6 Investing Mistakes I Regret

July 11, 2011

The first time I tried my hand at investing in the stock market was a huge disaster, where I lost at least 50-75% of the money I invested. Today I’ll share the investing mistakes I made – hopefully my beginners mistakes will help you if you’re new to investing or are thinking about getting started.

Investing Failure #1: Listening to Advice from Amateur Investors

When I was eighteen years old, I was very excited about the idea of investing money in the stock market. I had long wanted to invest, but my parents always forbid me from doing so. Once I was 18, I couldn’t wait to take the few thousand dollars I had saved up from high school jobs and invest it in the stock market. The problem was, I didn’t have a clue about how to invest – I barely even understood how the stock market worked.

I spoke with a friend of my parents who often talked about investing. He was part of a stock club, and investing was a big hobby of his. I asked him about investing and he provided some good information about how investing and the stock market worked. Then I asked him for a “stock tip.” This of course, sounded like an adult thing to ask. He told me he thought General Electric was a good stock to buy at the time.

Perhaps (ok, likely) misinterpreting our conversation, I went out and put all of my money into General Electric. Now again, in my defense I was 18 years old at the time. I had never heard of terms like “diversify.” I barely knew what a mutual fund was. I don’t think General Electric even lost me all that much money, but it was clearly a risky stock buying strategy.

Investing Failure #2 – Getting Impatient

After a while, I got bored with keeping all of my money in General Electric stock. I started to put money into other individual stocks (again–not smart for someone who didn’t understand the market or the companies I was investing in). I spent a ton of money in transaction fees. I gambled on penny stocks that always lost me money. I was like the world’s worst day-trader. Ever.

Buy and hold was boring to my 18 year old mind. I wanted to prove my parents wrong and show that I was ready to invest. But I wasn’t taking the time to learn about how to invest. I was too proud to ask my parents for advice and too dumb to go read about it. I was actually proving that my parents fears were warranted, but I couldn’t admit it. Meanwhile, my losses were starting to pile up–thanks mostly to fees lost with all of the buying and selling.

Investing Failure #3: Not Researching Investments 

Like a degenerate gambler, I decided I needed a “big score,” to “at least get back to even” with the money I had lost in the market. I had started with around $3,000 and was now done to about $1,500, if I remember correctly. Shortly after 9/11, I had read in the Philadelphia Inquirer, that one of the local airlines (American Airlines I believe) had filed for bankruptcy protection.

I figured that a major airline would always stay in business (not studying about the deregulation of airlines or looking into the finances of the airline in any way). I sold all of my other stocks and put it all into American Airlines. I figured the stock couldn’t fall any further, since they had already filed for bankruptcy, – unfortunately I was wrong.

Investing Failure #4: Selling at the Bottom

I then compounded the problem by selling at the bottom, when the shares were basically valueless anyway. At that point in time, I turned my “paper losses” into “real losses.” I think I cashed out about $700-$800 of the $3,000 I originally invested.

Investing Failure #5: The Great Depression Attitude

I had started out as an enthusiastic investor and had been stung pretty badly. “Screw the stock market. It’s just legalized gambling,” I thought. I started hiding the remainder of my savings underneath my mattress, like some Great Depression Survivor who no longer trusted the banks. I missed out on the boom-time that followed.

Investing Failure #6: Lack of Knowledge

Underlying all of these mistakes, was a lack of knowledge. I had failed to take the time to thoroughly understand the system. I failed to comprehend even basic terms such as diversification or risk tolerance. More complex terms such as price to earnings (P/E) ratio were completely foreign to me at the time. I had been beaten and battered by the market; and at the time, I was convinced that I would never invest again.

My Investing Mistakes

Investing in the stock market shouldn’t be taken lightly. Even the most intelligent of investors can suffer huge losses in the stock market. I hope that by reading about my investing failures, you will be better equipped to make smart decisions. Or at the very least, more intelligent decisions than I made.

In an upcoming post on investing successes, I will tell the story of the second time I went into the market. It was several years later when I was finishing up college. Unlike my first venture into the stock market, I have had since had some successes along the way.

How about you what investing mistakes have you made? Do you have any stories of making epic mistakes when it comes to investing in the stock market?  


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Chris Thomas is a personal finance blogger at Debt Payer.com and the owner/creator of FreelancePF. Chris has a B.A. in English and a J.D. in law. Chris lives in the northeast with his Wife and dog.

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4 Responses to 6 Investing Mistakes I Regret

  • Janelle

    I just heard a story on marketplace money about a “fantasy” stock market game/website updown. I’ve always wanted to get into buying stocks but also have no knowledge. This website lets you “manage” a million dollar portfolio, learning hard lessons without the financial risk.
    But I’ve noticed all the stages of stock market learning, I’ve been going through! I’ll try to become less frenetic about my buying and selling!

  • tmgbooks

    Ben: You write this:

    “Even the most intelligent of investors can suffer huge losses in the stock market.”

    You are an intelligent person but that did not prevent your losses in the stock market that you describe.

    Lack of appropriate knowledge, not intelligemce, is the issue. Most people have enough intellect to understand the fundamental aspects of investing in the stock market if they take the time to educate thmeselves.

    The reason I don’t like the stock market is that no amount of information and education will protect you from the vagaries of the market.

    Diversification, risk tolerance, and all the “informed-investor” terms you mention are all well and good but basically the stock market is a casino.


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