Losing someone else's money is far worse than losing your own money. If you lose someone else's money, you will have this tremendous psychological burden that will be hard to shake.
For a brief moment in time, I wanted to be a money manager. The idea of managing other people's money was alluring. After all, I had an intese interest in the markets and generally invested with positive returns and minimum blowups. My track record was all of three years.
Of course I was still in college at the time, trying to figure out what I wanted to do with my life. I hadn't gone through enough ups and downs in the market to really feel the emotions of investing. All I remember was making $500 bucks in one day after going to class. Books a Million (ticker symbol BAMM) so happened to announce it was being acquired a couple hours after I invested $1,000. At the time, I thought I was a genius.
The worst thing a novice investor can experience is immediate success. With immediate success comes a feeling of invincibility. I thought I could do no wrong as I whipped around the several thousand dollars I had online. I gave advice to friends and mentioned to girls I wanted to woo about my fortuity. I was an arrogant bastard. The irony is, people listened and girls accepted my invitations. Damn, how I miss college!
Losing Someone Else's Money Is A Sorrow I Cannot Bear
Everything was going well when I decided to aggressively pitch a company called TDFX junior year. TDFX was a graphics card company which I thought was on the cusp of launching a fantastic new product for all the hardcore gamers to devour. I got my parents and friends into the name right at the peak. The company missed their quarterly earnings results the following month and decided to delay their latest graphics card by at least six months. TDFX's share price fell 30%.
I was embarrassed and ashamed. My heart dropped like a company going out of business. I remember thinking to myself, I would be willing to lose all my money if my parents and friends could lose no money. I was willing to sacrifice everything I had to make them whole on their TDFX investment.
When I offerred to cover their losses, they all declined. They told me that at the end of the day, nobody forced them to invest and it was their responsibility alone. I apologized and told them that all I wanted was for them to win. They understood, but their graciousness actually made me feel worse!
From this indelible moment, I told myself to be quiet about any stock wins. Only if people asked for my advice would I begrudgingly give it with a large caveat that I can lose money as quickly as I can make money.
I ONLY KNOW WHAT I THINK I KNOW
Let's be clear. If I was a brilliant stock picker, I'd be a mega-millionaire wonder boy running a multi-billion dollar hedge fund with my own G5 jet. Alas, I'm just a regular person who is looking to navigate through the landmines, trying to eek out a return greater than the risk-free rate.
I only know what I think I know, some of which are written in my predictions and macroeconomic related posts. Readers are free to pick apart my arguments all they want.
The “something” far worse than losing money is losing other people's money. I can't take the guilt, sorrow, and embarrassment for losing other people's livelihoods. I write this post to remind myself that I am a mediocre stock picker who should always remember his place.
A blind squirrel finds a nut once in a while. I'm content with just rebalancing my portfolios several times a year and leaving the stock picking to professionals who can't even outperform most of the time!
Invest In Private Growth Companies
Consider diversifying into private growth companies through an open venture capital fund. Companies are staying private for longer, as a result, more gains are accruing to private company investors. Finding the next Google or Apple before going public can be a life-changing investment.
Check out the Innovation Fund, which invests in the following five sectors:
- Artificial Intelligence & Machine Learning
- Modern Data Infrastructure
- Development Operations (DevOps)
- Financial Technology (FinTech)
- Real Estate & Property Technology (PropTech)
Roughly 35% of the Innovation Fund is invested in artificial intelligence, which I'm extremely bullish about. In 20 years, I don't want my kids wondering why I didn't invest in AI or work in AI!
The investment minimum is also only $10. Most venture capital funds have a $250,000+ minimum. You can see what the Innovation Fund is holding before deciding to invest and how much. Traditional venture capital funds require capital commitment first and then hope the general partners will find great investments.