• Home
• About Myself
• Ask A Question
• Blog
• Disclaimer Statement
• Privacy Policy

How a Bad Investment Experience Changed My Life

Recently I had lunch with an old friend. My friend is about ten years younger than I am and is still working. He asked me a question that I had to think about. My friend wanted to know what are the most important investment lessons that I learned over my investing life. In this post I thought I would provide an answer to his question.

For anyone fully engaged in managing their own or other people’s assets, there are probably as many answers to this question as there are investors. So I can only put forward my own experiences during my investing life and how it impacted me.

In reflecting back over my investing life I think there was one significant event that greatly affected the way I invest. This event was my horrendous real estate investing experience in California in the late 1980s. I wrote about this experience in an earlier blog post. You can click here if you want to read about what I call my “California real estate fiasco.” This post describes a real estate experience that will probably seem familiar to many people who invested in real estate in the middle of the last decade.

I learned several “life” lessons as well as investing lessons from my California real estate fiasco. And I applied these lessons to all other investing decisions I made after that. The two most important life lessons I learned were:

• First, I am responsible for my own financial life and no one else will be there to take care of me;
• Second, evaluating the risk of any choice in life, investment or otherwise, is as important as the potential benefits of the choice. This is another way of saying things don’t always work out the way you intend; are you prepared for the consequences if they don’t?

So how did these two life lessons change my behavior? Before I went through my discouraging real estate experience, I was like most people in regards to saving for retirement. I casually saved money “when it was convenient” as long as it did not impose on my current lifestyle. After my California real estate fiasco, my attitude toward savings changed 180 degrees. I transformed myself from a “spender” to a “saver” and became completely focused on accumulating investment capital. The earlier in life you accumulate investment capital, the sooner you will be able to invest and reach your financial goals.

I changed my housing arrangement, car ownership, and the vacations I took in order to save more money. These changes were relatively easy for me as I did not have any children or even a wife to worry about. (Many of my friends, seeing the changes I made in my lifestyle, were pretty certain I would never have to worry about having a wife. I did fortunately find a woman who accepted my Spartan lifestyle, but that is another story).

After going through a painful investing experience like my California real estate fiasco, most people would decide that real estate was a loser and would never consider this type of investment again (such as many people think today). Fortunately, I did not take that view. I had known many people who had made small fortunes investing in real estate so I knew it was possible to do; I just was not doing it right. So the other major change I made in my life was I decided to educate myself as much as possible in the area of real estate investing and investing in general. From that point forward I began to read every investment book I could get my hands on.

In looking back I would have to say that my California real estate experience was a blessing in disguise as it changed my life. It caused me to look at earning and saving money much more seriously. It also prompted me to research what it takes to be a successful investor. This research took me on a long road to discovering the many mistakes that the average retail investor makes and how to avoid them. I am now glad that this self-education started in the early 1990s as it helped me avoid all the investing landmines that seemed to be everywhere in the 2000s.

In my next post I will discuss what I think are the most important investment concepts I learned from all my research and my investment experiences.

Did you enjoy this post? Why not leave a comment below and continue the conversation, or subscribe to my feed and get articles like this delivered automatically to your feed reader.