Life Strategies - For those with one hand tied behind their back: 10 Things I Told Myself Which Turned Out To Be Completely Wrong

In my last 2 posts, I told you about 3 things I told myself which turned out to be completely wrong.

One of them, I told myself I would never get married – I was wrong.

Then I told myself I would never learn to drive.

I was wrong about that too.

Then I told myself I was a words person, not a numbers person.

I was wrong about that too.

Hattrick? Ha! I wish. There’s plenty more where that came from.

You are not going to believe this next one, wait for it…

I told myself I could invest like Warren Buffett!

I know what you are thinking, “Minoo, you don’t need to tell us you were completely wrong about that. If you had been right, your name would be on the Forbes billionaires list.”

And you would be right. But I am going to tell you the story anyway.

Here are some reasons why…

Because you invested in penny stocks, and now you have nothing but regret to show for it.

Because you invested in a stock based on a hot tip from a friend or acquaintance, and lost a chunk of money.

Because you tried your hand at day trading, only to have to call it a day, when wins were followed by losses, and wins were followed by losses again, until you decided you had had enough.

Because you invested in a stock, based on one of the talking heads on TV saying it was a good bet (example Jim Cramer), only to discover they were wrong.

Because you couldn’t resist the temptation to time the market, to sell because you thought the market was at a high, or to buy because you thought the market was going higher, but your predictions didn’t pan out.

Because you hit upon some strategy, be it Dogs of the Dow, or something else, and said “aha, this is what I should do”, but found yourself licking your wounds.

Because you became enamored (being further down on the learning curve is sometimes as bad as being at the beginning of the learning curve) with stocks which had the highest yield, i.e. paid the highest dividends, and you bought some high-yielding stocks which turned out to be complete money sucks.

If your track record of investing includes one or more of the above misadventures, you will relate to my story.

It’s pretty typical.

Every novice investor goes through stages.

Stage 1: To you, buying stocks is gambling. It’s like going to Vegas – without the fun. (At least when you go to Vegas, you can sow some wild oats and say, “What happens in Vegas, stays in Vegas”. Even if you are not the wild-oats sowing type, you can still say “What happens in Vegas, stays in Vegas” if you so desperately want people to think you are a rake. To which I say “why?”But let me not be judgmental.

Stage 2: Temptation rears its ugly head. The irresistible power of suggestion is about to make a pawn out of you. Typically, you hear that someone made big bucks ($$$) by investing small bucks ($$$) in some stock. Your heart starts to race. Imagine if you could invest and get lucky too – turn $1000 into $10,000 overnight. I am using big numbers, because Chinese whispers will usually be at play. Woo hoo!

Stage 3: You decide to hold your nose and take the plunge. Depending on the source of temptation, you do penny stock investing, or day trading, or buying a stock based on a hot tip, or buying a stock based on a TV talking head like Jim Cramer, or getting into the market just because everyone and their uncle and aunt are doing so, or market timing, or buying high yield stocks, or buying some stock after reading something in a book by Ken Fisher, or reading something in a book about Warren Buffet, take your pick.

But what you don’t know is that, like the young adult who tries to get too much out of life by living it up, and ends up in a perpetually hung over and exhausted state, you, as a novice investor are trying to get too much out of investing. You don’t realize it is very rare to make money in the stock market in a short period of time, and even if you do, it is very rare to be able to hold on to it. So you are destined for an investment hangover. The size of the hangover depends on the size of your investment partying. And it can’t be cured by Alka Seltzer, or Reset IVs.

Eventually, like the young adult, who learns to say no to the temptation to continuously party, because at the end of the day, it is not worth it, you become enlightened and eventually learn to say no to all the immature investing temptations described earlier in this post, because at the end of the day, it is not worth it.

Now that you have this background, I can tell you my story of how "I told myself I could invest like Warren Buffett”.

Imagine you have just finished reading the book The Warren Buffett Way.

In it, you come across a strategy called bottom fishing, which the author says is one of Warren Buffett’s strategies. Bottom fishing is buying stocks which are unpopular and have taken a beating.

You can’t wait to put this strategy into practice. The reason why the strategy appeals to you, is because you have only small bucks to invest, not big bucks.

Your small bucks – formerly, a problem to you, now no longer seem to be a problem. You think to yourself, I just have to follow Warren Buffett’s strategy to buy good stocks when they are on sale. That way, I will spend small bucks on them.

You formulate a plan. “I will wait for the stock of a good company to plunge in price and seize the day.”

Your moment soon arrives.

One day, you wake up and you find out on Yahoo Finance, or Bloomberg, or WSJ online (oh my, hoity-toity, aren’t we), Krispy Kreme’s stock has plunged 40%.

Perfect you think.

After all, don’t the long lines outside Krispy Kreme stores attest to the popularity of their donuts?

And haven’t you heard people at work rave about the melt-in-your-mouth taste of Krispy Kreme donuts?

And didn’t that lead you only just the other day to posit in your Mangalorean way that a company like Krispy Kreme had a bright future for international expansion, and would do exceedingly well in a country of "V"listers like India?

So when you wake up that morning and see that Krispy Kreme stock has plunged by almost 40%, there is joy in your heart and dollar signs in your eyes.

If it’s because Krispy Kreme missed their quarter by a huge margin, you don’t care (because what is one quarter – and you are not aware of the importance of that kind of information at the time, anyway.)

All you care is that you think Krispy Kreme is a great company and now their stock has plunged.

You rub your hands with glee.

Here’s an opportunity to buy a stock on sale, just like your idol Warren Buffett says to do.

You log onto your favorite online broker, and boom, with a few clicks, the deed is done.

You are the owner of 100 shares of Krispy Kreme stock, and it is headed, you are sure, to its pre-crash price, and then straight to the moon.

Oh-oh! A sucker is born every second.

Little do you know, you are not a smart investor like Warren Buffett. You only think you are. You are actually nothing but a silly, ignorant, greedy and speculative fool.

You realize this only after your $2,000 becomes $1,000. This happens after Krispy Kreme announces another dismal quarter.

You go, “Whoa, what just happened?”

And slowly, but surely, it dawns on you, you have been an utter idiot and a fool.

It’s time to fess up to that by selling your Krispy Kreme shares and taking a loss.

Friends and readers, this is my story.

I told myself I could invest like Warren Buffett and turned out to be completely wrong.

So the question is, did any good come out of my Krispy Kreme fiasco?

And the answer is yes.

I learned my lesson. Actually, I more than learned my lesson, because $1,000 is not a small sum to lose, especially for a frugal modest-income person like Minoo Jha. Krispy Kreme was a cautionary tale to me.

Now I want you to cast yourself a few years into the future, and imagine yourself a sadder, but wiser investor – for this is the investor I became, and I want you to feel what it was like to be in my new improved investing shoes.

You have put the shame and ignominy of the Krispy Kreme loss (as well as some other embarrassing losses) behind you.

In fact, you even wrote a Toastmaster’s speech and won an award for talking about your Krispy Kreme mess up.

After Krispy Kreme, you had a few more oopsies (par for the course for eager stock beavers). But then you settled on an investing philosophy that bore the test of time.

And you wrote several posts from your altered perspective. You wanted investors to navigate the Wild West of investing with eyes wide open. You warned them that some things they might think were great, were not so great after all, for example, great products do not necessarily make great stocks, and conglomerates do not necessarily make good investments (In your new wisdom, you could appreciate Google’s decision to separate Google from Alphabet, even though Alphabet’s moonshots were so exciting, and oh so promising).

Your intention in writing these articles was to put a spotlight on all the erroneous thinking you had been prey to.

And you wrote a post How To Turn Your Girl Scout or Cub Scout Into A Stock Scout, because you wanted people to fall off the investing bike as early as possible, so as to be able to get back on and recover.

So in the final analysis, it’s all good, dear reader.

Though I had the idea I could invest like Warren Buffett, and it turned out I was completely wrong, this investor has lived to see another day.

Now if you will excuse me, I have to go read what Howard Marks has to say, and what Ray Dalio has to say, and what Ken Fisher has to say, so I can buy some stocks – just kidding!

Though I am a compulsive reader of investing information, I have not bought a single individual stock since 2006. I have just been sitting pretty with the stocks and mutual funds I bought prior to that.

“Amen!” as one of my sisters would say.

P.S. Here’s an interesting tit-bit of information. While I was writing this post, I decided to go back and research why Krispy Kreme stock got hammered back in 2004. I almost fell off my chair by what I found out. The CEO blamed the low-carb trend for Krispy Kreme’s woes; he said the low carb trend had impacted Krispy Kreme’s sales negatively, and was “here to stay”. Huh, and I was under the impression the low-carb trend started in 2013, 5 years ago. “Minoo, how clueless you are again.” Sigh! It’s the story of my life.

Do come back next week for the fourth part of this series, 10 Things I Told Myself That Turned Out To Be Completely Wrong.

Acknowledgements

Thanks for the feedback, (comments, likes, shares) on Part 1 and 2 of this series. I appreciate the kudos from old friends, new friends, and relatives who have become friends. You keep me going.

NEXT, Thanks to all readers, current and future, for sharing my journey to wisdom, meaning and a better life. Like you, I am trying to find my way through this complex maze we call life, and I am honored to have you share my journey, as I continue to seek the wisdom hidden in plain sight.

FINALLY, A Happy Birthday shout-out: to those with May birthdays. If something you have been telling yourself is completely wrong, hope you use your birthday month to face reality and change course.

Have a blessed week, and hope to see you again next week.

P.S. Not sure if you have time, but if you do, you may enjoy these other posts:

Friendships