My Worst Investment Decision To Date…

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I made a mistake. I was hoping I wouldn’t have to admit it, but after two years and a continued drain on my wallet, I think it’s safe to say that I’ve made my worst investment decision to date…

My Worst Investment Decision to Date

It was June 2016. Liz and I had our first rental property humming and we were starting to save aggressively for the next one (with cash of course – we figured it would take about 2 years). At the time, the Dow was at $17,400 (the highest it had ever been) and the stock market had already been flailing for an entire year. And that’s when I saw it. The double top…!!

my worst investment decision to date - DJIA up to June 2016

The Double Top? What the Heck Am I Talking About??

Back in my college years, I was way more interested in stock investing than I am today (these days I’m all about investing passively in index funds). From those early years, I remembered specifically hearing about double tops – a technical investment term that I was hoping was about to make me rich!

Alright, so what exactly are we talking about here…?

Warren Buffett…he’s NOT a technical analyst. He’s what you’d call a fundamental investor – meaning he buys solid companies that will likely grow because of their track record, their leadership, and their product. Technical analysts don’t care about any of those things. The only thing that matters in technical investing is the movement of that line on the chart.

If the market hits a “double top” and then breaks below the “pullback low”, watch out! It’s getting ready to tank!

I know I know…this jibber jabber makes no sense, so here’s a picture for all of you that could really care less but what to know what the heck I’m talking about in this moment (thanks Investopedia!):

my worst investment decision to date - double top

Looks a heck of a lot like the chart of the Dow on June 20, 2016, right??? (really, stop and take a look again. It’s like an exact match!!). Pair this with the uncertainty of the 2016 U.S. election… I decided it was time for me to strike!! The stock market was sure to tank…likely in just a matter of days!

My Fool Proof Plan…said this fool named Derek…

Like I said, Liz and I were starting to save up some cash for our next real estate investment. Based on what I was seeing in the market and on the political front, here’s what I thought would happen and what my course of action would be along with it:

  1. We buy $1,000 worth of silver
  2. The market crashes
  3. The value of real estate starts to soften (or even fall)
  4. Precious metal values skyrocket
  5. I sell our silver for $2,000-$4,000 and put that toward our next cash housing purchase.

Pretty solid plan, right? Silver goes up, housing goes down, I sell the expensive silver to buy the cheap housing. BOOM! What could go wrong?? Get ready for my story on my worst investment decision to date…

What Actually Happened

Fifteen days after I invested $1,000 into precious metals (mainly silver), the values jumped and it was suddenly worth $1,230! I was up 23% on my money and I was just 2 weeks in!

Most people would be ecstatic if they earned that return over the course of 2 years! I mean, check this out! Things couldn’t have been going better. (Blue line is the precious metals value, green line is the S&P 500). Skyrocketing, baby!!

my worst investment decision to date - the good times

And that about when things started to go terribly wrong…

Since that date, my gold and silver investment has never been the same. Because of the apparent strength of the market, my hedging investments started to plunge. By October, my investment was worth just $950. Then…to add insult to injury…I was so confident that the market would plunge and my silver would skyrocket once again that I doubled down! I tossed another $1,000 into the mix assuming that silver would once again jump to that 23% gain (or more) and I’d be the genius that earned $460 instead of just $230.

As you can probably guess…it didn’t quite work out that way. Here’s the rest of the chart… The S&P 500 takes off…and my precious metals plummet… Womp wommmm….

my worst investment decision to date - S&P 500

 

my worst investment decision to date

To date, I’m down $550, or roughly 30% over the course of 2 years. Not exactly the track record I was hoping for… Like I said….my worst investment decision to date…Pretty terrible.

My Worst Investment Decision to Date – Lessons Learned

I learned two main things about investing over the last two years:

  1. “Wealth gained hastily will dwindle, but whoever gathers little by little will increase it.” — Proverbs 13:11
  2. Speculating in the market is a sure way to set up regrets for your future self

In other words, you can’t just swing for the fences every day when it comes to the stock market. You’ll strike out far more often than you’ll hit a dinger…which of course means you’ll eventually end up broke and left with just a few stories about those great moments. Too bad there are far more stories that you choose not to tell…

My Future Plans – How They’ve Changed

Instead of trying to time the market and make it big with a hedge investment, I’ve discovered it’s far wiser to just invest in a few different index funds.

  • I’ll get the return of the market,
  • I won’t have to worry about the sharp highs and lows of precious metals, bitcoin, or any other speculative investment product, and
  • Overall, I know my investment is far more likely to go up than down (thanks to decades of history on these markets).

Thankfully, my silver investment was only $1,000 (well, actually $2,000 after my “genius” double-down move). This story could have been far worse if I had thrown our entire savings account into the mix. Sure, we lost $500, but it wasn’t money we were depending on. Plus, I’ve got the luxury of holding onto this investment with the hope that it will eventually go up when the overall stock market softens (hey, it could happen!! ;)).

Have you ever pulled a bonehead move like me? Have you made an investment that you thought was a sure deal and it turned out to be the mistake of a lifetime? What’s your story?

What’s YOUR worst investment decision to date?

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4 comments to My Worst Investment Decision To Date…

  • This post reminds me of why I consider you a friend or kindred spirit even though we’ve never had a real conversation or ever met. Why? Because it’s exactly how I would have thought: I’m kind of a hobbyist at trying to time the market. I like evaluating my “gut feel” and then trying to make money betting on my feelings. When I’m right, I walk around the house like a peacock with all his feathers out as I tell my wife, “I was right today!!!!” And then when I’m wrong, it’s like, “Whoops, didn’t expect that to happen at all.” In the end trying to time the market is all just a hobby for me, meaning: 1) It’s money I was going to invest anyway. 2) I rarely, if ever, make dangerous bets that could really hurt me financially. I haven’t found a way to time the market, but I understand it is fun to try.

    • Lol. It’s important to remind your wife when you’re right, and not only remind them, but shout it out randomly to keep her on her toes. Hahahaha. I really need to do this. I might try it today.

      Love the comment. Keep doing awesome stuff financially and try to limit those silver investments. 😉

  • Hey don’t beat yourself up over $500, I personally know people that lose that much each month playing the lottery and going to the casino. Obviously these people are not subscribers of your blog, but I’m working on them.
    Thanks for staying honest with us, your readers, and admitting when you make such “horrible” mistakes. 😉
    I recently sold most of my tangible silver to fund my vacation, I got roughly the same price for it that I had paid about 2 years ago, so no big deal.
    Keep up the great work!
    We should close on our next flip house project by the end of the month so stay tuned to our blog for details on that one, it’s going to be HUGE!💪👍👌

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