Tuesday, May 11, 2021
Home The Capital Lessons I Learned From My $25000 Loss

Lessons I Learned From My $25000 Loss

I made and lost $25700. I had this to learn about business and decision making.

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If someone were to tell you that you had a chance to start with $50 and have $25700 4 months later. Would you take the chance?

OK, what if you knew that you would lose almost all of that money and anytime, would you still keep taking the chance?

If you answered yes to those questions, then you made the came choices I did in 2017. This is why some of those choices were a bad experience but with an amazing lesson.

First a quick back story…

I got interested in finance at around late 2008/2009 and one technology really had my interest more than the other.

There was this digital currency that was valued at pennies on a dollar. Its principle really excited me even though I was about 14 then. I even wrote an article in my school’s magazine. It was bitcoin. The article was about bitcoin.

People made fun of me for having talked about how $0.01 pennies worth of money were an exciting future and definitely something to have as a collection. Truth is I had read about it from a paper that was projecting the future of bitcoin based on its potential purpose. I did not have any knowledge of what was possible with bitcoin at the time.

My school teachers and students didn’t pay any attention to that article and I felt sad. The fact that I got some ridicule for it also didn’t help which made me think to myself that I would start collecting those coins when I got older.

First forward to 2017 and bitcoin was rallying like crazy.

At this time I had a bank account, debit cards, and a digital wallet that could allow me to get in on the fun.

I started actively trading it starting at $50. I was in university at this time and I would wake up early to inspect my “portfolio” before laying strategies for the trades and going to class for my engineering lectures.

Class at this time was not even fun because I was only thinking about price action and strategies that I would be using to get the most out of the day.

Most of the trades were good until I got to $500 and then lost half the value of my money. I do not take losses easily… No… Especially not in my early 20s. I decided that I would look for someone who actually knew what they were doing to help me invest the remaining half.

This was the time automatic trading bots and companies were in high demand. I saw this one that really captured my mind. Someone I knew that had been using it had apparently even bought an 8500sq ft. house and for me, these were all selling points that convinced me that my 250 was in good hands.

Besides this, I didn’t have to trade actively all the time and I could concentrate on my engineering as well. This was the push button… I was naive and all in. Advice was for haters. There was no stopping me. I was going to prove the world wrong. Everyone who had called me a loser and all that jazz.

This high on the world feeling lasted a full 90 days. 3 months and I was riding high. 3 months and every sunrise was a salutation to all my wins…

Then at the end of the 3 months, I had amassed $25700. I decided that this was time to take some money out and begin having the true fun of a young adult.

Since it was $25700, I decided to take out $700. Given that I was in India at the time, things were not expensive and $700 was way more than I needed.

I would leave the $25000 in to keep growing. Sure enough, I got my $700 out. It was fun to get that notification of $700 worth of bitcoin in my wallet.

Up until this time, I had ignored the rules of fundamental investing entirely and I was also beginning to violate those of technical investing.

I left the $25000 there that night and in the morning, I woke up saluting the rising sun as I had done in the past. But when I came to my phone, sure my $700 was still there but the $25000, that was gone.

I got to know that there had been an equivalent of a bank run and the company that had got me all this money had frozen all withdrawals. We were told our money would continue compounding but we would not be able to get it out anytime soon.

I started panicking. Then it dawned on me that I should have gotten $25000 out and left the $700…

All of a sudden the sun wasn’t as bright, things were hazy, I forgot what it meant to have good food, baths were foreign and friends were strange and the haters were right. It didn’t feel good.

I always emailed my account reps back and forth till I got shadowed.

Since I already had a depression going for me from a past relationship, it wasn’t so hard for me to take on the pain. I also consoled myself for getting at least $700 out. I had made $450 profit from my $250 I told myself.

I then quickly did get back to my senses and start analyzing what had actually happened in the past 3 months.

I vowed never to take on such levels of risk.

These were the lessons I learned.

  1. Investments that were worth my time had to have real-world value and not just hold value the market gives them.
  2. I also determined that I must always be able to quantify this “ value” in terms of numbers that I can compare and comprehend.
  3. I learned to look at assets that derive their value from the psychology of the market as not only highly speculative but also subject to higher levels of unethical manipulation from people. I now never put more than 5% of my total investments into these. The money I put here is my “play money.”
  4. Even though bitcoin is a revolutionary product, it is important to understand market dynamics from those that are a no go for anybody to those that are highly lucrative.
  5. Learning to take profit is just as important as knowing when to stop losses.

These lessons have always helped me in my investments since then and with continuous study and a quest to get better, I have always had the luck that I need on my side to help me make the best investment decisions.

Do you have any stories of your own like this, let me know in the response below and your lessons learned also mean a lot.

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