I was hungry to make money fast. I’d just returned from paratrooper school, was well-educated and thought I was invincible. I’d been reading investing books and was ready to “go big.” I scrounged every cent I had and put it into oil stocks. By age 21, my dividend check (the percent of company earnings some organizations send stock holders) had grown to almost $300 a month, but I wanted more. So I borrowed money from my brokerage account. This process is known as buying on margin, where you basically borrow money from a broker to purchase stock. Doing that increased my monthly dividend paycheck to $400 — just for owning a stock. Life was going to be easy, and I could already picture myself retiring early and living on a beach at age 25.
Not so Fast
However, my combination of overconfidence and greed turned out to be my downfall. The day the market crashed in 2008 was like living out my worst nightmare. The balance in my portfolio plunged from $30,000 to $10,000 overnight. I was in shock. The morning after the market crash, I logged into my brokerage account just in time to watch my remaining $10,000 by wiped out. I sat there, imagining all of the things I could have bought with that money: a new car, a trip to anywhere in the world, a better version of literally anything I owned. I questioned my decision to save rather than freely spend my money like my peers had done.
After a few days of sulking, I focused my energy toward ways of fixing my finances. I developed a plan to save more money and immediately made massive cuts to my budget. I was determined to rebuild my net worth as fast as possible. This time, I was even more efficient with my money. I put every penny I saved to work in a variety of interest-bearing bank accounts and mutual funds. I added to my savings by opening several bank accounts and credit cards with free cash promotional offers.
My new approach helped me save up enough dough to purchase a house at 23, allowed me to graduate from college debt free and landed me a job as a college financial coach, where I now teach students how to be better with money. I still trade stocks, but I also use other investments to spread out the risk.
Investing Mistakes I Learned to Avoid
• When life gets busy, make time to assess you investments. With so much money on the line, I should have been paying closer attention to the stock market.• Don’t let emotions cloud your judgement. After my initial loss, I could have salvaged $10,000. But rather than taking action to correct my position, I let that money disappear into nothing.
• Try to make a variety of investments outside the stock market realm. Real estate has been a good investment for me, and there are many other options to explore.
• Use less-than-perfect experiences as motivation to get even more creative with your investment strategies.
I’ve learned that losing everything wasn’t the end of the world, and now I know smarter ways to invest in the future.