My 4 Worst Investments And How You Can Learn From My Mistakes

People always talk about their best stock picks. It’s more fun to talk about buying Facebook at IPO or picking up Netflix before it’s meteoric rise.  Investing in Moonshot companies is fun. However we like to keep it real at Financial Freedom Countdown. In fact, I believe you can learn more from failures than your successful picks.

Let us dive into my biggest investment mistakes.

I have certainly made more than 4 horrible investments; but to keep it simple, I only included the ones where I lost more than $50,000 each time.

Sears Holding (SHLD) – 2007 As you know from my immigrant story, I came to this country by myself. Everything from emergency fund to bank accounts to credit cards to renting an apartment was a learning experience. Stocks were not even on my radar the first few years. In fact, I never contributed to my 401(k) for the first 2 years. And this was with a 50% match. Yikes!!

One stock which he highly recommended was Sears Holding. In my defense, I did not immediately buy although Jim Cramer was yelling BUY BUY BUY. I researched the stock. Although not a fan of retail, Eddie Lambert was a Wall Street legend with a great track record as a hedge fund manger. He had gained a reputation for spotting opportunities where others did not. He began acquiring Kmart stock in 2003 and Sears in 2004.

While we may not agree with everything he says, there are nine decades of wisdom buried in Warren Buffett’s quotes.

Lampert was featured on Time 100 list for being one of the “brightest minds on Wall Street”. He was the richest person in Connecticut in 2006 with a net worth of $3.8 billion. Even if he failed, many stores still held tremendous potential value in the form of real estate on which Kmart and Sears stores were located.

Lesson Learned: Don’t take stock tips from Jim Cramer lol.  It is wrong to assume success in one field translates into expertise in another. Lampert’s hedge fund success was extrapolated to his expertise as the CEO and Chairman of Sears. 

United States Natural Gas Fund (UNG) – 2008 One of the biggest challenges in any oil or natural gas commodities fund is the contango and backwardation. Since these ETFs are futures contracts; one needs to watch the spot and futures price. With a skewed price curve, the fund is literally forced to pay a deep premium to roll their contracts, inevitably dropping the value of the fund intrinsically every month.

The other major mistake was not anticipating the change in technical advancements.

If you told anyone in 2008, that USA would achieve energy independence in a decade and in fact would be a net energy exporter; they would have laughed at you. And yet here we are 10 years later. Lesson Learned: When investing make sure you anticipate any technological changes that may result in your thesis not being valid in the future.

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