Author Topic: What are some of the investment horror stories you have heard/done?  (Read 7843 times)

ElMono

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Please share some of the bad investment options you have witnessed and the lesson you/others learned.

ltt

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Re: What are some of the investment horror stories you have heard/done?
« Reply #1 on: November 26, 2014, 08:20:47 PM »
We had a bond that we inherited from my father--in Lehman Brothers.  :(  We have slowly recouped some of the money.  I'm not sure why he invested in it, other than to receive some income in retirement.  He would have been so upset if he was living and lost it.

hodedofome

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Re: What are some of the investment horror stories you have heard/done?
« Reply #2 on: November 26, 2014, 08:25:28 PM »
I bought a Chinese stock that had been hammered by 50% because Citron Research said it was a fraud. I bought a good bit thinking it was overdone. Then a few weeks later trading was halted and it was subsequently delisted. It crashed another 80% when trading resumed and I was able to get out.

Moral of the story: stay away from Chinese stocks. And don't buy a stock with a Citron hit piece on it!

EricL

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Re: What are some of the investment horror stories you have heard/done?
« Reply #3 on: November 26, 2014, 09:51:00 PM »
1. Invested in a band.  They were friends and I liked their music.  So did everyone else but their interpersonal relations were volitile and they broke up.  No you've never heard of them.
2. Invested (can it even be called that?) in term life insurance when I was dumb enough to put my money decisions in other peoples' hands. 
3. Invested in Fidelity Funds that were always beating every market crash to rock bottom yet last to recover.  Same time and reason as #2.  They were front loaded too.
4. Invested in GM.  I thought it would be bailed out.
5. Invested in Blackberry just before they nose dived.  This was when they were so popular every professional seemed addicted to the "Crackberry".
6. Invested in a not particularly useful university degree.

Really the one dependable thing I've ever invested in were Vanguard Index Funds and the TSP.  Though Vanguard Dividend Fund beats the S&P AND pays dividends. 

divinvestor

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Re: What are some of the investment horror stories you have heard/done?
« Reply #4 on: November 26, 2014, 10:19:32 PM »
EricL, GM was bailed out.

surfhb

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Re: What are some of the investment horror stories you have heard/done?
« Reply #5 on: November 26, 2014, 10:24:12 PM »
In 1992 my mother inherited 2 home in the Los Angeles area which they sold immediately and invested in stocks.   

My parent's net worth went from $1.2 MM to a slim $100K from buying high and selling low with the guidance of a poor financial advisor.  Hope the asshole rots in hell :)

They had GM stock too which they sold in 2008     face punch!!!

EricL

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Re: What are some of the investment horror stories you have heard/done?
« Reply #6 on: November 26, 2014, 11:29:39 PM »
EricL, GM was bailed out.

Not at the time I invested.  $2k down the drain.

dungoofed

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Re: What are some of the investment horror stories you have heard/done?
« Reply #7 on: November 26, 2014, 11:39:02 PM »
You've probably see the thread already but there is no shortage of horror stories here: http://forum.mrmoneymustache.com/investor-alley/i-dun-goofed/

ElMono

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Re: What are some of the investment horror stories you have heard/done?
« Reply #8 on: November 27, 2014, 11:03:22 AM »
One of the things that really irks me is when people say, "if you haven't invested in stocks ever before in your life, you should take X amount (usually 1000$) and invest it and "learn your lessons" now before you get older."--> GIANT FACEPUNCH, GIANT DONKEYKICK! Holy CRAP! Really, if you've never invested before the only lesson you need to learn is that you won't beat the market so dump all your money into a total us market index fund. Then after you've set a fatty portion of your portfolio say 95% to be solid index funds, some bonds, some reits or whatever lazy portfolio ---then go use the last ~ 5% of your portfolio on the self picked stocks. 

tl;dr --> Buy and hold index funds.

mjs111

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Re: What are some of the investment horror stories you have heard/done?
« Reply #9 on: November 27, 2014, 01:31:35 PM »
There was a guy on the Motley Fool boards who sold a lot of naked puts on Apple stock back in 2013 when Apple went through a relatively short term dip in price. 

For those new to put writing, writing a put is like selling people insurance.  You make a bit of premium but also incur the liability of having to buy the stock from someone at a certain price. If the stock price is at or above the put strike price when the put option expires you pocket the premium and the put expires worthless.  If the stock falls below the strike price though, you're on the hook for either buying the stock at the strike price or buying the put option you sold back at a much higher price than you sold it for, incurring a loss. Additionally, calls and puts on shares of stock are sold in bundles of 100 called options contracts.  You can't buy or sell a single option on a single share of stock.

At the time Apple stock was pre-split and trading at several hundreds of dollars per share.  To give that some context, if you sold one put option contract for Apple at a strike price of $700, you'd be on the hook for buying 100 shares of Apple stock at $700 a share, requiring $70,000 worth of funds.  Also at the time, Apple was going up and up and up, lulling people into avoiding extensive thought on downside. In an environment like that, writing puts seemed like making free money, where you'd be netting a couple thousand dollars for taking on the $70,000 liability.

Move forward a few months and Apple missed an earnings estimate (like Apple or any other company does on occasion).  The stock tumbled over the next several months from around $700 to around $400.  The poster, who at this point had written 8 put contracts for Apple, saw the value of those puts increase markedly, losing him over $100,000 in just three months.

It was clear from his post that he didn't have the money to buy them back.  He wasn't a multimillionaire gambling with a few hundred thousand.  He was a thousandaire gambling with a few hundred thousand, picking up pennies in front of an oncoming steamroller, so to speak.  This line, taken from the original post, sums it all up:

I have destroyed my net worth. 10+ years of saving and scrimping and adding to new stocks over time erased in 3 months...



Mike
« Last Edit: November 27, 2014, 01:41:34 PM by mjs111 »

Water

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Re: What are some of the investment horror stories you have heard/done?
« Reply #10 on: November 28, 2014, 02:58:12 PM »
Forex Exchange. High expense (PIP), bought really high and sold really low...$2500 burned in less than 24 hours.
« Last Edit: November 28, 2014, 03:06:14 PM by Water »

hodedofome

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Re: What are some of the investment horror stories you have heard/done?
« Reply #11 on: November 28, 2014, 05:59:32 PM »
Tried to call the bottom in oil in 2014. Started buying at $90 a barrel because some guy on CNBC said this past summer that oil could go to $150 again. Bought all the way down and it ended up going lower than I ever imagined it would.

***I didn't actually do this, but I imagine we'll be hearing these stories soon.***

astvilla

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Re: What are some of the investment horror stories you have heard/done?
« Reply #12 on: November 28, 2014, 11:20:55 PM »
mentioned it before but know of someone who took high paying job with lot of company stock before crash. amassed $3 million in 401k company stock, everything he had, felt very financially secure, believed hit jackpot, so had 5 kids. 2008, well you know what happened. 3 million turned into zero because company went bankrupt, now still working (luckily got job somehow) instead of retiring. pretty much lost everything, depression all that followed. i also know of a person who committed suicide by burning (this happened right after the crash so i assumed it was related to losing investments, maybe real estate?) but not sure i feel that was the correlation though. 

lesson is diversify but also be very conservative when older. if you were about to retire when crash hit and you lose almost everything, to stick out and maintain lifestyle you had you would need very signficant savings pay taxes/food, etc and to let your investment go back up and real spine to not blink at watching 20 years wash down the drain. i know many people in these forums say like it's easy don't panic, stay the course but other needs override like tuition, bills, loans, many had to dip in or just sold in panic and unsure what to believe in. everyone says look long term but when you're about to retire, you're less concerned about long-term so you take what you can, and also can't predict it'd recover like this but i think having more cold, hard cash than many recommend isn't a bad idea.

UnleashHell

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Re: What are some of the investment horror stories you have heard/done?
« Reply #13 on: November 29, 2014, 11:12:09 AM »
I managed to move some pension money from the UK into an IRA. Listened to the financial advisor.
put some in funds (did badly)
I'd done a lot of research into one company and wanted to invest 25k in it. he talked me done to 10k and putting the rest in Lehman bros.

The company I wanted to invest in tripled in price - lehman bros - not so much.
I ended up breaking even in 2008 - If I'd ignored the expert I'd have made a big increase in my funds... those shares are now 5/6 times the price I could have bought them for....

MrsK

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Re: What are some of the investment horror stories you have heard/done?
« Reply #14 on: November 29, 2014, 11:42:17 AM »
I have a BIL who got into Amway 10 years ago.  He kept calling it an investment--it's actually a cult. 

pbkmaine

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Re: What are some of the investment horror stories you have heard/done?
« Reply #15 on: November 29, 2014, 12:01:28 PM »
My former father-in-law traded naked puts and calls because he thought he was smarter than everyone else. Lost all his retirement money. I think about him every time I buy index funds.

iris lily

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Re: What are some of the investment horror stories you have heard/done?
« Reply #16 on: November 29, 2014, 12:11:15 PM »
Here's my sad story: I've known about index funds for decades. I understand why they are good. Yet--I continued to plow money into load funds.

Facepunch, please, and hard.

Oh yeah, here's another one from the Iris Lily archives: we have 3 tiny houses that we don't rent out. They sit there, unoccupied. Well to be frank they are not habitable, they have not electrical or plumbing or heat.  We bought real estate because we wanted extra land on which to grow iris and lilies and other things, and because, in one case, I wanted a particular kind of Victorian architecture. That is a silly waste of money. Now understand we didn't buy them for "investment" purposes because at least we knew enough to realize they are not investment worthy. They are kind of our hobby houses.
« Last Edit: November 29, 2014, 12:15:06 PM by iris lily »

LordSquidworth

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Re: What are some of the investment horror stories you have heard/done?
« Reply #17 on: November 29, 2014, 02:24:22 PM »
EricL, GM was bailed out.

They were "bailed out" in the sense they went through bankruptcy and went public again.

Those holding the stock before bankruptcy were wiped out.

KC1983

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Re: What are some of the investment horror stories you have heard/done?
« Reply #18 on: November 29, 2014, 05:48:18 PM »
Two horror stories, one conventional, one not.

Some years ago my mother inherited about $80k, which was a substantial sum for her. Kids were grown and gone, she was on a good path to retirement (nice government pension), and she had no experience investing, nor did anyone in her family. She heard a Jim Kramer type touting a potential breakthru stock -- a startup by a few doctors and scientists who thought they were on the verge of an HIV direct test (at the time, the only test was for antibodies, and so you had to be infected for weeks or months to show positive). If they'd have succeeded, they would be billionaires. She dropped the who $80k on this. Her logic was that if she invested it in CDs, which was about all she knew about, it wouldn't change her life much, but if this money quadrupled, then she could shower the rest of the family with shared wealth. Once the stock started to drop, she fell into the sunk-cost fallacy, and rode it all the way down to zero. There were a couple of upsides. One, she had investment losses to use for her taxable investment gains for the rest of her life, and two, she learned to invest much more thoughtfully. I could never get her into index funds, but she did later invest heavily and successfully in P&G and a local utility, both of which produced a nice dividend stream every year.

During the early-mid 2000's, a coworker had a family friend who thought he was an investment whiz. My friend gave him $10k to invest. He was trading options. He made about a half a dozen all-in successful moves, and just before the holidays my friend told me he was up to $400k! I about fainted, and suggested he cash half of it out and buy a house (which in those days was possible). He said he'd tried that, but the investment whiz got angry at the mistrust, and convinced him to leave it alone until he could get it up to at least a million dollars. Of course the next trade resulted in the complete loss of all the money, as happens with options. My friend at first wasn't too upset, because he'd never really had the money, and he could afford to lose $10k.

Then he got the tax bill. You see, the $400k in short-term capital gains had been in one tax year, while the one bad trade had occurred in early January of the next year. My friend was stuck with a six-figure tax bill, and the IRS garnished his wages for the next 6 or 8 years. The investment whiz fled the country to avoid his even larger tax bill.

dungoofed

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Re: What are some of the investment horror stories you have heard/done?
« Reply #19 on: November 29, 2014, 06:32:58 PM »
The investment whiz fled the country to avoid his even larger tax bill.

Geez that is tragic. I mean, I understand the law is the law, but for the IRS to f*ck someone's life up as a result of a single victimless mistake which had already cost him dearly, that's just messed up.

I hope he is paying tax to a nation that treats him better these days, rather than one that just views him as a milk cow.

Malaysia41

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Re: What are some of the investment horror stories you have heard/done?
« Reply #20 on: November 29, 2014, 07:19:02 PM »
I know a guy who put hundreds of thousands of dollars into a deep sea oil drill company that he thought would explode with returns as it had rock solid contracts booked for years to come. He was banking on this 'quick win' to fund an imminent FIRE.  That was in January 2010.

April 2010: Deepwater Horizon Oil spill and his $ exploded all right - into oblivion.
« Last Edit: November 29, 2014, 07:22:22 PM by Malaysia41 »

Malaysia41

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Re: What are some of the investment horror stories you have heard/done?
« Reply #21 on: November 30, 2014, 08:48:20 PM »
Two years into my Silicon Valley engineering job, I invested $15k into a movie called Going Greek .  (I'm actually in one of the party scenes).

Four years later, I took a $15k deduction on my taxes. Total loss.  Woops.  My story, however, pales in comparison to that of a co-investor.

He was a kid my age, but wheel-chair bound.  In LA, there are a lot of Melrose Place style apartments - two story buildings wrapped around a kidney shaped pool - I lived in one like this in college.  Apparently he'd jumped off the roof, tripped and landed on the concrete and not in the pool.  At the time I met him he was quadrepelegic.  He'd just won something like $300k in the lawsuit and put it all into this movie.  Ugh.  Poor guy.  I really hope he was given whatever scraps were left of equity in that film. 

Scary part - I did that jump at my apartment complex (face-punching-self-so idiotic).  Luckily I cleared the concrete.  Shudder. Seriously, I should be dead 20 times over given the stupid shit I did in my twenties.  Crossing fingers my kids are more sensible.

As for the movie: at least I put in only as much as I was willing to lose.  I'll take the $15k loss over his situation every time. 

Sorry, was that too bleak?

Adventine

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Re: What are some of the investment horror stories you have heard/done?
« Reply #22 on: November 30, 2014, 09:40:28 PM »
Two years into my Silicon Valley engineering job, I invested $15k into a movie called Going Greek .  (I'm actually in one of the party scenes).

Four years later, I took a $15k deduction on my taxes. Total loss.  Woops.  My story, however, pales in comparison to that of a co-investor.

He was a kid my age, but wheel-chair bound.  In LA, there are a lot of Melrose Place style apartments - two story buildings wrapped around a kidney shaped pool - I lived in one like this in college.  Apparently he'd jumped off the roof, tripped and landed on the concrete and not in the pool.  At the time I met him he was quadrepelegic.  He'd just won something like $300k in the lawsuit and put it all into this movie.  Ugh.  Poor guy.  I really hope he was given whatever scraps were left of equity in that film. 

Scary part - I did that jump at my apartment complex (face-punching-self-so idiotic).  Luckily I cleared the concrete.  Shudder. Seriously, I should be dead 20 times over given the stupid shit I did in my twenties.  Crossing fingers my kids are more sensible.

As for the movie: at least I put in only as much as I was willing to lose.  I'll take the $15k loss over his situation every time. 

Sorry, was that too bleak?
Daaaaaamn.