Author Topic: How could you actually lose all your money in the stock market forever?  (Read 9527 times)

shelivesthedream

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I'm sure you've all heard people telling you not to invest in the stock market because you'll lose all your money. But it seems to me that what goes down usually comes up if you wait long enough, so your money is never lost forever if you keep it in. The only way to genuinely lose money is to sell when it's down (and I accept that there is a risk that you might have to do this if you need cash at an unfortunate moment) or for the entire stock market to disappear.

How else could you lose money forever?

JLee

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By having your entire portfolio in Enron. :P

ioseftavi

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THE NORMAL WAY: Invest all your money in one company that goes bankrupt.

THE SLIGHTLY DIFFERENT WAY: Invest your money in a diversified portfolio but have the worst possible timing habits.  Buy in completely whenever the market makes new highs.  Sell out completely when the market is crashing.  Repeat until you are out of money.

THE 'LET'S PRETEND I AM A HEDGE FUND' WAY: Invest in a portfolio consisting of very volatile assets (i.e. an index fund, or a sector fund) and purchase above and beyond your normal buying power by using margin.  Buy more at every opportunity until you're leveraged to your eyeballs.  Have no additional cash lying around to meet margin calls.  Wait for assets to decline substantially and suddenly.  Be sold out of everything in order to meet margin requirements.

THE WAY THAT IT ACTUALLY NEVER HAPPENS, BUT MOST NEW INVESTORS WORRY ABOUT ANYWAY: Buy into a diversified portfolio of low-cost funds.  Suddenly the economy hits a bad spot and OH MY GOD ALL COMPANIES THAT WE OWNED ARE SIMULTANEOUSLY WORTHLESS OH NOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO now we have to eat catfood forever :(



^^That last one is a joke.  It hasn't happened yet in the history of the world.  It would require a nightmare scenario: every traded equity that you owned would need to simultaneously go to zero.  This is, uhmmmm, unlikely.  Like "getting hit by lightning, while winning the lottery, while meeting an identical twin that you never knew you had" unlikely.  However, it's the scenario most people worry about because they don't understand the stock market.

For what it's worth, a lot of people who lose money in one of the first 3 ways I mentioned, like to stop investing and start preaching some version of the 4th scenario as gospel.  i.e. They lost all their money speculating on margin / trying to time the market / investing in a single company that went bankrupt.  They lost money (maybe all their money).  They have now "overlearned" their lesson and walk around telling everyone that no matter how you invest in the market, you're fucked because it's a rigged game and you'll lose all your money, etc, etc.  Smile and nod and change the subject when you meet these people.
« Last Edit: March 11, 2015, 07:42:33 AM by ioseftavi »

MsPeacock

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My former in-laws lost all their money "in the stock market." They lost a substantial part of their savings, after retirement, because they had all their money in stocks. The market "crashed" and they sold all their stocks after the price dropped. They took all the remaining funds and put them in a hedge fund that they learned about from a postcard they received in the mail. Despite numerous signs that it was a fraud ("10% monthly growth" - but the fund was unable to generate account statements or 1099 tax forms) they also talked many of their friends and family into putting all their money in the fund as well.

Then the fund manager lost a great deal of money (what was actually really happening - not the 10% returns) and then absconded out of the country w/ the remaining money. Eventually he was caught and prosecuted and some of the money was returned. The state and lawyers took their cuts and in the end the in-laws got about maybe 3% of their original money back.

There were a host of other bad financial decisions that also worsened their situation. But - in a nutshell, that is how you lose all your savings in the stock market.

Another relative invested all her retirement savings in a "hotel in Mexico" and lost her entire savings that way.

Annie get it done

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I have known people who lost real fortunes trading options: Betting against the market as  it keeps going up. This is really a version of the third scenario above, but seems to attract a particular demographic: Older men (and perhaps women, but not in my anecdotal experience) who are in decline themselves, and project that personal reality on the market.

 

MsPeacock

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I seem to hear about it less now - but there was a real trend of day trading on E-trades or what have you. I am thinking that was in 2000 or so when it became widely and cheaply available. Many people lost everything in this, which is really just a form of gambling (except in the case of stock you don't even know what the odds are vs. blackjack or whatever).

ShoulderThingThatGoesUp

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Global thermonuclear war

TN_Steve

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Maximum margin in speculative securities could lead to this.  Indeed, you could owe the broker money.  Here is a sad (apparently) first-person account from the tech stock crash of 2000:  http://boards.fool.com/the-real-real-risks-of-margin-12251371.aspx


MetalCap

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I immediately thought of this clip from South Park

http://southpark.cc.com/clips/27im67/the-importance-of-saving-money

Annnd its GONE!

But if you lose your money forever, that means you make money forever.  Anyone who loses all money is not diversified, people who lose a lot sell at the bottom, please also note that while it sucks those people are still alive.

FLBiker

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My only experience with losing money forever is via investing in a single stock.  In the late 90s, fresh out of college, I was writing for an online investment newsletter.  I started following some of the tips, and made a bit of money.  One of the tips I followed, though, was a company (the ticker was DBCC) that went to zero.  I lost $2000 on that.  Overall, I did OK as an individual stock investor, but I am absolutely convinced that index funds are the way to go.  And (as outlined in scenario 4) any situation wherein index funds would zero out would mean a catastrophic collapse of civilization as we know it.  I'm not saying it's impossible, I'm just saying that no investment would be immune.

Jack

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Re: How could you actually lose all your money in the stock market forever?
« Reply #10 on: March 11, 2015, 10:48:30 AM »

THE WAY THAT IT ACTUALLY NEVER HAPPENS, BUT MOST NEW INVESTORS WORRY ABOUT ANYWAY: Buy into a diversified portfolio of low-cost funds.  Suddenly the economy hits a bad spot and OH MY GOD ALL COMPANIES THAT WE OWNED ARE SIMULTANEOUSLY WORTHLESS OH NOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO now we have to eat catfood forever :(

^^That last one is a joke.  It hasn't happened yet in the history of the world.  It would require a nightmare scenario: every traded equity that you owned would need to simultaneously go to zero.  This is, uhmmmm, unlikely.  Like "getting hit by lightning, while winning the lottery, while meeting an identical twin that you never knew you had" unlikely.  However, it's the scenario most people worry about because they don't understand the stock market.

And (as outlined in scenario 4) any situation wherein index funds would zero out would mean a catastrophic collapse of civilization as we know it.  I'm not saying it's impossible, I'm just saying that no investment would be immune.

Yep. At that point, funding retirement is the least of your worries, and the only market winner is the "ammo and canned goods" portfolio.

tarheeldan

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Re: How could you actually lose all your money in the stock market forever?
« Reply #11 on: March 11, 2015, 12:09:43 PM »
I seem to hear about it less now - but there was a real trend of day trading on E-trades or what have you.

Reminds me of this guy ($250k in day trading losses):
http://www.debtkid.com/about

Kingomri

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Re: How could you actually lose all your money in the stock market forever?
« Reply #12 on: March 11, 2015, 12:58:20 PM »
-snip-
THE WAY THAT IT ACTUALLY NEVER HAPPENS, BUT MOST NEW INVESTORS WORRY ABOUT ANYWAY: Buy into a diversified portfolio of low-cost funds.  Suddenly the economy hits a bad spot and OH MY GOD ALL COMPANIES THAT WE OWNED ARE SIMULTANEOUSLY WORTHLESS OH NOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO now we have to eat catfood forever :(

^^That last one is a joke.  It hasn't happened yet in the history of the world.
-snip-
Has so. Russia in the early 20th century: http://www.bogleheads.org/forum/viewtopic.php?f=2&t=133282#p1970770

Quote
I'm sure you've all heard people telling you not to invest in the stock market because you'll lose all your money. But it seems to me that what goes down usually comes up if you wait long enough, so your money is never lost forever if you keep it in.
And although it's not losing everything, there's no guarantee if stocks go down that they'll eventually come back up. After over 25 years, the Nikkei (essentially S&P500 of Japanese stocks) is still down over 50% from its peak in 1989: http://finance.yahoo.com/echarts?s=%5En225+interactive#%7B%22range%22%3A%22max%22%2C%22scale%22%3A%22linear%22%7D

These kinds of occurrences are rare, but you can't entirely discount the possibility. That's part of the risk of stocks, and that risk is exactly why they're able to have higher returns. If you're unwilling or unable to bear that risk, you should certainly not be 100% stocks, and the Japan example is exactly why international diversification is important.

Edit: Fixed a typo.
« Last Edit: March 11, 2015, 12:59:59 PM by Kingomri »

ShoulderThingThatGoesUp

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Re: How could you actually lose all your money in the stock market forever?
« Reply #13 on: March 11, 2015, 01:05:06 PM »
-snip-
THE WAY THAT IT ACTUALLY NEVER HAPPENS, BUT MOST NEW INVESTORS WORRY ABOUT ANYWAY: Buy into a diversified portfolio of low-cost funds.  Suddenly the economy hits a bad spot and OH MY GOD ALL COMPANIES THAT WE OWNED ARE SIMULTANEOUSLY WORTHLESS OH NOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO now we have to eat catfood forever :(

^^That last one is a joke.  It hasn't happened yet in the history of the world.
-snip-
Has so. Russia in the early 20th century: http://www.bogleheads.org/forum/viewtopic.php?f=2&t=133282#p1970770

OK, but Russians had much bigger problems then, because they were living in a communist state which murdered, starved to death, and tortured millions upon millions of them in the next few decades. If there's a communist revolution in the USA, I'm not comparing retirement horizons, I'm figuring out how to sneak my family out of the country.

Travis

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Re: How could you actually lose all your money in the stock market forever?
« Reply #14 on: March 11, 2015, 01:50:20 PM »

Quote from: FLBiker on Today at 09:26:07 AM
Quote
And (as outlined in scenario 4) any situation wherein index funds would zero out would mean a catastrophic collapse of civilization as we know it.  I'm not saying it's impossible, I'm just saying that no investment would be immune.




Yep. At that point, funding retirement is the least of your worries, and the only market winner is the "ammo and canned goods" portfolio.

JlCollins said something like this. Basically the odds of the US market completely collapsing are ridiculously small, and even if it did, the end result would be a form of Armageddon where it wouldn't matter where you had your money stashed since it would worthless by that point anyways.

Kingomri

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Re: How could you actually lose all your money in the stock market forever?
« Reply #15 on: March 11, 2015, 01:57:49 PM »
-snip-
THE WAY THAT IT ACTUALLY NEVER HAPPENS, BUT MOST NEW INVESTORS WORRY ABOUT ANYWAY: Buy into a diversified portfolio of low-cost funds.  Suddenly the economy hits a bad spot and OH MY GOD ALL COMPANIES THAT WE OWNED ARE SIMULTANEOUSLY WORTHLESS OH NOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO now we have to eat catfood forever :(

^^That last one is a joke.  It hasn't happened yet in the history of the world.
-snip-
Has so. Russia in the early 20th century: http://www.bogleheads.org/forum/viewtopic.php?f=2&t=133282#p1970770

OK, but Russians had much bigger problems then, because they were living in a communist state which murdered, starved to death, and tortured millions upon millions of them in the next few decades. If there's a communist revolution in the USA, I'm not comparing retirement horizons, I'm figuring out how to sneak my family out of the country.
This is true, but saying that it has never happened is just false.


Quote from: FLBiker on Today at 09:26:07 AM
Quote
And (as outlined in scenario 4) any situation wherein index funds would zero out would mean a catastrophic collapse of civilization as we know it.  I'm not saying it's impossible, I'm just saying that no investment would be immune.

Yep. At that point, funding retirement is the least of your worries, and the only market winner is the "ammo and canned goods" portfolio.

JlCollins said something like this. Basically the odds of the US market completely collapsing are ridiculously small, and even if it did, the end result would be a form of Armageddon where it wouldn't matter where you had your money stashed since it would worthless by that point anyways.
To elaborate on my previous point, Armageddon isn't the only way the US market could have low (or even negative) returns over a long time horizon. Japan didn't experience Armageddon in 1989 and Japanese stocks have not performed well at all for them over a period of multiple decades.
« Last Edit: March 11, 2015, 02:00:40 PM by Kingomri »

ioseftavi

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Re: How could you actually lose all your money in the stock market forever?
« Reply #16 on: March 11, 2015, 02:11:46 PM »
OP asked "could you lose all your money in the stock market".

I replied "Not if you invest in any kind of a rational manner."

You countered: "Well what about times with really low real returns?"

"Really low real returns" are not the same as "losing all your money".  Low real returns suck, but having your account go to zero is far worse.

EDIT:  Don't get me wrong, Kingomri - I'm not disputing your point, or your data.  I'm simply stressing that I think you're asking a different question from the one that the OP and myself are talking about.
« Last Edit: March 11, 2015, 02:14:57 PM by ioseftavi »

Kaspian

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Re: How could you actually lose all your money in the stock market forever?
« Reply #17 on: March 11, 2015, 02:16:09 PM »
I bought $2,000 of MP3.com in 1999 when Alanis Morissette and David Bowie were both shareholders.  The stock market hasn't since disappeared nor did I sell at the bottom.   ...But I'm pretty damn sure that money is now "gone forever".  If it isn't, I'd like to know where the hell it's been hiding.

ShoulderThingThatGoesUp

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Re: How could you actually lose all your money in the stock market forever?
« Reply #18 on: March 11, 2015, 02:18:20 PM »
I thought Ukraine, a country that is literally trying to fight off an invasion, might have a stock market that has fallen precipitously recently.

It's not great, but it's not terrible over the last few years either.

hamildub

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Re: How could you actually lose all your money in the stock market forever?
« Reply #19 on: March 11, 2015, 02:47:56 PM »
THE NORMAL WAY: Invest all your money in one company that goes bankrupt.

THE SLIGHTLY DIFFERENT WAY: Invest your money in a diversified portfolio but have the worst possible timing habits.  Buy in completely whenever the market makes new highs.  Sell out completely when the market is crashing.  Repeat until you are out of money.

THE 'LET'S PRETEND I AM A HEDGE FUND' WAY: Invest in a portfolio consisting of very volatile assets (i.e. an index fund, or a sector fund) and purchase above and beyond your normal buying power by using margin.  Buy more at every opportunity until you're leveraged to your eyeballs.  Have no additional cash lying around to meet margin calls.  Wait for assets to decline substantially and suddenly.  Be sold out of everything in order to meet margin requirements.

THE WAY THAT IT ACTUALLY NEVER HAPPENS, BUT MOST NEW INVESTORS WORRY ABOUT ANYWAY: Buy into a diversified portfolio of low-cost funds.  Suddenly the economy hits a bad spot and OH MY GOD ALL COMPANIES THAT WE OWNED ARE SIMULTANEOUSLY WORTHLESS OH NOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO now we have to eat catfood forever :(



^^That last one is a joke.  It hasn't happened yet in the history of the world.  It would require a nightmare scenario: every traded equity that you owned would need to simultaneously go to zero.  This is, uhmmmm, unlikely.  Like "getting hit by lightning, while winning the lottery, while meeting an identical twin that you never knew you had" unlikely.  However, it's the scenario most people worry about because they don't understand the stock market.

For what it's worth, a lot of people who lose money in one of the first 3 ways I mentioned, like to stop investing and start preaching some version of the 4th scenario as gospel.  i.e. They lost all their money speculating on margin / trying to time the market / investing in a single company that went bankrupt.  They lost money (maybe all their money).  They have now "overlearned" their lesson and walk around telling everyone that no matter how you invest in the market, you're fucked because it's a rigged game and you'll lose all your money, etc, etc.  Smile and nod and change the subject when you meet these people.


This is so perfect.

When I worked at a brokerage people told me they were worried about the deposit insurance on their banking & brokerage accounts. I always found that hilarious, since in Canada there are only 5 major banks, if any one of them were insolvent our entire country would be in a world of economic hurt and paper money would be pretty much worthless anyways.

Gone Fishing

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Re: How could you actually lose all your money in the stock market forever?
« Reply #20 on: March 11, 2015, 03:01:26 PM »

When I worked at a brokerage people told me they were worried about the deposit insurance on their banking & brokerage accounts. I always found that hilarious, since in Canada there are only 5 major banks, if any one of them were insolvent our entire country would be in a world of economic hurt and paper money would be pretty much worthless anyways.

More important than the actual insurance are the underwriting requirements for the insurance.  It pretty much weeds out any fly-by-night operations.  Can be pretty important in the days of online banks no one has ever heard of. Even if they have a fat brokerage account, most people like knowing they have a portion of their of assets that is not likely to disappear overnight.   There are certainly plenty of creative investment groups selling CD look alike products with official sounding names.

NoraLenderbee

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Re: How could you actually lose all your money in the stock market forever?
« Reply #21 on: March 11, 2015, 04:26:52 PM »
It's hard to lose everything, but you can definitely lose a lot even with a diversified portfolio of low-cost funds:

1. Retire into a long, grinding bear market, with or without high inflation (like the 1970s). Sell as needed to obtain income. You'll sell for a loss a lot of times, and you won't have a choice because you need the money to live.

2. In the middle of a tough down market, have an emergency that requires you to come up with a whole lot of money at once. Not a "car broke down" emergency, but something like your child needs emergency brain surgery and a year of full-time rehabilitation that your insurance company will only cover a fraction of. Sell for whatever you can get, which is less than you paid, because you need the cash NOW.

3. Have some of the major companies in your diversified fund go bankrupt and out of business, like WAMU and other financials in 2008. Stock goes to zero and never comes back. This hurt a LOT of value funds that invested in financials because they were traditionally safe.

However, most of the times when people lose a lot, it's because they panicked and sold low, or because they bought "hot" stocks because they were hot, or one of the reasons ioseftavi listed.

coachese

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Re: How could you actually lose all your money in the stock market forever?
« Reply #22 on: March 11, 2015, 04:47:14 PM »
Like "getting hit by lightning, while winning the lottery, while meeting an identical twin that you never knew you had" unlikely.

Damn, it is really funny that you bring this up.......

skyrefuge

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Re: How could you actually lose all your money in the stock market forever?
« Reply #23 on: March 11, 2015, 09:04:19 PM »
EDIT:  Don't get me wrong, Kingomri - I'm not disputing your point, or your data.  I'm simply stressing that I think you're asking a different question from the one that the OP and myself are talking about.

The OP asked "How could you actually lose all your money in the stock market forever?"

"The market gets abolished" is a completely valid (perhaps the *most* valid!) answer to that question. If that had never happened, it might not be worth mentioning, but it has happened at least twice, in Russia, and China.

https://publications.credit-suisse.com/tasks/render/file/?fileID=0E0A3525-EA60-2750-71CE20B5D14A7818

China: "Though a tiny proportion of assets held outside the mainland may have retained value, and some UK bondholders received a small settlement in 1987 for outstanding claims, we assume the communist takeover generated total losses for domestic investors."

Russia: "Very limited compensation was eventually paid to British and French bondholders in the 1980s and 1990s, respectively, but investors in aggregate still lost more than 99% in present value terms. The 1917 revolution is deemed to have resulted in complete losses for domestic stock- and bondholders."

Thanks for the reference, Kingomri. My Google-fu had failed me because I had been looking for Germany and Japan, but those markets just took huge hits; only China and Russia actually went to zero.

PEIslander

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Re: How could you actually lose all your money in the stock market forever?
« Reply #24 on: March 12, 2015, 04:47:19 AM »
I'm thinking the most common way to loose all your money is to buy with leverage. Let's say you have 10k to invest and you borrow 90k to increase your investment account to 100k. If the market goes down 10% you've just lost all your money.

libertarian4321

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Re: How could you actually lose all your money in the stock market forever?
« Reply #25 on: March 12, 2015, 05:05:18 AM »
I'm sure you've all heard people telling you not to invest in the stock market because you'll lose all your money.

I suppose it's possible, but you'd have to be REALLY COLOSSALLY stupid over a long period of time to do so.

Most people use "lost all my money" as a figure of speech to mean something along the lines of "I started investing in 2007 because everyone was making money, the market tanked, so I bailed in 2008, and ended up with half of what I started with, because I was an idiot.  Had I kept the money in the market, I'd be way ahead now."

kpd905

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Re: How could you actually lose all your money in the stock market forever?
« Reply #26 on: March 12, 2015, 06:18:41 AM »
If you're invested in global index funds and they go to zero, then we'll be in a situation where money doesn't really matter anyway.

shelivesthedream

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Re: How could you actually lose all your money in the stock market forever?
« Reply #27 on: March 12, 2015, 07:17:15 AM »
Thank you all for your replies! It's pretty much along the lines I was expecting, but it neve hurts to check and now I can actually explain it properly when the next person tells me that the stock market is a money-eating devil...

hodedofome

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Re: How could you actually lose all your money in the stock market forever?
« Reply #28 on: March 12, 2015, 08:58:38 AM »
If you're invested in global index funds and they go to zero, then we'll be in a situation where money doesn't really matter anyway.

+1

This is really the only way to take away the individual country risk. Invest in global stock markets instead of just the country you live in.

--------------------------------------------------------------------------------------------------------------------------------

One easy way to lose money in your brokerage account in the US is to keep cash in it. When your broker decides to use your cash for other things, and goes under, even though it was illegal there are still plenty of customers out there who had to wait years for the bankruptcy proceedings to finish before they were made whole. And many were never made whole. Never keep cash with a broker. Keep it invested in Treasury Bills or equivalent. Any cash I have with a broker is invested in SHY. I don't do money market funds as those were seriously stressed during the '08 financial crisis. I don't trust money market funds anymore.

If all of your money with a broker is invested in stocks, bonds, mutual funds, ETFs, whatever, then all those securities (there's a reason it's called a security!) are in your name. Nobody can steal those from you. But brokers have been stealing cash for decades.

TheGibberingPotato

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Re: How could you actually lose all your money in the stock market forever?
« Reply #29 on: March 12, 2015, 09:07:11 AM »
THE NORMAL WAY: Invest all your money in one company that goes bankrupt.

THE SLIGHTLY DIFFERENT WAY: Invest your money in a diversified portfolio but have the worst possible timing habits.  Buy in completely whenever the market makes new highs.  Sell out completely when the market is crashing.  Repeat until you are out of money.

THE 'LET'S PRETEND I AM A HEDGE FUND' WAY: Invest in a portfolio consisting of very volatile assets (i.e. an index fund, or a sector fund) and purchase above and beyond your normal buying power by using margin.  Buy more at every opportunity until you're leveraged to your eyeballs.  Have no additional cash lying around to meet margin calls.  Wait for assets to decline substantially and suddenly.  Be sold out of everything in order to meet margin requirements.

THE WAY THAT IT ACTUALLY NEVER HAPPENS, BUT MOST NEW INVESTORS WORRY ABOUT ANYWAY: Buy into a diversified portfolio of low-cost funds.  Suddenly the economy hits a bad spot and OH MY GOD ALL COMPANIES THAT WE OWNED ARE SIMULTANEOUSLY WORTHLESS OH NOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO now we have to eat catfood forever :(



^^That last one is a joke.  It hasn't happened yet in the history of the world.  It would require a nightmare scenario: every traded equity that you owned would need to simultaneously go to zero.  This is, uhmmmm, unlikely.  Like "getting hit by lightning, while winning the lottery, while meeting an identical twin that you never knew you had" unlikely.  However, it's the scenario most people worry about because they don't understand the stock market.

For what it's worth, a lot of people who lose money in one of the first 3 ways I mentioned, like to stop investing and start preaching some version of the 4th scenario as gospel.  i.e. They lost all their money speculating on margin / trying to time the market / investing in a single company that went bankrupt.  They lost money (maybe all their money).  They have now "overlearned" their lesson and walk around telling everyone that no matter how you invest in the market, you're fucked because it's a rigged game and you'll lose all your money, etc, etc.  Smile and nod and change the subject when you meet these people.

Although I agree with your viewpoint is unlikely, I disagree with how unlikely it is.  Very unlikely, probably, but I think our ability to guess when/if the collapse of the financial market will occur is quite poor.

ioseftavi

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Re: How could you actually lose all your money in the stock market forever?
« Reply #30 on: March 12, 2015, 09:23:19 AM »
OK, I stand corrected here.  I suffer from recency (last 100 years?) / home country (USA) bias.  Here are the points I'd add to my "this has never happened" note, to make it more accurate:
  • All global stock indices have never simultaneously gone to zero.
  • In exceedingly rare cases, a countries equity markets have gone to zero.  To be fair, this hasn't happened because all companies simultaneously go out of business.  This normally results from a massive change in the status quo: the government decides to nationalize private assets, the stock market / equity ownership are no longer recognized, etc.  In such cases, it is likely that you will experience a complete loss on your equity investments in that country.  However, in these scenarios, the value of your equity investments is likely to be a much less pressing priority if you live in the country.  Things like personal liberty, safety of your family, and immediate employment prospects (if not already retired) are probably going to be your main concerns.
  • The US stock market has never "gone to zero".  In fact, most (all?) developed capitalist societies have never had their equity markets go to zero.  Some developed equity markets, however, have experienced decade-plus periods of abnormally low real returns (i.e. after inflation, you're breaking even).

I think this addresses most of what y'all are nitpicking.

PeachFuzzInVA

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Re: How could you actually lose all your money in the stock market forever?
« Reply #31 on: March 12, 2015, 09:36:20 AM »
Back during the height of the financial crisis, I lost $50,000 in a matter of 3 days. At the time, that was my entire portfolio. I sold bank of America short on margin and it went up by 75% in 2 days. Got a margin call and had to liquidate my entire portfolio to cover. 2 weeks later, Bank of America was lower than what I had sold it for originally. 2 weeks too late for me. Tough way to learn a lesson, but I deserved every bit of hardship I went through because of such a stupid decision.

Kaspian

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Re: How could you actually lose all your money in the stock market forever?
« Reply #32 on: March 12, 2015, 11:03:08 AM »
OK, I stand corrected here.  I suffer from recency (last 100 years?) / home country (USA) bias...

  • All global stock indices have never simultaneously gone to zero.


From 2000 to 2013, international equities indexes outperformed US equities 10 of 14 times.  71% of the time.  Diversification has been good to me![/list]

Tyler

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Re: How could you actually lose all your money in the stock market forever?
« Reply #33 on: March 12, 2015, 12:06:45 PM »
This is a must-read on this topic.  It chronicles the real-life reactions of people who lost everything betting on a "can't miss" stock.

http://www.joshuakennon.com/gt-advanced-technologies-bankruptcy/