Since joining the Steemit community only days ago, and ponying up some cash to “power up,” I’ve been thinking a bit about the dumbest thing I ever did with money. It was a very painful lesson, but it made me wiser and taught me to make better decisions. Hopefully, this story can help you too.
I’ve shared this online before, both in this mini eBook and in this article, and probably a few other times on PropertyInvesting.com.
But here’s the full version for you, my Steemion friends, with some special application to what we’re all doing here.
“I’m ‘bout to get rich!”
I had just graduated from college with a degree in finance and was working as an intern for a stockbroker at Merril Lynch. The DotCom Bubble of 1999 had just burst, and considering myself to be a sophisticated stock market professional, I saw an opportunity to “get rich.”
I did the only rational thing that any poverty-stricken recent college graduate could do. I emptied my savings account and borrowed $6,000 cash off my credit card to deposit it all into a newly opened brokerage account.
After all, I had a degree in finance and an internship with a major investment bank. What could go wrong?
I had my eye on a tech start-up incubator company called CMGI. The stock price was rolling for months between $100 and $120 per share. Investors were buying at $100, selling at $120, then buying again at $100, and selling again at $120, over and over again.
After the NASDAQ bubble burst, CMGI fell to $55 per share. What a bargain!
I went all in, buying 200 shares, using about half my own cash and half what I had borrowed off my credit card.
After reading an analyst’s prediction that CMGI would eventually be worth $550 per share, my emotions lit up. I would lay in bed at night and dream about what my winnings would bring me: a new car, a trip around the world, the respect and envy of my friends.
Almost a month later, my broker called and said, “Jason, CMGI is now valued at $75 per share. I think it’s time to sell.”
I thought to myself, “What kind of weak, short-sighted, pansy-ass stock broker am I working with? Doesn't he know these shares are headed for $550?”
So I simply replied, “No way, we’re gonna let this one ride.”
“Oh, %$&!, what have I done?”
A few weeks later, CMGI fell and was trading again at $55 per share. I thought, “Maybe I should have sold at $75. Oh well, this is temporary. I’ve learned my lesson. I won’t be so greedy. I’ll just double my money, then get out.”
Another week passed, and now my shares were trading at $45. I still remember the sick feeling in my stomach as I anguished over what to do. Do I cut my losses and sell now or hold out? Fear gripped me.
My new plan: “If they go back up to $55, I’ll sell and break even.” I started bargaining with God. “If you get me out of this, I will never…”
Before long, CMGI hit $35 per share, and then $25. I was already all in, and had completely lost faith in the future value of this stock.
So again, I did what any rational-thinking investor gambler would do. I maxed out my credit card, and bought another few hundred shares of the exact same stock.
Now, if it would only go up to $33, I could sell it all, break even, and walk away with a lesson learned.
CMGI kept falling to $15, then $5, then $2 per share where it stayed for years. I finally sold at $2.16.
I told you it was a painful story. But thankfully it taught me something.
1. Only speculate with what you can afford to lose.
The most obvious mistake I made was borrowing money to buy an asset that was highly volatile and which I knew very little about. I had a university degree and an internship – just enough knowledge and arrogance to get me into trouble.
There will be many new people attracted to Steem in the near future. Most of them will be like me, having never owned a cybercurrency before.
This is a beautiful thing, because we Steemians are awaking the world to the value of the blockchain. But it could also potentially present great risk to people.
Warren Buffett once said, “Risk comes from not knowing what you are doing.”
Some people will look at Bitcoin’s growth and assume that Steem’s growth will be exactly the same. Some may even be as dumb as I was 17 years ago, and borrow big to speculate on Steem’s future value.
Steem could be huge, or as any venture in its infancy, it could all fall apart. We’re all here because we expect the best, but we need to be aware of the consequences of being wrong.
For now, because I know very little, I’ve only invested what I can afford to lose. Perhaps in the future, as my understanding increases, it will be wise to buy more Steem.
In the meantime, what I can do is leverage off my skill and knowledge in other areas, create content, and hope that by adding value to the Steemit community, I can grow my Steem holdings gradually over time.
Which brings me to my second revelation…
2. Think long term and do your part to add value.
I’m reminded of an ancient Hebrew Proverb, “Wealth from get-rich-quick schemes quickly disappears; wealth from hard work grows over time.”
I made the CMGI mistake because I was greedy and wanted to go from pauper to mogul overnight. Even worse, I failed to appreciate the reality that wealth follows those who consistently add value, little by little.
That’s one of the beauties of Steem. You receive an instant reward based on the degree of value you offer to the community.
Not every post will be a grand slam, but through consistent effort, you can grow an asset base of Steem Dollars and Steem Power by sharing your creativity, talents and knowledge with the world. How amazing is that!?
3. Check your motives for why you’re here.
As you can imagine, after the loss that I experienced, I did a lot of soul searching. How could I have been so dumb? What was I really chasing?
King Solomon of Israel, one of the richest men to have ever lived, once wrote, “Those who love money will never have enough. How meaningless to think that wealth brings true happiness!"
One of the things I realised was that what I was really after were feelings of validation and significance from other people. I wanted to be respected. My deepest problem was I was insecure and thought that by making a lot of money I would feel more important.
The starting point of true happiness is a contentment with and gratitude for the more important things that one already has – family, friendships, health, meaningful work, and life’s basic necessities.
If you want to check your motivation for why you’re here, read what my friend @lukestokes wrote here about how the real currency of Steem is relationship. It challenged me.
Do you have any additional wisdom to offer? Have you ever done anything dumb with money? If so, I’d love to hear about it.
There are two ways to see steem. One is from the cryptocurrency perspective and one is from the user-angle of a social platform.
The first one is concerned about entry and exit points, when to buy/sell, good trades, charts, etc. The second starts with zero investment and just starts to write and make money... so there are two worlds here, in parallel, that don't really overlap.
Imagine you came here today, not as an investor but as an author, made this 1.6k USD article (as of the time of my comment), and thus were +1600 USD from when you joined. In that case, the tips relevant to becoming a millionaire would be how to produce content that gets a good share of the content-reward pie. See how subjective the experience is?
As for your personal experience in investment, I think everyone will at some time or another have a bad investment experience, no matter how knowledgeable they think they are. I had some stocks back in '99, they crashed bad and lost tons... lol... multiple lessons learned.
That said, I am a long term buyer and holder of SP.
Nice... In terms of a mixed investment/author strategy, you can maximize your SP by being a good curator/voter. I see a lot of people who don't use their voting power, yet the voting power, used correctly, can increase SP and SD.
Can you tell me how to check how much voting power i have at any given time. I hear it flictuates and you can use up. Then it regenerates. How do i track it and how do you check others' if you see them not using it? Thanks in advance
https://steemd.com/@mguy808
You'll see it on the left column. You'll see it rises when you don't do anything and falls when you vote.
Thanks @alexgr. I have been doing some curating, hanging around the new feed at the 20-30 minute mark. But I need to have another good read of the white paper to better understand how to maximise voting power. Any insights you could offer would be appreciated.
I don't know if the white paper covers changes in the code that were done a few weeks ago to prevent automatic bot upvoting. I think right now, it's something like proper curation rewards are given between 15 and 30 mins - and supposing more votes come afterwards.
The recipe of success is to vote before others do, but not too early (most or all of the curation reward goes to the author) or too late (most or all of the curation reward goes to the author). And the time to do so is, from what I remember after the last changes, after the 15m mark and prior to the 30m mark. And of course the good payout is contingent on big rewards accumulating after your upvote. If say you spotted an article and you were the fifth vote at 15 minutes and then came another 300 votes and 20k USD, then you get a good slice (I don't know the precise algorithm). If you were the tenth vote at 18 minutes you'd get far less, etc, etc.
Super-helpful @alexgr. Thanks!
@alexgr, thanks for highlighting that. What's great is you can be both investor and author at the same time!
Yeah I may have overstated the "do not overlap" aspect, because for some of us it does. And the ratio of these two groups right now are relatively close. However as the number of people coming in from outside the cryptosphere increase, we'll be like specs in the sand compared to the "masses".
Oh the memories. I also worked in finance around '99/2000 and had much the same experiences. Some stocks I sat on tanked and others, slated by all the brokers, I happily traded in and out of over and over. Def multiple lessons learnt :)
Funny that after getting a degree in finance and that internship I still had no clue how to manage my own personal finances. Education is near useless for most people when it comes to basic life skills. And few of us had parents that taught us well.
I was lucky then because I'm very efficient with personal finance. Maybe all the years of backpacking taught me that as no money meant no travel :)
My advice would be to not invest too much money but "work" for it on steemit. The only thing you invest is time, you can use time others spend on TV ;)
Just for a while would be sufficient, using it like facebook or twitter. When it pays off, continue, if not, just leave it for a while.
This is still early steemit, maybe in some months / years the work from now will be worth much more.
Good advice. Thanks
I made a similar mistake when investing in the altcoin 'Mooncoin'. For weeks I had been trading it against bitcoin and had been on occasion placing a trade and waking up another £250 richer... then one week I was away on a training course for my work and didn't have regular internet access. I had around £3000 in Mooncoin at the start of the week, one morning it dropped around £200, I didn't mind as experience had shown that it would rebound - that's how I had been making such huge gains so no big deal... it went up a little as the week progressed... then down a little... and then a little more... and then...
By the time I got home from my training course my £3000 holdings had become £75 :(
Mooncoin never significantly recovered.
I stayed well away from cryptocurrency for several months after.
Ouch! Great story. Glad to hear you recovered from that one.
Thanks! I definitely learnt a lesson with that one. I've still made a few silly calls since (cough cough... The DAO) but try to keep a much more long-term perspective with investments now and question what value they could have in several months to several years time based upon the actual fundamentals.
Yeah, the wounds from my later options trading losses are still a little too painful to write about :-). The lesson there has been it's much better to be a seller of options than a buyer!
Three words: diversify diversify diversify. Did I mention you should diversify?
You would have thought they'd cover that in the Finance degree!
So it's like that then?
Great post!
That about sums it up :-)
I love this article! I love how you've given experiences from your real life! I can't fully relate because I haven't done that type of investing before, I also don't have a degree in finance. But I"ve always been interested in the subject! I've done some stock investing and I had a similar situation you did, I lost money in the end because I waited too long! But I've found Peer to peer lending a lot of fun!! I think you just have to learn more about what you are doing before you do it, IN order to reduce risk as much as possible.
Thanks @kaylinart! It was definitely a hard lesson but one I was thankful to learn earlier in my life.
Hahah! Wow, this is awesome, Jason. I was reading through this great post, telling @corinnestokes about it as I went, and then I saw the end where I got a shout out and was like, "Wait a minute... OMG! This is Jason's article!"
Hahaha... to funny. You're killed it with this! Such an amazing life lesson and you tell it so well. Thank you for sharing it all with us.
Ha! That's awesome. I was wondering when you were going to comment. I'm really glad you shared this steemit thing on facebook ;-)
Once friend list notifications get built in, it'll be a lot easier to keep track of what's going on. Right now it's like, "Whoa, how did I miss that?!?" all the time.
Looking forward to that.
Hey, can you pay it forward and add a post entry to the #bitcoinpizza challenge? I'd love to hear your thoughts on this from someone who got such a large payout and the conversations you started having with your friends and family about it.
This is one of the most amazing article i have ever read. And honestly am at this point in my life. My own story though i did not learn from it easily as you did. Maybe because i was a little bit dump at that time. During high school i used to go the library, infact we were forced to go to the library which i deeply hated. Most times, we use that opportunity to steer at your female crush or silently gossip with friends. After a while i decided to take my studies seriously in order to pass my matric exam. As time goes by i cultivate an habit of reading the news papers, before doing any serious reading for the day. The most interesting part of the newspaper for me was the stock and shares prices. Naive as i was, i would use a blue pen to journal the price of the shares that is doing well, and use a red pen to indicate that which is not doing well. The following day, i would compare the previous shares price, and therefore make an hypothesis of what each share price might be in the future. As time goes by, i began to enjoy this little habit of mine. My favourite part was searching for old news paper some dated five years back, and would compare the current price with the previous price. Then after matric, i was employed at a local hospital as a clerk. Luckily, my school was close to where i work, so during break i would go back to the library and indulge in my old habit of comparing and analyzing the prices of shares. And by the way, in those days we hardly have access to the internet. I could still remember the feeling of receiving my first salary which was $70. It was a feeling i could still remember till this day. Then i say to myself, i would save 50% of my salary to invest in shares, 30% for my monthly expenses and the remaining 20% will be given to my parents to support them in house responsibilities. After 8 months of savings, i thought to my self, yes i need a broker to buy my shares. Through the assistance of a friend of mine i was connected with a broker and this was the most difficult and interesting conversation we had. Me "Please i would like you to buy an EcoBank Shares for me" Him "But why would you chose to buy EcoBank, you should buy Oceanic Bank" Me "But why?" Him "Because Oceanic Bank shares is appreciating in value, and such trend would continue" There was i thinking to myself, should i go with my instinct and trust in research i have done for years having seen the gradual and consistent growth of EcoBank, or should i go with my broker advise on Oceanic Bank. I was aware that Oceanic Bank as a new generational bank shares price was growing tremendously, however it does not have the proven historical consistency in which EcoBank has maintained. Then a second thought came to me, do you know better than a broker? Don't you know this is their job!!! not you a common hospital clerk. Then, i left my instinct, also doubted even my little knowledge and took my entire savings to invest in Oceanic Bank momentum shares hype. And the rest was a sad story. Few months later, the CEO of Oceanic Bank was arrested and prosecuted for shares manipulation and other charges. And within, a day the price of the share went from up the loof to almost nothing. And there was i, struggling to hold back my tears. This was the money i intend furthering myself to the University. That day, was a bitter day for me. To make the matter worst, within few weeks, EcoBank through its new partnership Eco Transitional Incorp executed a massive objective to establish more branches across Africa. Within few days the value of EcoBank skyrocketed, appreciating in more than 2x it's previous price. And there was i looking at myself in what an idiot i was to ignore my instinct, believe in myself and also believe in my own knowledge. That was the most difficult investment lesson for me. So how do we apply it to steemit. I would seriously agree with @jasonstaggers that there is no guarantee in any investment. Only invest that which you can afford to lose. Do your research deligently, and believe in yourself. like Wallen Buffect would say, do not taste same river with both feet, hence diversify your portfoloi. And if it is too good to be true, it just might be. Finanlly, i think the best investment is in your self. While money is certainly a great thing, but if you do not invest in the know how of money management, it may just fly through the window. I thought i could share this personal experience with steemit, and hope it may be of value to someone out there. Peace.
Thanks for sharing your story. I made the same mistake, blindly trusting the analyst recommendation, failing to understand how he was incentivised to hype the stock. We live and learn. All the best.
Arbitrage and Market Making profits are short-term. So that Hebrew proverb is a bit generalist. Nice message anyways.
hmmm. You give me thoughts to ponder.
A good thing to see you got smarter than when you started gambling money you couldn't lose ;-)
I guess most people do huge mistakes when the greed is too huge :/
That's why God gave me a wife to temper my sometimes over active greed gland :-)
ARE you gripenfire?! Or are you jasonstaggers!? Not cool man!! 2 exact same pots with different names!!
What? Could someone have stolen my post? Definetly not cool!
That was a great and insightful read. Thank you for sharing.
You probably wouldn't believe but by 2011 I had saved $50,000, my family trusted me enough to match that amount, and I embarked on a real estate adventure. Buying up properties using owner financing and other creative financing strategies. That 100K has now disappeared. I lost every single penny. But I firmly believe the knowledge that I gained is worth millions, and I will get every penny back and much, much more.
Amazed by your attitude. Few people have the fortitude to bounce back from something like that. Keep believing!
I once invested quite an amount of money into a HYIP back when they were booming all over the internet about 7 years ago. We all know how that ended up. Funny thing is all these HYIP's using Bitcoin popping up all over the internet now. I just hope people have gotten smarter with time over how they invest. Great informative post!
Thanks @jaysanz. I hope so too. Appreciate you sharing that!
Good pointers man. I salute the steadiness of your instinct though it is not always a positive outcome. Value the experience and who knows table might turn if you are in the same situation again.
Thanks! I'll drink to that.
This is just about the best, if not THE best post I have read on Steemit. You write with wisdom! You have shared some great advice for us all here and you've shared your own mistakes made along the way.
Thank you! You have added value to my day kind sir.
Wow, that's the best complement you could have given me. Thanks heaps!
Yeap, little by little, step by step, that's the only way you can get happier and richer. Other schemes don't work at all. Even though internet offers a lot of ways to get rich quickly, be wise and don't let the feelings overflow you, always keep your head cold.
No doubt! Besides, the true value is in the lessons along the way. Lottery winnings are a curse.
Experience Is the best teacher. But, it only teaches us when we learn from it! Thanks for sharing your story with the rest of the community Bro...We have ALL been there before:)
Thanks @steemit-life. Always encouraging to hear I'm not the only one!
Also experience with forex few years ago and that made me a total fool. Making trades without even knowing what the circumstances is, trading with no knowledge just watching the curves go high and low and predict that it might go this way or that way without even understanding the market. Too bad
Been there as an options trader. The guys at tastytrade.com helped me make sense of that world. Thanks for sharing that!
Interesting read, but I still don't see how your most painful mistake can make others millionaires... Seems the lesson is don't invest in something you don't know, sell when you are ahead, and don't chase money for money itself... This is good advice on how to not lose a lot of dough, but how does it relate to actually making money, let alone millions?
That's a fair question. Perhaps I am given to hyperbole at times :-)
I guess my point is that if you think long term, create helpful content, and persevere and if Steem grows in value, who knows? It's fairly speculative even with your investment of time. But I do believe many will do very well. Time will tell :-)
thank you for the experience you shared to the steem community. i can totally relate to some degree. i just quit my secure job with the thought i will make it to the business world. i want to give financial freedom to my family but i know it's not without sacrifices. i have a large family and most of my friends and church members were in shock when i left my job to venture in a business. i know in their minds they must have said i was crazy. but like they say, no risk, no reward. joining steemit may help me with my journey to success by reading helpful posts just like yours. i hope to contribute my own experiences too in the near future.
Thanks for saying that and way to go! It takes heaps of courage to do that especially when people you care about think you're being dumb. You've made your decision now so keep going and don't give up :-)
Uh that hurts :/
I did something stupid myself: I made some money with BTC trading in November/December 2014 (about 6000$ with an investment of 400€). In summer 2014 I found a bitcoin gambling site for sport bets. It was the football worldcup and as stupid as I was I placed all my BTC on a bet to get a new car. You know what comes next.. I fcking lost everything :x. I couldn't sleep about 5 days after that :D
Doh! Feeling your pain. I bet that won't happen again though. Thanks for sharing.
I've never had enough money to get dumb with,. but your advice is spot on. and exactly what i told myself hen i got a little overexcited at first.
I have invested a little in steem but only a few dollars worth out of what I've earned each time to power up. i'm not sure i understand it enough to buy and sell even small amounts in the same way some people do here.
I'm the same. A long term buyer, not a trader at the moment.
A great post Jason. Thanks for the insight and I love the stories.
As trivial as this sounds, I took a gamble yesterday and happened to use your advice of only gamble what you're willing to lose. I decided to wash my jumper in hot water and decided that I could cope if it shrunk. It shrunk, and I'm disappointed. But I'm glad it wasn't my life savings!
Ha! Great to hear there was such an immediate and practical application :-)
Thanks for the story! One of my first steemit entries was about an ill-fated attempt to run an international arbitrage on MtGox before the exchange went belly up, and I'm planning a follow up post in the near future going over EVERY.DAMN.TRADE that ever went against me. I've been keeping a list of them over the last 15 years, I think now's the time (and steemit's the platform) to tell those stories!
Looking forward to hearing more. I'll go read the story.
I know the feeling of going all in on a stock, in order to survive you need to be cold harder bastard, be very analytical and choose your fights.
will steem be the one ? who knows. but it's about hedging your bets. I prefer invest time here then facebook for sure.
I'm with you mate. Steemit trumps Facebook every day of the week.
Putting too much money in altcoins is like gambling. Some people who know better will still do it. Yes, I bought Steem too.
Ha! As long as it wasn't more than you could afford to lose :-)
Thanks for sharing your pain with us Jason - looking forward to your future contributions to our new economy ;-)
Thanks for the encouragement! I'm loving this community and everything I'm learning and super-excited to be here from the early days. The more I learn about what this could become the more it blows my mind!
I can definitely relate, and i'm sure many other can too!
Thanks!
remember you are just playing with numbers, dont get emotional
Sometimes as hard today as it was 17 years ago.
Wow. Thanks for sharing your story!
Thanks for sharing your husband whose been answering all of my newbie questions about steemit. Lol
Haha :) Looks like you've done well so far ;)
I. FEEL. YOUR. PAIN.
It's been quite therapeutic for me to realise I'm not the only one.
you have to flag the post of the person that stole your post
Done. Thanks!
encouraging - thanks for the info
Thanks :-)
🌠🌠🌠👏👍
👊
well in was one in the same shoes you found yourself as an early ignorant investor, thinking of making money overnight, cos it really does not allign with life like that, growing the ladder slowly and steady win the race. it was a lesson learnt
maybe the story might of been different if you had won the stock price gamble.
The say sell your loses and ride the longs..
That was the problem. It was never more than a gamble!
I really did enjoy reading this. Thanks for sharing that story with us, and for the wisdom you shared. Keep STEEMin'
thanks!
Great story but I didn't see where you have 'Tastytrade' in it? (it was in the article description) I'm a TastyTrader and love the company. I feel your pain though - I seem to make a little, tell my friends, and they get burned..sucky feeling. But I think Steemit is as solid as we can expect. We are in it for the long haul!!
Tasty Trade is amazing. This mistake I wrote about happened long before they were around. Had I known about probability of profit and credit spreads in those days I would have never gone all in on one stock. Better late than never!
By the way, I think I mentioned tasty trade in a comment.
"Risk management is so crucial. Buy Steemit, but only with a proper risk management strategy that is proportionally related to your total net worth." Very wise words. Thank you for pulling that out. And crazy! You were in the same role! We should grab a coffee sometime :-)
TJ, amazing truths there. I've heard the average male retiree dies within 4 years of quitting work. I look forward to hearing more from you in the future. Thanks for following me.
That's crazy Mr Question-Answers that you had the same experience as Jason! Cool comment.
Super-cool!
Must be a female intuition :-)
i wish i was able to awnser questions like you and post on boards like you do your actually really talented to be able to do something like this o.o