At the time I first began investing in 1993, I began in mutual funds. I did not have much. I continued adding a little bit of money each month from my day jobs and night job to my trading account and when I had an adequate amount, I would acquire more of the identical large funds. I brought my trading account up to $10,000 which was also the greater part of my total net worth.
I grew tired of the little gains every year from my mutual funds and then Janus was busted by the SEC for allowing their preferred customers to trade in and out of their funds while small guys like myself had to buy and hold.
I began studying penny stocks and greed filled my brain with how much I could earn in a short time provided I went long the right one.
I was naive, susceptible white meat for the next sly penny stock con that came along.
I invested $1,000 in a pink sheet stock called Plasticon. I heard about this company from Investor Business Daily. The journal appeared of good reputation. After that College Stocks profiled Plasticon, and finally Green Light. Truly this was the next searing penny stock.
I was inexperienced. Most things published about this pink sheet company was a lie. The CEO Jim Turek even went on Investors Business Daily streaming video information show and said lie after lie.
Subsequent to my original $1,000 invested, the stock fell 50%. So what did I do? Well double down of course. I went long an added $2,000 worth of stock.
Then Yahoo Finance published the news story that Plasticon was filing for a listing to the OTCBB. This stock is a jumper I imagined! Therefore I researched the topic of stocks that went from the pink sheets to the OTCBB and found that a few did really well after. So what did I do? Well I bought $1,000 more of Plasticon as any good penny stock investor would do.
The stock fell a further 50%. I was a little bothered. But then a news story came out that Plasticon had just signed with a major distributor to sell their plastic re-bar supports! This could be like Tazer I imagined. A small penny stock supplying product to a major distributor means wild pay-day profits! I bought an additional $2,000 on the news.
The stock dropped another 50%. I was becoming very scared now. But then, like a reward from God (I used religion in my stock trading back in those dumb days), James Turek announced that Plasticon was not going to file for an OTCBB listing, oh no, they changed their mind and were moving to file for a listing to the AMEX. Therefore what did I do? Well if I thought that an uplisting to the OTCBB was worth $1,000, then certainly an uplisting to the AMEX was worth $2,000. Therefore I purchased $2,000 more!
All this happened over a two year period until ultimately, the penny stock fell under $0.001 and Plasticon filed for bankruptcy.
There are so many mistakes that I made along the way to losing everything. Obviously I was quite miserable about how much I had lost. What made it twice as disheartening was that it was my whole nest egg. This money was everything to me. It was all my hopes and imaginings, particularly when you compound that amount at some 4% or 5% for maybe 40 to 50 years ahead of me. I sat down long and hard, reviewed all of my errors, and tried to understand my stock trading and investing lessons. My wife asked why I was doing it at all, waking up at 6:00am PST for so many mornings to trade stocks, reading hundreds of books about technical analysis, and yet I had zero to show for it, but a huge hole in the pocket and heart. It was a powerful question, and I had an unusual answer.
My response was “I prefer to lose it all now in my thirties, rather than losing it all in my fifties. Provided I learn my lessons early, I would not make the same huge errors much later. Nowadays, I am trading and investing some $15,000. One day, I hope to be managing and investing one million dollars. I can afford to lose $10,000 in my thirties, but I will not be able to afford to lose even 20% of a million dollars when I'm older.” Yeah, I was in torture from my unfathomable loss. Nevertheless I was so determined in continuing my stock trading and investing, and I was convinced that one day I would be managing a much bigger amount. Since I knew I would be investing for the next 30 years or more, the earlier I learned how to do it the better.
Each of my past investing and trading errors has continued to help me to become a better investor and smarter stock trader. My own giant loss of my entire life savings in my early thirties has made me a much more cautious and well-informed investor. He who has grabbed a bull by its tail knows twice as much as he who never has. I know some of the lessons you can never learn from books. All the real crucial lessons must be learned from painful errors.
This is a video of some of the painful lessons I learned.
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