The Worst Investment Ever

Last week, we asked readers to tell us about the best investment they've ever made. This week, we decided to ask the opposite question: What is the worst investment you've ever made?

Our readers, many of whom are seasoned investors, were very candid about where they had made missteps. They also shared what they had learned from these mistakes, and how they have helped them become savvier investors. For some, it was just a bad pick. For others, their timing was off--they bought an investment too late and missed out on most of its upside. Other readers bought a stock with great potential but then sold it too early.

Here's a summary of what they had to say. (To read the full discussion and weigh in on this topic, please click here.)

I Wish I Had Cut My Losses Some respondents held on to sinking investments for too long and wished they had sold sooner. In most cases, these were individual stocks--some of them value traps, others penny stocks with uncertain fundamentals. As yogiman points out, "Stocks can go to zero. Generally, mutual funds don't." But despite their greater diversification, plenty of readers mentioned funds, too--especially technology-sector funds that were bought and sold at poor times.

"I failed to take profits on the stock options I had in a small biotech because I 'knew' the stock would pop on approval of their drug candidate, only to see it get crushed after another trial had bad results a few weeks prior to the approval," said WCB0107.

"Mine was Lucent," said

doctorWu

. "I never bought a share. My

"Van Wagoner Emerging Growth Fund. Bought near the top of the 2000 tech bubble and held on for far too long after the bubble burst. I don't remember the numbers, but they were really ugly," said beecnul8r.

SilSanders recounted the story of investing in a tiny tech company recommended by a broker, which unfortunately went belly-up. "I have stayed clear of these sorts of 'investments' ever since--so they were really my best investments ever--in investment education."

"Wachovia Bank in the mid-2000s. As an employee, it was acquired through stock options that I exercised and then held. I kept waiting for the next 52-week high before selling. I had other WB options that never got exercised before the stock bombed in September 2008 at about 18 cents on the dollar," said SamFlorida.

I Threw Good Money After Bad In a related vein, some respondents admitted that not only did they hold on too long, they continued to invest in a sagging investment despite crumbling fundamentals. Some also learned the hard way that becoming sentimentally attached to an investment can cloud their objectivity.

"I purchased Exodus Communications (an Internet hosting company) in the early 2000s, during the Internet boom/bust," davemck21 said. "Not only did I not sell it when all of the fundamental indicators screamed SELL, but I began to dollar-cost average more into the stock as it plummeted--because I was emotionally and financially committed to it!"

Akhand

said, "[I] bought financial stocks in 2008--

"In 2008 I bought Six Flags in an IRA. A friend recommended the stock and when it went down I averaged down! Not too long later they went Chapter 11 and I salvaged a few hundred or so of my investment," said broman.

Arora1 bought Washington Mutual, Ambac Financial AMBC, and American Home Mortgage, only to see them all go bankrupt. "Compounded my blunder by adding more money even when bankruptcy was imminent without thoroughly understanding the whole bankruptcy process (and overconfidence that came from a couple of successful turnarounds that rewarded me handsomely). ... Lesson learned: Even when you have capped the amount you are going to speculate with, set a limit to the total loss you are willing to take on an individual investment. And hope is not a strategy; take the losses, unless you are capable of understanding how a turnaround can occur with its probability."

I Sold Too Soon Some readers picked a winning investment but underestimated its potential and sold too soon.

"[I] sold early shares of

ramble165

.

"I was a portfolio advisor to a longtime friend," recalls

beecnul8r

. "... I had her buy

Fear motivated ellipsis7 to sell too soon. "Worst investment ever executed was the sale of a business development company (Prospect Capital) in May 2014, [following] an announcement that the SEC was auditing their books. I realized a loss of $25,000. Painful lesson learned is that the SEC's investigation had no merit and the stock corrected back up. If only I had waited for the stock to correct ... but instead made a decision to sell based upon foolish emotions and paranoia that the stock would collapse."

I Bought Without Kicking the Tires Myself Some readers regretted not doing their own research and considering their own risk tolerance. Many of these readers bought on someone else's recommendation, whether that advice came from a broker, a TV personality, or even a Morningstar recommendation.

Meddguy regrets not doing due diligence before investing, and then not keeping track of the investment once it started to go south. "I bought [Washington Mutual] without doing any research, but solely on the fact that one of my favorite mutual fund managers at the time had bought a large stake in it. ... The even bigger mistake was not paying attention to it when it started to crumble. I should have gotten out a lot sooner than I did."

"The worst was WorldCom," said zelda56. "What did I learn? Not to ever listen to a broker who promoted the stock because his brokerage firm had so much of it. ... I also learned to be my own manager. I armed myself with accounting courses at a university and that was the beginning of a great self-directed portfolio that has done very well."

"When I first got involved in the market in the early 1980s, I bought a Canadian company named Ranger Oil, on a tip from a coworker. Needless to say, it tanked, and I lost most of my money," said shipmad. "This taught me that I better get educated, do my own research, pick my own investments, and never, never buy on a tip again."

Jimbo123 says: "In the late 1970s, I bought 100 shares of Braniff Airlines. Not long afterwards it had a 100-for-1 reverse split. Lesson ... never listen to a broker!"

After investing in a few companies that went bankrupt (including Sun TV & Appliances, Mutual Benefit Life of New Jersey, and Monarch Life Insurance company) yogibearbull has this to say: "Trust only goes so far. One must constantly review new data and situation."

I Regret Buying Real Estate Most people think of real estate (as in a physical property such as a home or apartment) as a fairly sensible investment--after all, everyone needs a place to live. But a few respondents mentioned that they considered buying real estate to be their worst investment decision. For these folks, whether because of slow-rising real estate values or better returns that could have been achieved elsewhere, the opportunity cost of keeping a big chunk of their net worth tied up was too great.

"My worst investment thus far was a 30-year mortgage at the age of 25," said RenainTexas. "Had I invested that same money in something else, I would have far more money than I had equity in the house. I live in an area where home prices rise slowly (and reasonably), and rents are cheap in comparison. Let's not even discuss home maintenance costs, which most 'you should buy a house' calculators don't mention."

Camaro68

agreed, adding "[I] was in the same exact situation myself. ... I just unloaded my house and don't plan to buy another for a while. ... I put a large down payment on my first home, and had I put that $50,000 into the market in 2005--[in