Before I turned 28, I made several bad investment decisions that cost me financially and emotionally. These mistakes were difficult to endure, but the lessons I learned from them were invaluable. Today, these experiences shape how I approach investments and advise my clients. They’ve made me a much more cautious and disciplined investor, and I hope these insights help you avoid similar pitfalls. Here are the three worst investments I ever made and the five most valuable lessons I learned.
1. The Property Syndication Disaster
One of my most painful financial mistakes happened when I was just 20 years old. After my father passed away, my family decided to sell the farm and the businesses he built. We were left with a sizable sum to invest, and we trusted a broker who convinced us to put nearly all our family’s wealth into two property syndications: Sharemax and Picvest. The sales pitch was enticing—guaranteed capital and the promise of doubling our money in five years. Unfortunately, both syndications collapsed, wiping out almost all our funds. My mother, who should have been financially secure, became financially dependent on my brother and me. My grandmothers, who had invested their life savings in these schemes, faced a similar fate.
Lesson 1: Diversification Is Crucial
This experience taught me the importance of diversification. If we had spread our investments across various asset classes and sectors, we wouldn’t have been so vulnerable to the collapse of a single scheme. Putting all your eggs in one basket can be devastating when things go wrong.
Key Takeaway: Spreading your investments across different asset classes and sectors helps reduce risk. Diversification is one of the most effective strategies for protecting your wealth from catastrophic losses.
2. The Bank Investment Gone Wrong
After the property syndication disaster, I sought advice from a consultant at a major bank. He advised me to invest in an endowment policy, which was not tax-efficient for my situation. I had very little taxable income, so the structure of the endowment didn’t benefit me. Worse, he encouraged me to invest in a high-risk Mining and Resources fund because it had been the top-performing equity fund for five years. Shortly after I invested, however, the fund crashed during a market downturn and took years to recover.
Lesson 2: Don’t Chase Past Winners
This experience taught me that past performance is not an indicator of future success. Just because a fund has performed well for years doesn’t mean it will continue to do so. Investments that have experienced stellar growth often become more volatile or may have reached their peak.
Key Takeaway: Don’t invest in something solely because it has done well in the past. Constantly evaluate an investment based on its current fundamentals and future potential.
3. The Venture Capital Coal Mining Debacle
My third major mistake was investing in a friend's venture capital business focused on coal mining plants. The founder was incredibly charismatic, and I was swept up by his enthusiasm and promises of great returns. I trusted him based on his personality and vision, but I didn’t fully understand the complexities of the business. As time went on, it became clear the venture was mismanaged, and unfortunately, when the business folded, many investors lost their money.
Lesson 3: If It Sounds Too Good to Be True, It Probably Is
This experience taught me that charismatic personalities and grand promises often mask underlying risks. No matter how compelling a person’s vision is, looking beyond the pitch and critically assessing the investment is essential.
Key Takeaway: Be cautious of investments that promise unusually high returns or seem too good to be true. Always conduct thorough research and due diligence before committing your money, and never let personality alone influence your financial decisions.
Lesson 4: Don’t Invest in What You Don’t Understand
One of the biggest mistakes I made with the venture capital investment was not fully understanding the business model or the industry. I trusted the founder’s vision but didn’t take the time to educate myself on the risks or mechanics of coal mining ventures. When the business struggled, I was caught off guard.
Key Takeaway: Never invest in something you don’t fully understand. If you can’t explain how an investment works, its risks, and how it fits into your financial plan, you shouldn’t invest in it. Always take the time to educate yourself before committing.
4. Holding on Too Long: The Sunk Cost Fallacy
Another major mistake was holding on to a failing investment for far too long. After investing in the Mining and Resources fund through the bank, I saw the value drop significantly when the market turned. However, I convinced myself the market would recover, and I held on to the investment longer than I should have. When I finally sold, the damage was done, and I missed other opportunities.
Lesson 5: Cut Your Losses Early
This experience reinforced the importance of knowing when to walk away from a bad investment. Holding on, hoping things will turn around, can lead to more significant losses. It’s essential to recognize when an investment isn’t working and move on before the situation worsens.
Key Takeaway: Don’t let emotions or the sunk cost fallacy stop you from making rational decisions. Sometimes, the best thing you can do is cut your losses early and redeploy your capital elsewhere.
Conclusion
The property syndication disaster, the poor investment choices with the bank, and the venture capital coal mining debacle were three of the worst financial decisions I ever made. However, the lessons I learned from these experiences have shaped my approach to investing and how I advise my clients today. Diversification, understanding your investments, and avoiding chasing past winners are critical to long-term financial success. Above all, it’s essential to remain disciplined, trust your research, and avoid emotional decision-making. Mistakes are inevitable, but learning from them makes you a smarter, more effective investor.
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