About a little over a year ago I got burned hard with a bad stock investment. The company I owned was poised to skyrocket after the release of a new product. In the past years of owning this relatively unknown stock, it had gained popularity on Seeking Alpha and had risen from a few dollars a share to somewhere around $20. I made a very nice return on the stock during this time, and I wanted more. I poured a good chunk of my IRA savings into the company, and dumped some of my wife’s IRA balance into it as well. Through all the noise, hoopla, and SA writers shouting Buy buy buy, I bought into this one hook line and sinker. I believed that I was going to strike it big on my secret stock. The company was going to partner with a well known technology maker and be featured very prominently in their number one product. Everything was ready to go. I had made 30-40% return on my bride’s IRA, and more than that on my first investment in my own. I poured more gas on the fire by continuing to buy as the stock went up. Man was I greedy.
But here’s the thing…
The company’s product wasn’t good enough, production didn’t go as planned, and the big customer backed out of the deal. The stock price plummeted 50% in a few days. I held on. Surely this was just noise, and the price would rebound. About a month later after that I remember during the day I checked my phone’s alerts to read the headline, “#### halts trading after market open”. Uh-oh. How could this be? Just a few weeks earlier, the earnings conference call had painted a rosy picture of a company on track for a record blowout.
The company had suddenly declared bankruptcy.
Immediately I think we lost around 30% of our total portfolio. My wife’s IRA dropped 50%. We (I) made a huge mistake and invested in something I didn’t know. I invested in something that some pundit who gets paid to write articles on Seeking Alpha, and sell stock advice for the low monthly fee of $$$, wanted me to buy. The pundit had egg on his face. I was out of a lot of money.
Looking back now I see the writing was on the wall. I can see it plain as day and I kick myself when I think about the time and money I lost to greed. I lost to ignorance. I bought into the hype of Seeking Alpha and the endless positive feedback loop of the comment section on each article about this stock. I learned today that when you don’t have a positive and negative feedback on anything, eventually, if it’s only positive or negative the thing will become more chaotic and wrong. That’s exactly what happened to me. I shut out the negative feedback and missed the signals that it was time to get out when I had the chance.
So what do you after a loss like that? “Why do we fall down Bruce?” To pick yourself up and continue on. I learned how to pick my investing self up after that for sure. Since then I’ve set out to become a wiser investor. I’ve set out to become financially educated. I’ve set out to become financially free. I’m learning to be humble, patient, and emotionless when it comes to investing and decision making with money. It’s not easy and I am so far from where I need to be. But I think I’ll get there.
To move on I’ve shifted our focus from finding the next big thing to choosing quality dividend paying stocks. We’re moving money into index funds eventually, and we’re going to get rid of any high expense funds that we currently own. We’re saving greater than 30% percent of our income each year and attempting to live as frugally as possible.
To help others we want to set an example as people who manage to give faithfully to what we believe in and still achieve all of our financial goals. We want to help others do the same through education. That’s what this website is for, and I hope you’ll let me know if we can improve it in any way.
Thanks for reading.