Don’t hide from your investing mistakes

Trekking back through time to around 2009 / 2010 see’s Mr Z being qualified as an accountant for a year or two.  Buoyed by his qualification and rise up from the minimum wage of a trainee accountant he has some funds to save each month.

Working in finance he decides to opt for a bit of share selection, how hard can it be?

Mr Z pours some cash into Weir Group, some time in the last quarter of 2009, lucking out as it is promoted into the FTSE100 and shows superb growth over the next 18 months or so.  He sells out of this position at the end of 2010 to a nice profit.

Investing in Weir Group

Easy, right?

He piles into BP after the oil spill crisis.   He then gets out in Early January 2010.  By pure chance, he times the market to near perfection, making a tidy profit.  He was also completely unaware of the huge risk he took on during this time, his thinking was something along the lines of BP is to big to collapse.

Investing in BP

Again, buy low, sell high. What’s the big deal?

Whilst all the success was going on Mr Z also invests in a few house-builders, banks and speculative oil exploration companies.

High on the successes of BP and Weir, he’s pretty sure he’s got the gift and can now look at the markets like a jigsaw meant for 5 year olds.  He piles into two more select shares.




Mr Z takes a punt on HMV, chasing a high yield and a quick recovery, which went terribly.

Investing in HMV

Hmmm, buy high, sell low?

Chasing a supposed high dividend payout really didn’t work well.  We all know what happened to HMV.

Mr Z’s other speculative buy was in Quintain Estate & Developments, QED.

Panic Mr Z, sell!

Panic Mr Z, sell!

Another solid loss making investment from Mr Z and a perfect execution of panic trading.

I actually ended up selling all of these investments as I needed cashflow for something so insignificant that I forget what it was.

Now, we all make mistakes.  This should have been a great learning experience for Mr Z, there were so many lessons on offer ;

  • The benefits of diversification, despite two huge losses, overall I come out with a slight profit.
  • Trying to time the market is as much down to chance, than anything else.  The market can remain irrational longer than you remain solvent, and all that.  I got lucky with BP and Weir, nothing more.
  • I don’t have the bottle for active trading.
  • Single shares can completely bottom out, see HMV.
  • Panicking and selling can just crystallise losses, QED went on to recover just fine.
  • I was disciplined enough to save each month, this should have carried on.
  • Investing in equity is volatile and best suited to the long term.
  • Don’t invest any money you might need for short term cashflow.

What should have been a short sharp period of learning just ended up rattling me.  I stopped investing in equities (not including my pension) until summer 2014 when I discovered both Financial Independence and Index Investing.

Which is a shame, because we all fuck up along the way.  And we should learn from these experiences, not shy away from them.  In isolation my successes in BP and Weir really taught me nothing.  The pain from losses on QED and HMV should have taught me loads.  And they did, it just took a few years.

Loss aversion, where we place far more emphasis on negative experiences than the positives, scared me away from investing for too long.  I missed being in the markets from 2011 to 2014 and the gains that went with it.  Don’t shy away from your mistakes like I did, learn from them.

Mr Z

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15 thoughts on “Don’t hide from your investing mistakes

  1. Tissue King

    Don’t kill yourself over it, we all did it. I think failure is the best medicine for the future. As long as we keep a sharp eye on the future we will all succeed.

    Reply
    1. Mr Zombie Post author

      Failure definitely makes us better in the future, as long as we evolve from it. Shame it took me so long! 🙂

      Reply
  2. Team CF

    Been there, done that. Same as you, me (Mr. CF) did exactly the same on different stocks and leveraged stock products. Made money of a few, lost big on some of the other.
    The long term vision is definitely key, although I recently played a bit with some dividend stocks, the far majority of what we have now is of the buy and hold category. Wisdom comes with age…..guess I’m saying i’m getting old 😉

    Reply
    1. Mr Zombie Post author

      Haha. Yup, getting old too 🙂

      I think having a long term plan helps with investing, rather than just trying to make a profit. Chasing just profit seems to unleash the inner maniac in us. And that maniac loves to trade based on emotion

      Reply
  3. weenie

    Like you, my first foray into ‘investing’ was a success.

    In true Thatcherism-style, I used my student loan to buy shares in the electricity companies (Norweb and Manweb) being privatised. Sold them quickly, made a large profit, went to Thailand and Hong Kong for a month over the summer.

    After finally clearing my debts and finding myself with cash in the bank, I realised that I had no idea how to repeat those success trades, so I just didn’t invest at all, leaving the cash in a savings account which I inevitably kept dipping into.

    I finally took the plunge into unit trusts in 2014, so I was out of the market from 2010. Had that cash been invested, I wouldn’t have been able to dip into it so my pot would have been much larger, another reason why I hold very little cash these days.

    Reply
    1. Mr Zombie Post author

      At least we both recognised the luck involved in our profitable trades and not some gift handed down from the investing gods. 😀 It does sound like you did better than me though!

      I found that just having a bit of money in the market caused me to get more interested and do a lot of research. I think I put £100 into a ftse 100 tracker not long after finding Monevator. Just as a wee test. And from there got more and more interested.

      Mr Z

      Reply
  4. Income Surfer

    We’ve each made some big mistakes Zombie. It’s all about learning, right? I think you’re correct in that it’s important not to hide from those mistakes. Those mistakes are part of learning. For me, it’s more important WHY I did something, than what the eventual outcome was. Hoping to be a little bit better investor, every year. I hope you have a great weekend
    -Bryan

    Reply
    1. Mr Zombie Post author

      Hi Bryan. Exactly, as long as you learn from your mistakes it’s good. Amazing how many people have had a similar experience.

      Reply
  5. Organised Redhead

    Hey Zombie!

    I think it’s difficult to own up to our mistakes, let alone in public – thanks for sharing because it helps me realise that everyone is essentially in the same boat at some point or other, and it is easy to make mistakes, especially when starting out investing (as I am doing).

    I really liked your use of the graphs with the comments on them in this post – it made me laugh out loud, and reminds me a little of the style of Dave Gorman’s powerpoint presentations (one of my favourite comedians)!

    I will certainly be trying my very best a) not to avoid investing and b) once I’m invested, holding those investments rather than being tempted to sell for short-term gain…

    Thanks for the advice!

    OR

    Reply
    1. Mr Zombie Post author

      Hi OR. We got to accept that we are going to make mistakes, no matter how much reading and research we do. I doubt any of the leaders in their respective fields got anywhere without making mistakes. Still, it does suck making them!

      Being compared to Dave Gorman is flattering 🙂

      Reply
    1. Mr Zombie Post author

      Completely agree Tawcan Sir! It does seem like plenty of people have had a similar start. I wonder how many people never invested again as a result….

      Reply
  6. Adam

    I think we both had the same story with BP. It was my first real foray into buying stocks and my ego became insufferable. I was thinking I could do no wrong. Luckily it wasn’t that expensive of a lesson for me to learn I was wrong.

    Reply

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