Biggest Financial Blunders

[Donnie]

Due to my overly conservative nature, I have been fortunate not to make any catastrophic financial blunders.  Ranking them from least serious to most serious I never paid an FA, never trusted my "friend" on a hot deal he found that's "just for me", never invested in a Ponzi scheme, and never bought a whole life policy :P

Probably my biggest blunders are:

1. carrying too much cash (~10% of assets excluding home) despite having a high paying job and being under 40, and


2. buying a 3D printing stock five years ago that I lost 75% of my investment on.

I continually try to carry less cash.  The current level of 10% is down from 20% a couple years ago, and not just from asset value appreciation and more savings!

On the 3D printing stock, I was at least able to accumulate some tax losses that I still have! I also learned as someone else did in a recent thread not to try my hand at stock picking.

When I bought my house I got a 7 year ARM.  I guess time will tell whether that was a blunder or not.  I say no, but I know you guys hate mortgages and ARMs.  I saved about 150bps in interest expense when the loan was the largest, so I think it was a good trade, but I haven't run the math for a while.

So what blunders have you guys made and what did you learn from them?

 

[jz]

Funny.   I've made every dopey financial decision you can envision:  short term home ownership, overly speculative angel investing, performance chasing in dot.com  bubble, market timing, home ownership in declining market, universal life insurance, paying overpriced  college tuitions.  Yet,  we've made  more wise decisions than dopey decisions, so we're retiring  wealthy.

[Hatton]

I agree with jz it is possible to make mistakes and still retire wealthy.  I have bought loaded mutual funds,paid broker commissions, and lost badly on angel investing but I am ok .  You can make mistakes just recognize and correct.

[FIREshrink]

I have made two financial mistakes in my life, both during periods of emotional distress. One cost me $1000, the other $3000 and it may yet be worth more than nothing. So all in maybe I lost a couple thousand bucks. It could definitely be worse. I have learned that understanding Behavioral finance definitely reduces errors but does not eliminate them entirely.

[Dreamgiver]

Played with options and went from gaining 4k to losing 1.5K in one minute. That's the biggest so far.

I just invested 10k in a medical device startup. It was started by a colleague whom I begged to take my money at the next capitalization since I think it is a good product. Only time will tell I guess.

[Jaqen Haghar MD]

A man finds himself in the presence of some pretty ideal investors....

The biggest mistake I made was right out of residency.  I didn't know anything about investing and came from humble beginnings.  I was basically only knew how to live frugally and save.  Thank god, I don't have expensive tastes.

I was truly taught investing and money management by 'No One'.

I knew that the stock market was important, and I didn't have much experience or knowledge with it.

I bought every book on stock trading, swing trading, day trading, trend following, technical analysis etc...

It was around 2006-lol.  I worked hard, and before too long I saved up $70,000 in a trading account and set out to see what I could do with this capped amount.  I applied for the ability to trade options, had access to margin.

I studied diligently and began my experiment.  On my best days I seriously made +$10,000 at one point, and this was usually followed with 11 straight days of -$1,000 losses.

After literally using all of my free time and sanity trading (one year did a total (not profit) of 2 Million dollars in trades), at the end of the housing crash, I had turned $70,000 dollars into about $45,000 -Lol!   So ended my study of trading stocks!  I was tired, frustrated, and swore off market participation.  I'd say it was a $25,000 education, but it actually cost much more than that, in later opportunities.

After that, I watched the stock market with interest, like it was a football game.  I payed off debt, saved, breathed, moved up in the world a little bit, and lived comfortably, defensibly, and not extravagantly.  I had a big health scare, and felt real fear for the first time, so the emergency funds grew and grew, and 401K accounts were placed in conservative investments.

It took years to stumble upon Bernstein, Bogle, Indexing, and what I now consider a mature, but still basic understanding of true investing. I am only now really starting to get things in order and humming, but it is a work in progress.  Always a work in progress.  I move slowly and carefully now.

Truly, thank you WCI and folk for what you provide here.  I have come from the dark and see the light.

I still have a nervousness about the rising markets...  Always nervous about losses.

 

 

[Lithium]

Buying a house I'll probably sell in 3 years while the stock market went way up.

More minor mistakes include buying TDFs and bonds in taxable while I started out.  Being too nice and waiting to fire my family friend/FA for a couple of years.

With a nearly paid off house and 14% bonds, I probably still carry too much cash logically at 20k, but it's what I'm comfortable with.

[Dicast]

8k on a fraudulent startup pharmaceutical company stock about 10 years ago.

[RogueDadMD]

Bought Apple stock. Held it for about 11 months then sold it roughly 5 days before went up significantly in value and split a million ways.

I forget what year this was -- I think I was worried about new iPhone being underwhelming and making the stock drop or something

[adventure]

Not getting compensated fairly at work.

[jfoxcpacfp]

Invested in a small, closely-held startup with money I inherited from my grandparents. That was 25 years ago and a very humbling lesson.

[StarTrekDoc]

10k loss in ponzi style scheme that was too good to be true....unfortunately was so.

[Hatton]

I think it is good for folks to post about mistakes because we have all made them.  Being too heavy in cash and paralyzed is another mistake that comes up on this board.

[jfoxcpacfp]

hatton1 wrote:

I think it is good for folks to post about mistakes because we have all made them.  Being too heavy in cash and paralyzed is another mistake that comes up on this board.

Click to expand...

Totally agree, especially because there are so many forum readers who are intimidated by the regular participants because we make it sound like we've always had our stuff together. We're all on the journey, just at different stages.

[q-school]

dear 20 year old q-school.  you are about to receive a letter offering you a fantastic job with a company called apple.  you should accept this offer.

medical school--huge mistake which you can not recover from financially versus the opportunities that this company will offer you.



ps-your wife when you meet her is a keeper.  don't feel bad about not finding anyone until late in life.  not a financial blunder.