June 17, 2016

I show GenX’ers how to dominate finances and get more out of life.

As a financial advisor, I’m educated on nearly every type of investment under the sun. In addition, I’m highly trained to take that knowledge and turn it into actionable advice that helps my clients succeed.

Still, my investing history isn’t perfect. Before I became a financial advisor, I made my share of embarrassing mistakes – both in the stock market and the investments I chose for my personal brand.

When I think of my worst investment mistakes, two stories stick out in my mind. While each is different, they underscore some of the biggest lessons I have learned as an advisor – lessons I actively try to impart on my clients to this day.

Let’s start with my first foray into investing in the stock market, shall we? It all started when I got really into the stock market before the tech bubble burst. After the huge market correction that took place, I noticed that Lucent Technologies was trading at around $8 per share. Obviously, it would eventually work its way back up to its former worth of around $60 – $80 per share, right? I was going to be rich!.

Sadly, Lucent Technologies never rebounded the way I hoped and I wound up selling my shares for a loss. My biggest mistake was one that you hear repeated often in the investing world:

Another big investing mistake I made was a different kind, but still costly. When I first started out as a financial advisor, I read several books on how to market myself and my brand to get more clients. Based on some advice in one of the books I was reading, I hired a high end marketing firm to create beautiful custom brochures for my business.

When I switched firms shortly after that, I realized the custom brochures I had were virtually worthless – both because they had my old company’s name all over them, and also because they never actually helped me get clients to begin with. Worse than that, my wife later showed me how I could have ordered the exact same brochures for about half the cost!

The lesson here is a big one:

When you’re investing in your company or your brand, it pays to have a comprehensive plan – and to shop around!

11 Financial Advisors Share Their Own Worst Investing Mistakes

The truth is, the vast majority of investors aren’t perfect – and that includes financial advisors. Many of us learn through trial and error just like everyone else.

Want proof? Here are some of the worst financial mistakes some popular financial advisors made when they were first starting out:

Mistake #1: Investing in Individual Stocks Without a Plan

This story comes courtesy of Ronn Yaish, Wealth Advisor at Yaish Financial Services. After Ronn and his wife got married in 1999, the couple decided to invest some of their wedding money with the belief they would see huge returns.

Without much hesitation, Yaish and his wife invested blindly into tech stocks. However, the couple failed to research their investments or consider how those investments might work with their long-term goals.

“The fact remains that we didn’t have a plan, and we had no experience or business investing money in something we didn’t understand. The icing on the cake was the poor timing of this life lesson as it occurred smack in the middle of the dot-com crash of 2000,” he says.

The good news was, Yaish and his family didn’t bet the farm. They lost plenty, yes, but not all of their savings. The main takeaway, as Yaish sees it, is that real investing shouldn’t feel like betting or gambling.

“I had no business buying stocks of companies I knew nothing about nor did I truly understand the rules of the stock market,” he says.

Mistake #2: Doubling Down at All Costs

Portland financial planner Grant Bledsoe shares one of his most embarrassing investing mishaps:

“Back in 2011, I was really into picking stocks and finding undervalued companies. There was a brokerage firm I followed pretty closely called MF Global. It was a commodities & derivatives firm based in New York. I hadn’t really formed an opinion about the company, I was just interested in it with everything that had gone on in the banking sector.”

At the time, he explains, the economy was just starting to rebound from the mortgage crisis. Then, all of a sudden, news broke that MF Global was having “liquidity issues.” Shortly after, shares plummeted to around $2.50 per share.

Rather than pause, gather his senses, and make a logical decision, Bledsoe pounced immediately.

“I was far too aggressive. I decided to buy out of the money, $3 call options. This means that if the stock rebounded above $3, I could buy shares for $3 and would profit from the transaction. If they remained below $3, I’d lose everything.”

Sadly, MF Global filed for bankruptcy a few weeks later.

Mistake #3: Investing Everything You Have Into a Depreciating Asset

Scott Wellens, financial planner from Fortress Planning Group made a really bad “investment” during the early years of his career.

“The worst investment I ever made was buying a brand new car after gaining full-time employment after college. It was 1995, and I was making just $20,000 per year at my new job but was approved to buy a $30,000 car.”

Wellens continues:

“This single purchase prevented me from having extra money each month to invest for retirement. The car eventually lost all of its value (cars are almost never a good investment) but $30,000 invested in the S&P 500 in 1995 would be worth over $180,000 today. The new car smell was nice – just not $180,000 nice.”

Mistake #4: Believing Something That’s Too Good to Be True

Greg Hart of Haddon Wealth Management shares how his worst investment turned out to be one of his life’s biggest lessons.

It was the 1980′s and Hart was just out of college.

“There were advertisements touting how, with a small investment, you could make huge profits and all I had to do was dial the 1-800 number!  Well, as a 23-year-old fresh out of college with a degree in finance, I thought I should be the one to make these huge profits!  I had been working for several months, had saved up some money, and it was time to get rich!”

Hart called the 1-800 number and started “investing” with a woman named “Cherry” right away.

“She explained how if I bought just one contract of a sugar future for $3,000 it had the chance to grow ten-fold in 6 months! I was in. Well, as you can imagine, my $3,000 slowly but surely eroded down to zero, as, what a surprise, the sugar market turned against me, and I lost all $3,000! Cherry somehow disappeared and I never heard from her again.”

Mistake #5: Investing in Shady Financial Products

Clint Haynes, Financial Planner from NextGen Wealth, shares his story of investing in a jumbo mortgage lender in 2007:

“I invested in a mortgage lender called Thornburg Mortgage in the summer of 2007. I heard about this company from an investment newsletter I subscribed to at the time. After doing a little research, I decided to put my money where my mouth was.

Long story short, it didn’t exactly turn out the way I was hoping. Things were going along nicely for a while, but as we all remember the mortgage crisis came roaring in like a freight train and there wasn’t much I could do so I continued to ride it out. They eventually filed for bankruptcy in 2009 and, poof, there went the money I invested in just under three years. It was certainly an eye opening experience to say the least and one I will never forget.”

Mistake #6: Assuming Good Stock Price = Good Value

Andrew McFadden of Panoramic Financial Advice shares his worst investment experience:

“The first investment I ever made was back in October of 2008, right after the stock market had experienced one of its worst declines in history.  I was fresh into my first career position as a stock analyst, and had an arsenal of research and financial modeling tools at my disposal. I thought I was hot stuff.

While I was personally covering the technology sector, I couldn’t help but notice the complete implosion of the financial sector during this time in history. Notably, Bank of America’s stock price had literally been cut in half over the previous 12 months, and was sitting at what seemed like a bargain $24 per share.

About the author 

Ronn Yaish

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