What was your biggest finnancial mistake and......

....what did you learn from it?

Just finished having this conversation over pizza (and a very nice bottle of red ) with friends and I thought it may make an interesting post.

It's interesting and did get me thinking.......personal experience obviously has a big influence here.....

Some may have made some disasterous property investments, business decisions, share investments or whatever. I have one friend for example who managed to bankrupt some of their family members through an unfortunate investment.

Personally, when asked this question my initial responses were more generic in that I had to say my biggest mistakes were never getting a 'financial education' at an earler age, never 'investing' an at earlier age, never buying property at an earlier age, being 'held up' for a couple of years with 'family complications' etc etc.

When pressed on specific examples of individual/actual mistakes I cited my investment in a particular public listed company(doesn't matter which one) that in the past, as part of a relatively diversified portfolio, I bought into and it went totally broke. The company was a Top 200 Company, paying good dividends, had a Debt/Equity less than one etc and yet I lost the lot! NB. Be very careful how the asset value is calculated.

I remember to this day very clearly when I received the letter saying the company had gone broke. A chill went down my spine and I sat at my desk for some time absorbing the enormity of what I had done. When I realised I had lost not only me, but more importantly my family(for us) a considerable amount of money, it was a terrible feeling.

I had followed this company for quite a period and listened very carefully to the Chairman, Directors and others comments. Even when the high profile Chairman decided he would be 'moving on' due to another great opportunity it didn't bother me. Then when I heard family members of Directors may have been selling some of their shares for personal reasons , I checked the fundamentals and again wasn't concerned. Then a Director decided to sell a significant part of his shareholding 'because he was just rebalancing his portfolio' I again checked the fundamentals and wasn't concerned. I attended AGM's and had the Directors sit there and tell us everything was fine. The Company folded within 6-12 months and this was not a small company with insignificant Directors.



What did I learn from this specific example?

Not all good unfortunately as my core preference is to trust people. Because it lost me, my wife and children a (personally)significant amount of money it made me very wary of some of the comments made by some companies. Unfortunately at times there are the comments that are made publically and then what is actually going on inside a company, and these can often be two totally different things. Also, it is very hard to believe that some of these comments are not straight out lies or heavily influenced by self interest motivations. I guess this is common sense for many but was a hard initial lesson for me.

I lost a bit of money from this company investment but I remember looking around at one particular AGM and hearing a number or retirees questions thinking later that they would have been totally ruined as a result of this collapse. I hope some of these Directors had a chance to meet these families later, but I doubt it.

What did I learn from this? Unfortunately, when a Company Director leaves because of 'ill health' this may have been the real reason, or it may have been something totally different. When Company Directors decide to 'sell off some shares to fund a home renovation', this may or may not be the real reason. When Directors decide to leave a Company 'to take advantage of other opportunies' it can sometimes mean just about anything! Very rarely is a company announcement made that may create a negative public image. It's unfortunate, and I guess that's life, but you have to be very careful.
'Spin' seems to be the name of the game more often than not.

Ok......jumping back to the bigger picture. Some lessons learnt........

1. Do your research........but also realise you may (unfortunately) never have access to all the information.

2. Diversify for a number of reasons. Point 1 included.

3. Continue to learn about your investment options and educate yourself as much as possible.

4. Don't let a single investment mistake stop you from investing. As with many things in life, pick yourself up, learn from the error and move on.

etc etc.



So what mistakes have some of you made in your 'investing careers' and what have you learned from them?

Over to you..............

 

Selling property when I could afford to hold. We had 2 properties that we bought in 94/95. One , after a property crash and a bad tenant, we sold for a loss of over 50K. Because of that experience, when the other tenancy arrangement changed, we also sold it but made a profit which offset a lot of the loss. The experience of the first kept us out of the property market from an investing perspective until 2003 meaning we missed most of the boom years. And had we kept those first 2 IPs.... Lesson: lesson buy and hold, keep investing (I haven't learned this one yet )

We had a financial advisor a few years back who put us into these fantastic sounding schemes which promised great returns. All up we invested 65K in 4 different schemes. To date we have got 1K back and are involved in a court case which has been going on for over 8 years to try and get back another 20k. Lesson: the old adage is correct, if something sounds to good to be true, it probably is

 

From a "generalisation" point of view, like most here, I "could" have done more in hindsight. I would like to have been more aggressive in terms of purchasing property over the years, as my LVR is a nice safe 52% and probably was never in danger of hitting 80%.

My Investment Property has done well for me, so no regrets there, however the only thing I could target is my own PPOR! I SHOULD have setup an offset account, rather than paying the whole thing off!! I now have no debt on it, and turning it into an IP is fine so long as I'm renting elsewhere, but to "move" my PPOR is now impossible from a "good taxation" point of view, so I would need to sell. Its in a great location, and an ideal rental with good cashflow and CG in Adelaide metro area. Oh well, you live and learn.

Andrew.

 

G'day AndrewG

You could refinance the PPOR to 80% LVR, invest that money in an income fund like Navra, then use the distributions to help pay off your new PPOR.
While the interest on the PPOR loan will not be tax deductable the interest on the refinance investment loan will be.
Just a thought. Get professional advice first though.

 

Could u sell your PPOR to your trust? In that way:

1) no cgt as it's your home
2) yes some stamp duty - but that's life
3) the debt becomes tax deductible (and if you use a HDT deductible for you)
4) you keep your property as an IP
5) you have a wad of cash to make the PPOR debt small or non-existent.

See, you can have your cake and eat it too!

N.

 

The biggest mistake in my life was NOT BEING INTERESTED IN INVESTING although I had vague vision of wanting to have enough money to live off to fund my lifestyle, which was having around $30-40K per year.

Second, FEAR OF DEBT, and I am just about to get over that now as I have margin loan limit of $50K but using ony $20K giving me a good buffer, just in case I need it. Also I am just about to commit to buying a unit in Sydney with 80% loan.

Third, FEAR OF LOSS FROM IGNORANCE, having held AMP & TLS shares during the wrong times where it fell from it's heights of $20 to meagre $5 I thought I may lose the whole deal if I got into shares because you never knew when shares would fall. After reading various forums and checking numbers, and general nature of share market, I was able to park my spare cash into management funds, and shares.

 

This sounds like fun.

My biggest mistakes:

• Not diversifying my share portfolio enough
• Going into business with workers, not entrepreneurs
• Not starting to invest early enough
• Sharing investments with family members
• Doing too much subjective due diligence (fall in love with the numbers!)
• Not starting the trusts earlier

All in all, everything's worked out ok, with the biggest and most recent mistake being the business. I learnt a huge amount with this one, so it's only a regret when I'm thinking about lost capital.

 

Being relatively new to the whole investment journey, I haven't had time to make a mistake yet!

There were a few 'could haves', but nothing too major...hoping to prevent anything too serious by increasing my education with great resources such as this forum (and others), and reading as much as I can.

Therefore, no biggest mistake.

(Where is the 'touching wood' smilie????)


Chris

 

My biggest mistake was not buying Brisbane property in 2000 or so when I had the itch. Would have made heaps.

I've also paid $5000 for a financial plan that I didn't need.

Other than that, no complaints.

 

Having three kids.

 

Stupid

Nothing major yet as I'm still young and have plenty of time to make more mistakes, but selling a large portion of my already small amount of managed funds when I wanted to buy a car has been my biggest mistake so far, especially when I had a perfectly good car at the time.

BR

Oh yeah, marrying my wife. I reckon I would have been a rich man by now if it wasn't for her. But hey, you can't put a price on happiness.

 

heh heh, I got married feb 10. Before that we were saving for the wedding, we still needed to extend her credit card by 3k.

Now its after the wedding we are in debt reduction mode. (except for the $2650 we chucked onto the navra fund... its our first managed fund, I wanted to see how it performs for a while (as a hobby more than anything else) while I continue paying down my consumer debt)

 

Why don't you consider borrowing $100K at 8% ish and using the spare income to kill your consumer debt even faster?

 

If I was borrowing $100k shouldnt I already have $100k of my own invested so that the lvr is %50 and I have a nice big buffer for margin calls?

Do BT, (or anyone for that matter) allow you to 100% gear into navra wholesale?

 

Nope......

 

Nope......

Simon:

http://www.invested.com.au/64/introducing-voigtstr-8549/

 

yep, no plans of borrowing 100K for investments just yet. (I dont reckon anyone would lend me even 20k at the moment).

 

Listening to my parents and not buying a 2 year old house at Buderim(sunny coast) in 99 for 88K and then listening again 18 months later and not buying a block of land in Poona for 22k(on the main road of the water front, could easily see fraser island).

And probably getting married to someone who had no concept of money and not properly protecting my hard earnt money.

Hard way to learn lessons but i don't think that you really learn them til you do it the hard way. That way I think most of the time you will only make that type of mistake once.

 

For me it was I spent a lot of money educating myself in an area of investing that I just don't think suits my nature. "Share trading"
It wasn't that I could not do it, it was more that I just did not feel comfortable with the concept of not having control of my investment.
Property is my only source of income and I feel all safe and secure with that. I can see it, feel it and do with it what I want. I must admit though that I got a bit excited when I heard about the current little correction in the share market. I even found myself blowing the cobwebs off my comsec web site and looking at a few trend charts.
But I guess there aint any mistakes only some big and sometimes expensive learning curves.
Don't beat yourself up too much about it Alan
We still love ya
regards
Simon

 

Guess it shows how we're all different doesn't it Simon.........I loved the Share Trading........except for that one big stuff up.

Ploughing through the Financial Review, keeping in touch with what was happening with huge companies, having preset trigger notifications on my mobile and sometimes trading a few times a day from anywhere in Australia. Learning more and trying to refine the methodologies. I must admit I really enjoyed it but I'd really need more time than I now have with a growing family and a full-time job.

Maybe one day again.......