2 Big Investing Mistakes That Actually Made Me Smarter

The post 2 Big Investing Mistakes That Actually Made Me Smarter appeared first on Budgets Are Sexy.

Back in 2013, I bought 25 shares of Tesla stock. I remember seeing electric cars starting to pop up around my neighborhood at the time and thought they were so cool!

Like most beginning investors, I checked the stock price every 15 minutes after making the trade. (Actually that’s a lie — I probably checked the prices every 5 minutes! 🤣). My $1,350 investment in Tesla started to rise and rise over the following weeks, and I was excited that I had picked a winner!

Just 18 days later, I was so incredibly pleased with an amazing ~70% return that I sold the 25 shares. Making $900 profit in just a few short weeks felt amazing! Woohoo!

Looking back now, however, I realize how much of a fool I was. (Still am in a lot of ways!). Tesla’s stock price has since increased more than 5,000%. If I had just held onto my original 25 shares, my $1,350 investment would now be worth about $106,000.

I bet we all have stories like this. Shoulda woulda coulda.

Advice for My Younger Self About Stocks

I shared this same story with a friend the other day. They laughed and said, “I bet you wish you could go back in time and tell your younger self not to sell those shares!”

While, yes, that’s a fun thought, truthfully if I could go back in time and give my younger self advice, I wouldn’t talk about Tesla at all. I would encourage myself not to buy any individual stocks whatsoever.

A lot has happened since 2013. A lot of changes and growth — and I’m not talking about in the stock market — I’m talking about changes and growth within myself. My personal financial education has grown by leaps and bounds. Over the last 7 years:

  • I’ve read 100+ books on investing.
  • I no longer try to time the market.
  • I don’t pick individual stocks anymore. 
  • I don’t get emotional about investing anymore.
  • I don’t invest in things I don’t understand.
  • I think long term. Quick profits don’t interest me anymore.
  • My mindset is slowly shifting to capital preservation.
  • I no longer want to be a mega bajillionaire. Just making $2-3M is plenty enough for my lifestyle.
  • I’m not in a hurry to make money anymore. Time + compounding is my advantage.
  • I don’t look at stock prices every 15 minutes. I try not to check the markets at all.

Going back in time and telling myself that Tesla will grow 5,000% sounds really cool. But it would be WAY cooler if I could go back and teach myself the 10 things I just outlined above. It would probably result in way more than an extra $106,000.

Here’s another big mistake I made. This time in real estate …

Advice for My Younger Self About Real Estate

In 2008, I bought an apartment in Hawaii. This was at the start of the housing collapse, so I thought it was a killer deal.

It started as a house-hack, but I transitioned it to a full rental property as soon as I moved out. From all the numbers I ran, the property should have broken even on cash flow each month.

But, after 2 years of ownership, I realized I was slowly losing money. Not a huge amount — but enough to get me scratching my head at the end of each year. Although I slowly increased the rent over time, it was not enough to cover the constant increase in expenses. HOA fees, leasehold fees, taxes, vacancies, etc… Death by a thousand papercuts.

I should have sold and cut my losses, but I couldn’t. I became emotionally attached. I fell in love with that apartment. I thought that if I held on longer, it would eventually increase in price and make up for all my losses. Houses always increase in price if you hold them long enough, right? 🙅

5 years later, still losing money, didn’t sell. 7 years later, still losing money, didn’t sell. 9 years later, still losing money, didn’t sell.

I really am a stubborn investor. This was a classic sunk cost fallacy.

Finally, after 10 years, I listed and sold the apartment. My rough estimate is that I lost about $50k over that 10 year period. It averages out to losing about $5k each year. It adds up quickly over time!

What I’ve Learned About Real Estate Investing

Same story with my stock trading mistakes… Changing 1 decision from 10 years ago would be freaking awesome. Oh how I wish I could go back in time and slap myself in the face.

But, the real estate knowledge I’ve accumulated since then (much of it learned from this failing property) is worth way more to me than saving $50k on 1 investment. Given the chance to go back in time, I would mostly preach to myself about basic real estate investing principles. Over the last 10 years…

  • I’ve listened to 100+ episodes of the BiggerPockets real estate podcast, read tons of books/blogs about property investing, how cashflow works and managing properties.
  • I went to real estate meet-ups in multiple cities and made friendships with other investors. I have mentors and investing partners now.
  • I don’t get emotional about real estate anymore.
  • I have very specific deal criteria when evaluating new opportunities.
  • I hire other people for tasks I’m not good at (like property management).
  • I scour my monthly management reports and look for errors and things to improve.
  • I evaluate my Return on Equity constantly.
  • I stay away from leasehold properties, HOAs, any anything that is not income producing from day #1.
  • I learned that leverage only works in your favor if you borrow money at a lower rate than the rate your investment is increasing at!
  • I consider my ongoing TIME investment before buying → passiveness is my priority now.

Going back in time and advising myself to not buy this property (or to sell it sooner!) would be nice. But I think having better principles as a young investor would have been way more valuable to me in the long run.

Should Have, Would Have, Could Have

There is nothing we can do to change the decisions we made in the past. And even if we could reverse a few big investment decisions, it would only change our bank balance — not the *more valuable* knowledge that comes from failing so hard.

OK, your turn… tell me some of the missed opportunities and screw ups you’ve had. Better yet, tell me what you’ve learned since then. Going back, would you give yourself individual stock tips, or broader investment principles?

The post 2 Big Investing Mistakes That Actually Made Me Smarter appeared first on Budgets Are Sexy.

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