Successful investing is about learning from your mistakes... or mine!
Last week I shared a story about one of my friends who had lost a sizeable amount following an ill-informed yet entirely commonplace investing blunder. This week, to even up the playing field, I thought it would be only fair to go through some of my own hideous investments.
One of my first meaningful investments was into a cryptocurrency called Ripple (XRP) in late 2017. Armed with little-to-no understanding of the crypto space and about an hour of research, I decided that a $2,000 position was the only logical next step. My investment thesis at the time went something like this.
"It was trading at 20c a coin three weeks ago, and now it's at $2.20. If it continues like this, I'll be a millionaire by Easter."
It started off well, jumping from $2.20 to $3.30 a coin. A 50% jump in just a matter of days. My genius clearly knew no bounds.
The subsequent three months were somewhat less successful; it was a cataclysmic disaster, to put it mildly. The price did a vertical nosedive from $3.40 to $0.50c in a matter of weeks.
My guaranteed millions had turned into a significant loss during a time when I definitely couldn't afford a 'significant loss'.. I was paying rent in Dublin at the time… enough said.
Another of my most memorable investing blunders is one I have discussed previously. This ended much more successfully but honestly haunts me far more than any loss ever will.
I purchased the much-beloved Canadian E-Commerce company 'Shopify' in late 2018 and sold after doubling my money just a few months later. I then watched on from the sidelines with tears in my eyes as Shopify went on one of the most relentless runs I have ever seen from a Large Cap company, a near 20X jump from the day I purchased.
It may seem strange that I spend so much time regaling investing horror stories, given that my overall goal is to encourage and help people to start investing. Still, there is a couple of important universal take-aways from these personal anecdotes.
Nobody gets it right all the time. You simply need to be right more often than you are wrong. Casinos are heralded as money-making machines but only win 54% of the time. Not every investing position will be a winner. You will be wrong plenty of times during the course of your investing journey, and that's perfectly fine.
It's always important to highlight failures. We are all human. Modern technology has ensured that we are berated by personal highlight reels on a daily basis. Skills are advertised, flaws are hidden. We have a societal tendency to describe successful investors as having guru-like powers. This 'pedestal culture' means everyone else looks at them and says, "I could never do that." Which is unfortunate because more people would be willing to try if they knew that those they admire are probably ordinary people who played the odds right.
I know this held me back for longer than I care to admit.
"When you are keenly aware of your own struggles but blind to others', it's easy to assume you're missing some skill or secret that others have." – Morgan Housel.
Don't let fear of failure stop you from getting started. Learn by doing. I have learned a lot from all my investing mistakes, and they have ultimately made me more successful over time. While I am acutely aware that this sounds like something you would pull out of a fortune cookie at an all-you-can-eat Chinese Buffet, it still stands true.
Start small but start now. It's the best way to learn.