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Our Biggest Mistakes… On Steroids
From the Baltimore Clubhouse – Wow, what a response…
Yesterday, Marc, Steve and Eric revealed the worst investment decisions they’ve ever made. [If you missed it, log on to oxfordclub.com and click here.]
Since the issue hit inboxes yesterday, we’ve received a flood of emails from Members who could commiserate with our editors’ experiences.
In fact, we received so many responses that we’ve decided to do a follow-up piece next week featuring some of your best stories.
As a sneak peek, here’s one of my favorites from Member Peter B…
I was a rookie broker at “Mother Merrill” in the early ‘80s. It was either late ‘82 or early ‘83, but an IPO prospectus crossed my desk. I am not a visionary and took one look at this prospectus and tossed it in the trash.
How in the world would some company get literally millions of “radio” towers built around the country, much less the world? And then get the public to buy devices that would talk to other devices, and regular phones, anywhere in the world? This was a nonstarter – Dick Tracy stuff…
The company was McCaw Cellular.
The lesson of the story – don’t listen to stock advice from Peter B.
I went on to have a successful 30-year career in insurance and employee benefits and now rely on others for investment advice.
A fraternity brother who spent his career on Wall Street and retired very young knows Alex Green personally. He told me to read The Gone Fishin’ Portfolio. I did and now rely exclusively on The Oxford Club for investment advice!
Thanks so much for sharing, Peter. I’m sure most of us can relate to your “one that got away” story.
That’s the beauty of the Club. We aren’t too proud to eat a slice of humble pie.
So today we’re continuing the conversation with stories from the rest of the Club’s experts, starting with Alex…
The worst investment I ever made was a duplex in downtown Orlando nearly 30 years ago.
I knew it was a terrible property, but an investor friend convinced me that the hospital next door would have to buy me out for a planned expansion. It didn’t happen.
Meanwhile, I had termites, major repairs and tenant problems galore, including tenants who couldn’t pay, tenants who wouldn’t pay and tenants who wouldn’t pay or move out.
At the closing – where I unloaded it at a loss – I could have jumped up and clicked my heels on the way out the door. Aside from personal residences, that was the last real estate investment I ever made.
I lost $109.95 on the worst trade of my life…
I had read about a renewable energy company that was a possible buyout target for a global blue chip. It was a penny stock, but the company’s fundamentals were horrible even by penny stock standards. But there would be a lot of upside if it were bought out. So I decided, “what the hey,” and took a flier on it.
I didn’t want to risk too much, so I bought several hundred shares for a whopping $100 plus the $9.95 transaction fee my broker charged…
I quickly realized my mistake – my transaction costs were roughly 10% of the total value of my stake. When the shares tanked – of course, no buyout was coming – I was stuck. My cost to exit the trade soared compared to the value.
In my haste, I made two nonsensical decisions – I bought shares of a company that I didn’t like, only for the prospect of a buyout. And I risked a nonsensically small amount – even though that seems smart – that virtually guaranteed I would lose 20% just in transaction costs.
On top of all that, the loss was so small that there was no way for it to have any real tax benefit.
Wachovia Bank, during the financial crisis. Insiders were buying tens of millions of dollars’ worth of the stock.
It turns out they were clueless and expected to be bailed out by the Fed.
The bank went under and was acquired by Wells Fargo.
I learned the hard way that insiders can often be wrong, despite how much of their own money they invest… and Wall Street executives are amongst the biggest liars in the game.
I still follow insider buying today, but with a very, very healthy dose of research.
The worst investment I ever made was going into a limited partnership that owned three Ben & Jerry’s ice cream stores.
The managing partner mismanaged the entire operation. Each limited partner saw their $35,000 investment vaporize.
Lesson learned: If it sounds too good to be true, it probably is.
We’re not too proud to admit we’ve made mistakes. Keep the conversation going by emailing your worst investing decision to mailbag@oxfordclub.com. I’ll share the highlights in an upcoming issue of Insight.
Good investing,
Rachel
P.S. Emerging Trends Strategist Matthew Carr is much wiser for his hard-earned lessons in investing… And now no one is better at producing monster-sized gains than he is. In fact, last year, his portfolio outperformed the average investor’s return by a whopping 607.6%. And he holds the Club’s record for the largest return. Now he’s guaranteeing Members that he can beat his previous record of 2,733% by September 30. To learn which company Matthew’s willing to risk eating crow over, click here now.