Investing Blunders ?

[likewow]

I was thinking yesterday how we read of a lot of investing success stories which is great and what its all about. But i was wondering if forum members would like to share investing blooper stories.

I'll start with my own.

In the late 90s i got caught up in the dot-com share boom and started day trading volatile tech shares. Well, not real day trading but sort of in & out in a few days to a week but sometimes on the same day.

Anyway i made some ok gains for a while which made me think i was a share trading genuis so i thought...hmm...if i can make a few grand in week doing this why dont i just increase the amount of money i have in there and make a motza.

So i did and bought at what i thought was the bottom of a particular volatile stock but of course this time it didnt turn around and go up again, it just kept going down. So i thought it would eventually turn around so i made the huge mistake of buying more to average my price down, waiting for the rebound which didnt come.

Down $45 grand later i learnt a couple of valuable lessons. They were:

I wasnt a genius at all the with the initial gains, i was gambling and having a good run, just like at the casino it was never going to last but i was too inexperienced at the time to realise that.

Never average down on the hope of a rebound, get out at a pre-set stop loss which i know now but didnt then.

My wife wanted to kill me and reckoned i'd lost all credibilty as far as trying to curb her spending for a while after that.

The only consolations from the above fiasco are that ive since used the capital loss on some property gains and gained a valuable but expensive lesson.

Any other share/property/whatever investing bloopers to share?

 

[The Y-man]

The big blunder....

Our biggest blunder(s).

Towards Christmas of 1997, we were looking at getting our toes wet for the first time in the property market. Not knowing anything about property, we took heed of a radio ad that said something to the lines of "call us, and we'll look after all you property investing needs...."

Anyway, this character turns up, and starts showing us all these developments "we should be buying". We ended up signing for an apartment in this huge 250 unit innercity development.

We signed an unconditional contract of sale, and handed over the 10% deposit to the character.

Some time later, our conveyancing lawyers called up telling us that the character, along with the deposit had disappeared Unfortunately the contract was REAL.

This was a pretty big blow, as the deposit took my wife over 6 years to save (I had nothing when we got married ). We were now staring down the barrel of having to settle this apatment on completion, having to come up with the original deposit, AND any additional amount that we might need.....(we were not sure how much the banks would lend us)

The lessons learnt:
1. Check that the person "selling" you the property is a licenced agent and authorized representative of the vendor.
2. Make sure all deposit cheques are paid to a trust account, not to companies or individuals.


The project completed, and we managed to settle in 2001. At this point we learnt several more things:

1. The plan did not indicate the noise from the elevated freeway running outside the window

2. We failed to notice the site was next door to a drug rehab centre. The foyer of the building quickly became a rest and recovery area for this centre. A security guard had to be employed after a resident was assaulted

3. Along with the security guard, maintenance of the swimming pool, gym, and 4 lifts servicing 26 stories, the body corporate costs were approaching $3k-$4kpa (This year, they introduced a further sinking fund of $800 pa in preparation for major lift maintenance that would be required at 5 years).

4. Off the plan apartments don't have window furnishings (nor light fittings, although in this case they were all halogen downlights).

5. Just because it's new doesn't mean everything works - a whole segment of the apartment did not have power, the hot water unit was faulty, the cooking stove was not designed for the correct gas pressure, cracked tiles in the bathroom, cracked laminex in the cupboard, chips, scuffs, etc etc To the builder's credit, they fixed all of these faults - however, we could not let it until it was all sorted.

Take care!

The Y-man

 

[agent007]

Back in 1999, I knew nothing about the subject when I started investing in property (I still have a lot to learn though). I just new I have to invest if I wanted to maintain my current life style in my senior years. Those were also the days when Banks were still more conservative (at least that was my feeling) than they’re now. Mortgage brokers were also starting to get momentum in the lending industry and I was introduced to one of them. This chat not only assisted me with selecting mortgage products, he went one step further and advised me on the financial structure I should use. I was happy with his advise since I was getting my first loans. However, X-collateralisation didn’t wait long before it started to hurt me . The things is that I was leapfrogging (I didn’t know I was doing that since a couple of month ago I attended one of Peter’s seminars), and my broker and adviser x-coll all my initial loans. This fact alone stopped me for a while to purchase more property since I was going 95% or 90% LVR. It cost me a small fortune to break all those loans and I’m glad I did it at that time. I paid dearly for that lesson.

The moral of the story:

1/ Invest in your education.

2/ Don’t leave things to the so called experts unless you understand the matter good enough to recognize an expert when you see one.

3/ You are the captain of your own boat and as such you have to assume your responsibilities and role. The rest of the people are just the support team.

Regards,

James.

 

[Peter 14.7]

Twice I invested in Private companies in the property dev. field my area of exterise.

Back in 1991 as ex staff we did a buyout of trading name thinking we could do better. Two of the six got greedy and wasted it all. TwO years later is was bankrupt. Lost $5k ( alot at the time)

Back in 1994, I bought shares in Private Ltd Company doing property development. It was startup and I used a loan for the cash. I joined said company and worked for it and that was good but the ethics was all wrong. I and many others tried to make MD understand he was being a physco. Board tried to take action but alas to no avail as suprise suprise he had controlling interest through options....

So I left and tried to sell out but there was no market for the shares. Took months to essentially get my money back less costs $5k. Huge amount of stress and loss of cofidence in people. Lost $5k but by shear luck it could have been $25k.

Lessons learnt:

1. never invest in a private company unless it is your 100%

2. never invest where control is with one persons or self interest group

3. trust my wife ( womans intuition) when she does not like someone

4. people don't change. If they start with dodgy deals they stay dodgy.

5. Get out ASAP if it go wrong. If only gets worst. Small loss better than a big loss.

6. Ego has no place in business. Anyone driven by ego is to avoided at all costs. No ifs, no buts.

Peter 147

 

[voodoo]

Approx 10 years ago I knew nothing of property Investing.
My wife and I had payed out our beach side townhouse PPOR at the time, and had moved into a house we had bought as the PPOR.
We kept the townhouse and rented it out and managed it ourselves.
It was a positive cash flow and cruising with no problems.
My accountant just kept on us to sell, sell, sell, there is no money in property he would say.
We were getting no money back at tax time and no deductions.
Well we sold it.
After 12mths on the market and 3 real estates + all the mistakes in the book, we made a $10,000 capital loss.
Now I know a little about property and agents and I have a good accountant, I get very cranky at my past accountant. He must have lost me thousands over the years.......but every dog has his day and this is a very small city, I will run into him one day and i will give him some advice on Investing in Property.

The place is now worth 3 times what I sold for 3 years ago...But remember, there is no money in Property.


Lesson learnt was research and be very selective of accountants and advisors when talking Property....

cheers

 

[likewow]

Cmon guys, with 250 views and only 4 stories, either we are a shy bunch or we are in the midst of investing greatness

The stories so far are excellent and make great lessons for forum members to learn from 'others mistakes' and not make the same blunders.

 

[geoffw]

Most of what I'll say I've said before anyway.

My biggest mistake was not getting into property investing (not even my own home) 25 years ago when I was getting established in my job. Or 12 years ago when a few colleagues were recommending "negative gearing".

But apart from the spilt milk, my biggest mistake was getting int "tax advantaged" agricultural investments- which I went into as a result of going to a financial advisor. I went into those three years in a row- then ATO disallowed those deductions. I was up for a bill of $53K in respect to just one of those three years. Quite some time later, ATO "settled", leaving me with another $5K to pay, in place of the $100K I was expecting.

That financial advisor also put me into a number of yother investments, all of which went broke- another $10K down the drain. (But not as much as some people lost. MrsW had colleagues who withdrew $85K from their super into their SMSF, which invested into one of their schemes- and lost the lot).

The best thing I did, on the other hand, was going to a long lunch which involved lots of alcohol. One of those people told me about that Peter Spann person- and the rest is history, as the cliche goes.

Bad and good advice doesn't always come from where you expect it.

 

[Aceyducey]

I've been thinking about this topic for a couple of days, but really haven't been able to come up with an investing decision that I regret having made.

There's been a number of learning experiences, such as paying ticket price for our first property without negotiating, confusing the books for a business I part-owned thinking we had $20K in the bank and going on a spending spree when in fact we were overdrawn $20K, and making some bad share trading decisions (generally holding too long) with my superannuation 'play money'.

However I consider these as part of the bigger picture of investing. No one gets every decision right!

What some people call a mistake others may consider an opportunity that sets them free of fear of failure & launches them on a successful path.

For how many people out there was it a 'blooper' that set them on a successful path?

Cheers,

Aceyducey

 

[handyandy]

Biggest (and only) losses have been in shares.

Unrealised loss is on Telstra. Bought at about the $5.30 mark and since has been down to nearlt $4. So lost a $1.30. Doesn't sound much except purchased $750k of them.

Based on current price I am actually square due to dividends, not taking into account lost oppurtunity

The largest loss in option trading. The trade was a calander spread which was working fine, getting a premium every month. The share then went way up and my position looked like it was going to get called. I then listened to my broker who advised me to buy my position call back and then sell it again subsequently. This moved lost me about $35k.

If I had done what I had intended then I would have made about $10k. What I actually phoned the broker up for was to move my positions to a discount broker and simply let them be called as it would have cost me a fortune to get excercised with the full service broker.

Subsequent to this episode the share tanked and I was unable to write any further calls but actually had recovered the cost of the long term call.

Failed oppurtunities I have a few of.

The most memorable was a block of units that I had an agent discussing the sale with the owner. Kept checking with the agent 'everything is fine', 'contract on the way' - then it was suddenly sold but not to me . They purchased at $80k per unit sold 4 months later at $140k - there were 12 units, so about $720k I missed out on .

Cheers

 

[The Y-man]

3. trust my wife ( womans intuition) when she does not like someone


Peter 147

My wife says she agrees with this strongly...

Cheers,

The Y-man

 

[Bill.L]

Hi all,

I have also been pondering how to answer this thread for a day or two.
I've been investing for a lot longer than most people here and made most of the classic blunders in the past.

In both the options and commodities areas I totally overtraded according to my account size. For example in the early 80's, I went short the $A vs the $US. The rate at the time was $A1 = $US1.13. Because I put on several contracts, a small move against me cost me plenty and I exited the trade. Within months the $A started its long collapse.

I was a slow learner(or is that time heals all wounds), because in the early 90's when trading options, I made the same mistake again(and compounded the mistake by averaging into a losing position. These were synthetic short positions(ie simultaneously buying a put and selling a call), It cost over $20,000 on BHP shares and $15,000 on CRA(now RIO) shares.

Or perhaps the one that got away? The Apollo Bay houses one street away from the centre of town and the beach that were $67,000 6 years ago. We were seriously thinking of buying one, but ended up deciding that there was way too much land on these blocks that we would have to look after and why would people want to rent these older weatherboards anyway? Then after prices started to rise, decided to wait until they came back to reality. The ones on a single block are around the $350k mark, on the larger subdividable block around $450-500k.

Geoff,
This comment of yours "Bad and good advice doesn't always come from where you expect it." is a real pearl of wisdom.

bye

 

[MarkR]

Two major blunders
1. When I first left NZ I put 50% of my capital into 2 companies (Brierlies sp? & Bob Jones) on my fathers advice as 'shares never lose in the long run". BJ went under a fw yrs after the 87/88 crash. Brielies went sideways after intial drop & eventually got a few hundred $ for my initial $1000 after over 10 yrs.

2. PPOR bought in quiet period (1994), negotiated with agent & believed everything he said without going & talking to owner who I knew lived there. Mistake was I paid 5% or more over realistic price & could've bought a better location by a few streets & larger block for the same amount. Then again, the house went from 140k to 440k in 10 yrs but I could've gone from 140 to 550 !!!!

3. Let lesson 1 put me off the sharemarket for over 10 yrs until I decided to start educating myself a few yrs ago.

Lessons learned were
1. I do not know anywhere as much as I think I know
2. Watch who you take advice from (I always thought my Dad was a great investor, now I'm aware that for his time he was good, but didn't educate himself enough)
3. Never stop learning as not knowing can be expensive in both lost money & lost opportunities.

 

[The Y-man]

Learning Experience

For how many people out there was it a 'blooper' that set them on a successful path?

Cheers,

Aceyducey

Yup. The amount we "lost" in our "blooper" probably cost less than some seminars, and we learnt a hell of a lot from it.

Cheers,

The Y-man

 

[Tandella]

3. Never stop learning as not knowing can be expensive in both lost money & lost opportunities.

"If you think education is expensive, try ignorance" - Derek Bok

I love that quote.

No major blunders from my end, but still early days yet
Probably a reflection of my conservative upbringing.

Got involved with a network marketing venture about 3 years ago with gold products being their niche. Haven't made any money yet and have only parted with less than a couple of thou, but all the training and contacts made have been priceless, and I now also have a better understanding and appreciation of network marketing concepts and structures.

I still have alot to learn, but even at this early stage, I have to agree with all of Peter's 6 points.

 

[agent007]

My wife says she agrees with this strongly...

Cheers,

The Y-man

A friend of mine once told me to use my sixth sense when things get tough but, to ask my wife to use her seventh if I'm still not sure. It works

Cheers!

 

[Peter 14.7]

This thread provides that anyone who has the courage to have ago will sooner or later get stung to sone extent. The trick is to learn and try again.

Peter 147

 

[perky29]

A couple of blunders, but not as bad as some others here

In 1993 bought a SE QLD townhouse that was around 15 or 20k overvalued for 130k - (and Peter you are right - my just married wife - we were on our honeymoon - felt wrong about it but I wanted to go through with it) ....at least now its worth around 210k so in the end it was not too bad .....although it did cost years of missed opportunities as I lost the trust of my wife in investing decisions for 8 years....at least the last 3 years have been ok

 

[Geld 1]

Too Nervous - Lost Opportunity

Early on in the piece before my wife were married we travelled to Perth and DIDN"T snap up the bargains we saw around us as we were in holiday mode.

Then some time after getting married we knocked back purchasing some old run down units Sydney's West as we felt it they weren't fit to live in and we didn't want to be slum lords.... 3 Years later these same units are still not fit to live in but have nearly tripled in value.

And to cap it off... we didn't purchase some old homes in rural Victoria as we couldn't see any potential capital gain either... They've tripled in value as well in the same time frame.

Lesson learnt... Stop looking gift horses in the mouth.

Ps... We are happy and have also had a fair share of success... but sometimes you can't help thinking....if only!

 

[ren-A]

Founder shot through

Back in the heady days of the 80's, it seemed as if every new float just went up and up.

I heard of a new film company investing in Australia, and setting up a company to make movies here. Sounded great with great upside. "A firecracker" I was told. I got in on the float with my entire life savings (only $15k at the time - I was a young pup).

Well the shares listed at par, but were met by a solid wall of selling. They went down to around 50% of par value before I found out that the founder was the heavy seller!

The company? DeLaurentis Entertainment Limited. The founder - Dino DeLaurentis. It seems to me he had no real intention of ever making a movie - just capitalised on his name, and took the profits and ran. Eventually I sold out for $10k, sorer but wiser.

Lessons - look hard at what you're REALLY buying.

 

[see_change]

Mine also fit in the missed opportunity catagory.

Starting with the PPOR . We didn't buy the Double waterfront block at Putney , on Sydney Harbour for 200K in MId 80's....

Second, I did listen to the Financial advisor in mid late 90's who said that we'd do better by paying off our PPOR before investing in other properties. Took me about two years to realise that if we'd kept on doing that we'd pay it off just in time to retire. Once we changed tack we had a mortgage free PPOR and numerous IP's within three years.

See change