My Dumbest Investment
Any investor, if they have been investing long enough, has made at least one dumb investment. I have made a few, that is for sure.
The one that sticks out in my mine is when I purchased a small forestry micro-cap stock out of Vancouver that I heard a stock analyst talk about on a morning radio show (I can't remember the name of the stock right now). He spoke about the prospects for the stock and how he was SURE that this stock was going up. He also spoke about relative strength and how this stock was advancing nicely. I was young and naive, so I got to work, checked out the current price of the stock, powered up my discount broker and bought 200 shares.
At that time in my life, I tended to not monitor my portfolio all that often. A couple of weeks later I happened to check my account and to my surprise I saw that my investment that was a SURE thing was down 75%. I basically had lost most of my initial investment on this stock. I did a little web research and the reason the company had been going up and looking so good was that management was cooking the books. The company was recording revenue that did not exist, basically bilking investors.
I got burned - I bought something based on some "expert" on the radio without doing my own due diligence. I also bought a micro-cap stock and ignored it - even if it was only for 2-weeks. Micro-caps can swing like crazy and constant monitoring them is required. I learned these lessons the hard way.
The thing with dumb investments is that they are not all bad. In fact, they can be very valuable. It is through this dumb investment, and others like it, that I have learned the most about investing from. I am 100% sure that there will be more dumb investments to come in the future (hopefully not too many though) and I look forward to learning from them and adjusting my investment style to become an even more intelligent investor.