The blogger who writes the Canadian Personal Financial Blog confessed to the worst advice he had given and challenged other bloggers to do the same. I didn’t have to think too hard on this one – I had committed a blooper that I regret to this day.
When I first started investing, I read a lot of books (regrettably none from the recommended list) but for some reason, I was most attracted by the Motley Fool books. I mean, if guys wearing joker hats are making a killing on Iomega and writing books about how easy pickings can be had in the stock market, really how hard can this investing thing be? If you recall those go-go days, the Motley Fool maintained a portfolio of what they called “Rule Makers”, composed of mostly high-tech stocks like Cisco (CSCO), Microsoft (MSFT), Intel (INTC) etc.
In my first year as an investor, I bought a venture capital fund and the next year, I did my “research” and picked JDS-Uniphase (JDSU) and Yahoo! (YHOO) from the Rule Maker portfolio. When a friend of mine asked for suggestions for investing his RRSP contribution, in a stunning case of the blind leading the blind, I recommended that he buy JDSU. And, that’s what he did and the stock even went up for a while after we bought it, only to fall off a cliff and never recover.
I didn’t come off too badly from my initial forays into stock picking – out of sheer dumb luck, I made a profit on Yahoo! and dumped JDSU after a few years. My friend, on the other hand, still holds the JDS shares and would be lucky to cover the trading commissions when selling. That’s not even the sad part: scarred by his initial experience with stocks, my friend gave up on equities entirely, stuck his savings in money market funds and missed the tremendous recovery from the bear market lows.
Today, I avoid giving financial advice of any sort to friends and relatives. Even when I’m sure of something, I just say how I handle my own situation and leave it at that. It is awful to feel responsible when the consequence of your advice goes bad.
Note: Many thanks to Larry MacDonald for mentioning this blog in his article titled Seven essential websites for becoming a better investor in Globe Investor Magazine. Needless to say, we feel honoured.