Stupid Things

I started my investing career in 2006, when things were different.  Amazon still sold books and most people were limited to only a handful of songs on their mp3 players and 1st generation Ipods.

Two years later when the financial crisis hit, I thought I was firmly in control of managing my own investments but had no plan, no financial objectives to guide my buy-sell decisions and as a result was overseeing a portfolio, full of stupid things.  Since the financial twitterverse seems to only convey filtered stories and experiences, here’s an unfiltered view of what my personal portfolio included at certain points:

  • Two investments based entirely on a hot tip

  • A single company which made up 25% of my portfolio

  • An investment in a Chinese medical stock that I knew nothing about but was told by someone it would soon be bought out at a premium (it was quickly bought at a significant discount to where I bought it)

  • Options positions which could move 20-30% in a single day

  • Four Companies that were bouncing off their 52-week lows (because obviously what goes down must come back up? Or reversion to the mean, who knows)

  • A double leveraged inverse natural gas ETF

Oh, and I did all of the above on margin (meaning I borrowed money) because that’s what a 25 year-old studying for level 2 of the CFA exam would do.

To be clear, not all of the above investments were bad bets, some actually made money. But not having a plan in place was totally stupid and made the experience a fantastic exercise in what not to do if managing your own money.

Years later, the experience has made me a significantly better investor and still makes for valuable insights to share with friends, family and eventually clients who asked, “what do I do, (or not do) with my money”.

A small allocation (like, 1%!) of your portfolio, specifically for experimenting and yes, doing stupid things is actually an experience I highly recommend, so long as there are some learnings to extract and you're not just doing it in lieu of a trip to the Casino.  A few penny stocks, or companies that might be around the corner from where you live, or investing in a stock that owns something you can pass by like a Real Estate Investment Trust (REIT) are all good options and a unique DIY investor ed exercise that just about anyone can enjoy, not just investing nerds.

No time? Not interested?  Not disciplined enough? For the management fees some (definitely not all) Mutual funds or Robo-advisors charge to take care of your investments, it makes plenty of sense to leave the investment decisions to someone else to get your money working for you.   All are fine options and all will steer you clear from having to decipher the head-spinning financial advice on google or twitter.

Added bonus? Avoiding all the stupid things.