My Best and Worst Investments Ever

July 12, 2013

Some of the questions that come up a lot in conversations about personal finances deal with the subject of investing. What can I invest in now to make the most money over the next year? What should I invest in now?  What have been your best and worst investments ever?  While the questions about what to do today are not questions that I can answer, the best and worst investment decisions I’ve ever made are questions I could take in a lot of different directions.

For the worst investment decision I’ve ever made, I can view this from a “life” perspective (marrying the wrong person and getting a divorce had a much bigger impact on my financial life than any single investment decision, but I’ll leave that topic for another day) as well as an investment decision.  Speaking strictly about investing, easily the worst decision I’ve ever made was buying a dot com stock about two days before the bubble burst.  The entire time that the dot com stocks were the hot investments that went up every day, I was a nonbeliever.  I am old fashioned and believe that companies need to have a solid business plan, a strong revenue stream, profits…you know, the kind of things that successful businesses have done since the dawn of time.  I didn’t get lured into the world of cool technology with a great website name but no profits and no thriving business behind it.

Until…I violated one of my primary rules of investing.  I let my emotions make a buying decision and not my analytical side.  It seemed like every day I heard from another friend who just made a bunch of money in a stock that no one had ever heard of and that no one had ever done business with, but the stock price went up and the company name was really fun.  I was the stick in the mud who wouldn’t buy into the hype as the market seemingly reached new highs every week.

I got a letter in the mail from a prior employer and unbeknownst to me, I had accrued some cash value in their pension plan and they wanted to send me a check to clean up their pension roster.  Suddenly, I had some cash (in an IRA rollover) and needed to buy something other than a money market fund or so I thought. (In retrospect, a money market fund would have been a far wiser choice.)

The analytical side of me succumbed to the emotional side and I used that pension money to buy what my financial advisor suggested was the cream of the crop in terms of dot com companies. In what seemed like a matter of days, but was probably closer to several months, the Internet bubble burst and stocks that were high flyers were now in a free fall.  Having just purchased the stock after needing a while to talk myself into buying it, I stubbornly refused (yes, let the emotions get in the way of the analytics again) to sell it.

Eventually, the company folded and my investment was a complete 100% failure. The only solace I can take from the experience is that I used money that I didn’t even realize I had and I learned a valuable lesson. Any time I let emotions take over the analytical side of my investment philosophy, nothing good is going to happen. Emotional investing is a recipe for failure.  I now, sadly, know this firsthand.

The flip side of the worst decision ever is not exactly a specific investment.  It was an investment in myself. No one in my family, on either my mother’s or father’s side, had ever gone to college. A life in either the enlisted military or manufacturing was the path that everyone at family reunions had chosen.

I knew that I wanted to do something a little bit different. If I was going to have a military career, it was going to be through one of the academies and if I was going to be in manufacturing, I wanted it to be as the owner not as a production line worker. Graduating from high school and immediately entering the military or the workforce wouldn’t have gotten me to where I wanted to be so college looked like the best option.

I paid for it 100% on my own through work, loans, and taking a semester off periodically when I couldn’t afford it and working 2-3 jobs that semester to build back the college fund. It was a struggle.  There were times I wanted to throw in the towel and just forget about it.

But I continued to make the investment in myself and while today I’m not doing what I thought I’d be doing when I was 17, I can’t imagine my life without the investment I made in myself – college, then an MBA program after a few years of work, then the CFP program. My friends call me “the eternal student” because I’m always looking for something else to learn about. It certainly wasn’t the easiest path I could have chosen, but in retrospect, my education was easily the best investment I’ve ever made.