The losses were getting to me. I could barely manage to get any sleep between trading days. Each second that passed felt like a second closer to my heart’s detonation. How much longer could I bear the weight of this pressure?
At 6:30 a.m., I painstakingly logged onto my brokerage account expecting another financial beating. My stomach began to churn as my eyes grudging gazed over my portfolio in an attempt to delay the inevitable pain. As I looked at the value of my stock, I thought if I squinted hard enough, maybe those losses would turn into gains. Sadly, the losses were real, and my portfolio was now worthless. In a short three-week period, I had lost all of my money, down to the last cent.
How could I let this happen?
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Sharing Our Learning Experiences
When I first joined BiggerPockets, I enjoyed reading all of the investors’ success stories.
While the stories were inspirational, I couldn’t tell if these triumphs were due to investment wisdom or luck. Let’s be real — if you invested in buy and hold real estate during the long U.S. post-war growth spurt or after the recent financial crisis, you had to try hard to fail.
So, were all of the investors in this period lucky? Who knows.
More importantly, where are the failures? Maybe the failures are not here to share their stories because most of them have quit real estate investing.
Maybe the successful investors are just survivors. When I think of a survivor, I think of someone who has endured through failure when others have quit.
So for all of the real estate investors who has survived, there has to be a story of failure they have overcame.
The following is my story of failure.
My First Investment
I bought my first shares of Nintendo Inc. before my 13th birthday at $12 each, and eventually I sold them for $50 per share. The profit was earth shattering for a kid, but what excited me the most was the idea of using brain power instead of muscle power to make money. If I continued to invest my money in the stock market, I knew I could eventually build a small fortune to lift myself and my family out of poverty.
Throughout high school and college, I continued to save my money and invest in the stock market.
Keeping Up With the Investment Herd
At Santa Clara University, I wanted to learn more about investing, so I enrolled into an investment fundamentals class. Our final project involved a fantasy investing simulation where each student was allocated $100,000 in virtual money to invest in stocks. My investment criteria was based on the principles of value investing — buying quality companies at a discount.
After the three month simulation was over, my portfolio earned a respectable 10% return. However, one of the students I was competing against spent his time day trading. His portfolio increased by 1,000%!
The student’s investment strategy would use massive amounts of leverage to day trade highly volatile stocks. At the time, I didn’t realize his strategy had more to do with luck than skill. His strategy was tied to the infinite monkey theorem, which states that if you get enough monkeys in front of a typewriter, one of them is bound to write a great novel. I didn’t know I was dealing with a lucky ape, not an investment genius that could forecast the moves of markets — which no one can reliably do.
While it was only a simulation, the fact that my investment criteria didn’t provide superior results made me question my strategy.
Greed Takes Hold
I decided I needed to change my investment philosophy to prove I could make money quickly. I took my $25,000 of my hard earned savings and decided to day trade stocks. To put things into perspective, I was a year removed from being on Section 8 housing. No one in my family attended college, and all of us were living below the poverty line. I was making about $400 per month working a part-time job, so $25,000 was a fortune.
Because I had greed coursing through my veins, I ditched my investment principles and plowed $25,000 into a highly volatile stock. All I could think about was what would happen when the stock tripled.
First Stage of Investor’s Grief: Denial
Everyday I would check my portfolio, eagerly anticipating my success. Slowly but surely, my stock was losing money. I knew this was a short-term blip in the road, and eventually the stock would recover.
Heck, I was so confident in the trade that I didn’t have a stop loss (a trigger to automatically sell a stock at a predetermined price) because I knew the stock would make me a ton of money.
Weeks passed, and things only got worse. My trade was going deeper and deeper into the red. But I pressed forward with my new strategy.
Eventually, I lost everything.
Second Stage of Investor’s Grief: Anger
How the **** did this happen!
My dad saw me in my angered state and told me, “I’m glad this happened to you. You became greedy. You forgot your investment principles. You forgot that money is a vehicle to do good. Money shouldn’t be made for the sake of money. Money isn’t something to be worshipped. Nor should it be wasted on worthless luxury that begets the thirst for more money. It’s to be used to help others and to have fulfilling experiences. You made the mistake of losing respect for money. If you remember to never forget your principles, you will have learned a valuable lesson.”
How could he tell me this? I lost everything, and now he’s going to tell me, “I’m glad this happened to you”? Whose team is this guy on?
Third Stage of Investor’s Grief: Bargaining
If I only would have set up those stop losses. Why did I pick that stock? This must be a nightmare that I need to wake up from! Maybe if I could build a time machine, I could go back and prevent myself from buying this stock altogether. But all of these “what-if” scenarios did nothing to bring back the $25,000 I lost.
Fourth Stage of Investor’s Grief: Depression
I was distraught, depressed, and nearly bed-ridden for a week. My energy was gone, and I lost the will to do anything. The shame of losing so much money was unbearable. I thought my life was over and there was no coming back from this loss. The $25,000 was supposed to be the bedrock for my fortune. It was not merely money; it was an extension of my ego and self-worth. Now I was back at square one. Poor again. All of that saving, planning, and investing for naught. I felt like a complete failure.
Fifth Stage of Investor’s Grief: Acceptance
Eventually the depression subsided. After recovering from this loss, I seared this lesson into my brain. It would have been easy to blame the market for what happened, blame the owners of the company, or find another scapegoat. I realized money had taken control of me. I placed so much value in money that I became a slave to it. I was responsible for this failure. If that was the case, then I knew I had to the power to make sure this wouldn’t happen again.
So I took these lessons and applied them to my future investments.
What’s Motivating YOU to Invest?
Most investors focus on analyzing the investment, but they fail to analyze their reasons for investing. Before we make the investment, we should be clear on why we are investing.
Why are you investing in the first place? If your goal is to get rich, you will soon learn that becoming rich is a moving target. You’ll get stuck in the trap of conditional investment happiness, where the goal posts for financial freedom continually move, requiring you to earn more and more.
Maybe more isn’t the solution. Could it be possible you’re searching for something else? Have you asked yourself why do you need the money in the first place? Could it be you think money can solve a deep-seeded emotional issue? Or is it just greed?
What are your emotional triggers? These triggers come in all shapes and sizes, such as: the fear of missing out, the scarcity mindset, unnecessary time pressure, etc. Understanding emotional triggers builds self awareness that will protect you from emotional risk.
Are you looking to escape from your current job? Being your own boss can be full of stress and pressure, and many people who start their own businesses fail. Not to mention, once you quit your job, you’ll need to start paying for healthcare (medical, dental, and vision), retirement, insurance, FICA taxes, and other necessities. Soon you’ll learn you might have been better off continuing to work your job while investing on the side.
So what are you truly looking for in investing? The people who become successful in any pursuit don’t chase the external rewards. They find satisfaction in the challenge of pursuit without the fear of failure. A master carpenter didn’t slog through the rough patches of his career just to be paid. He made it through the tough times due to his love of carpentry. While others quit because they were chasing a quick buck, he continued to work and eventually became world class. As a result of this, he now earns world-class pay.
You should enjoy the act of investing. The challenges involved. The lessons of failure. Not the financial rewards because unless you’re lucky. no one becomes an overnight success in real estate.
Now that I’ve shared my story, during the next few weeks, I will explain how I used this lesson to build an investment plan, as mentioned in my podcast. Stay tuned!
I’ve shared my failure. How about you?
Please share your story in the comments section.