a poor decision (I rarely do it).
My WORST though....
Sometime mid to late 2008 I bought a bunch of OSKin the mid-$7s and then more in the mid-$6s. I locked in to the biggest position I had ever taken, somewhere in the $8k range. In early 09 it dropped into the $5s and I bought a little more. I was convinced that they'd be able to make their huge debt payment from the acquisition of JLG or at least get new debt - I KNEW the stock had to go up.
About 2-3 months later I decided that on our trip to Paris I'd propose to my gf. I sold this stock at a small net gain and bought a ring. By the end of 2009 the stock had surpassed $40/share. At that point in time I don;t think I had ever made $1k on an investment, this one would have probably netted me a $30k profit.
The kick in the pants is that I'm never this tuned in to a company being undervalued, but even at that time I was SURE. I even got a guy at work to invest. All I got out of him was a free burger.
pet rock
In a state of sleep deprivation, I bought CHK two weeks ago. For the life of me, I cannot remember why.
VIX-related asset.
Groupon
Selling my apple stock in 2005.
AIG post-crisis, pre-reverse split. Stopped paying attention to AIG news after a while it was so out of the money. Woke up elated one morning to find a huge rally. A little investigation revelaed that I was the proud new owner of 1 share for every previous 20. Shortly thereafter went to pre-reverse split price levels. Girlfriend(s) are a close second.
My vote goes to girlfriends
African E&P stock, went up 350% from my purchase, I intended to sell prior to them announcing results - i went on holiday, they announced a dry well - the stock fell 96% and i still hold it!!!
Starting to move upwards again, so hopefully i can still end up in profit - but we'll see!!!
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