(How to Avoid Fumbling the Bag and Blowing Hundreds of Thousands of Dollars)
I first started investing in 2016, at 31 years old.
Along the way I’ve made some painful mistakes…
Mistakes that cost me hundreds of thousands of dollars.
Today I want to share the 3 most painful lessons with you…
So you can avoid making the mistakes I made.
Remember, smart people learn from their mistakes.
But wise people learn from other people’s mistakes.
So let’s get into it.
Mistake #1 – Listening to the Wrong Gurus
I first got into investing when I started writing sales copy for a group of investment gurus back in 2016.
I got paid to study their – expensive – investment newsletters…
And I figured I should put my money where my mouth is and follow their advice.
The problem is, I wrote for a gold newsletter written by a typical goldbug…
He was always warning his readers the market were about to collapse.
His solution: Buy Gold and short the markets.
Yes, this guy was telling his readers to short the markets – during the greatest stock market bull run in history.
Your typical doomsday prophet
Even back then shorting seemed like a bad idea to me.
But I got sucked into his doomer worldview.
As a result I put all my spare cash into gold coins and stayed out of the stock market for years..
That’s why I missed out on the massive run-up in tech stocks.
Look at these charts.
Since 2016, gold has roughly doubled.
Ok, not horrible.
But I could’ve simply chucked all my money into the S&P 500…
And watch it almost triple during the same time.
And let’s not even get into individual tech-stocks.
- Since 2016, Amazon has gone up over 6X.
- Meta (Facebook back then) has soared over 5X
- Microsoft up over 8X
- Netflix up over 7X
- Tesla up over 18X
You get the picture.
Overall, buying gold was a terrible investment move.
It’s better than doing nothing.
But I could have done much better by simply investing in a broad market index fund.
The lesson here is simple.
Be careful who you listen to.
There are permadoomer gurus out there who will kill your gains and keep you sidelined forever.
Take Peter Schiff, who has been railing against Bitcoin since 2013.
2013!
Since then Bitcoin has soared from $13 to almost $70,000.
That’s an incredible 530,000% gain.
It would take the S&P 500 fifty-three thousand years to go up that much.
Those are the type of opportunities you miss out on if you listen to permadoomers.
So make sure you don’t listen to the wrong gurus.
Or you risk missing out on life-changing opportunities.
Speaking of Bitcoin, buying gold wasn’t even the worst mistake I made.
Not by a long shot…
Mistake #2 – Investing More than You Can Afford to Lose
In early 2017 one of my buddies would not shut up about Bitcoin (BTC).
He had bought 100 BTC at $400…
And the price had tripled to $1,200.
I started reading about it and liked the idea of an alternative currency.
So I started buying BTC too.
The price kept going higher and I kept buying more.
Once it hit $8,000 I started getting nervous.
“Surely it can’t keep going up forever?”
So I stopped buying.
Smart move.
But what I did next wasn’t smart at all.
By winter of 2017 Bitcoin went parabolic.
It was insane. I had never been part of a mania like that.
My portfolio was soaring tens of thousands of dollars higher every day.
I had never seen money like that.
Me and my crypto friends thought we were geniuses.
We believed Bitcoin would go straight to $100,000.
That’s when I lost my mind and made the worst financial decision of my life…
In late 2020, when Bitcoin was about to hit $20,000 I decided to go ALL IN.
I put all my life savings in Bitcoin.
And I decided to sell a bunch of BTC for altcoins too.
The idea was that these were leveraged plays that would make me even more money.
You can probably tell what happened next.
Bitcoin topped out at around $20,000…
And crashed 80% over the next 12 months.
For a while I told myself I should just hold and it would eventually go back up.
Which would have been the smart choice.
But remember, I had ALL my money in Bitcoin.
And it affected me in a way I had never experienced before.
I couldn’t sleep.
I was stressed out 24/7.
I could barely get any work done.
By early 2019 I couldn’t take it anymore and sold everything.
I took a massive loss.
Check this out, I found my old portfolio tracking app when I wrote this post.
I went all in at the top…
And sold everything at the bottom.
It still hurts looking at these numbers today.
If I had done nothing, my portfolio would be worth $250,000 today.
Simply put, I had made every mistake in the book.
And it cost me my entire life-saving at the time..
It hurt so bad that I also completely missed out on the entire crypto bullrun of 2021.
Which made me miss out on even more millions of dollars in profit.
But that’s the topic for another future post.
So what are the lessons here?
- Risk management: Never invest more than you’re willing to lose!
- When you can’t sleep, you are overinvested and should reduce your position.
- When you think you’re a genius, you should probably sell.
It all sounds basic.
But these are the type of safeguards that can protect you from blowing up your accounts.
I really got a $100,000 education in market psychology.
Today, I’m much more careful with my investments.
And I can sleep soundly at night, I barely ever check the price of any of my investments.
I’m also up over $100,000 this year on crypto alone.
But I had to pay high price…
I lost out on years of investment returns.
Which brings us to the final lesson…
Mistake #3 – Not Starting Earlier
In my 20s I read a book called “The Keys to Success” from Napoleon Hill.
Honestly, I forgot 99% of what’s in that book.
But the one thing that stuck with me was his advice to save a portion of your paycheck every month.
It seems basic.
But until that point I just lived paycheck to paycheck.
I spent whatever money came in.
And I know a lot of people who never learned this lesson.
There are folks making hundreds of thousands of dollars a year who live paycheck to paycheck.
To me that’s insane.
To quote the great Larry June: “If you’re not getting richer every year you’re just backwards hustling.”
Thankfully I learned to save money early on in my 20s.
But I didn’t know about investing back then.
So I just kept it in the bank.
And that cost me a LOT of money.
Let’s say I had started investing at 21 instead of 31.
And let’s assume I would’ve put $5,000 into the markets…
And added another $500 every month.
That’s very doable, even for a broke university student.
Over the course of 10 years those modest investments would have grown into 112,000 dollars.
Source: Calculator.net
That’s the power of compounding.
So you want to start taking advantage as early as possible.
There’s another reason you want to get started young.
Let’s say mess up and blow up your entire account on crypto (like me).
You’d much rather go through that and rebuild at 24…
Than at 34, like I did.
When you’re young you can take risks and bounce back.
So do yourself a favor.
Get started right now.
Today.
Learn how to build your first $100k portfolio before 35.
Conclusion (tl;dr)
Don’t fall for the wrong gurus. Avoid the doomsday prophets who are always predicting a market crash.
Don’t invest more than you can afford to lose. When your investments keep you up at night, start selling off some of your positions.
Start early and put the power of compounding to work for you.
Any questions or comments?
Let me know down below.
- Pete
