Last week I teased you that I would reveal some more of the dumb things I’ve done in my financial life. Today let’s talk about the second dumbest thing. (I’ve already mentioned the dumbest… enjoy.)
It all started about ten years ago when a buddy of mine told me about a great stock that was about to go through the roof. It was a penny stock but they supposedly were creating this machine that would help hospitals get rid of needles and save them a ton of cash. They had supposedly signed contracts or something and passed “two of three” levels of FDA approvals. I did some research online and everything checked out (as in what he told me appeared to be legit – and everything he told me was online so I didn’t think it was any insider trading thing.). I thought I did the right research (I looked for a while). (Doesn’t this sound like a classic pump and dump?)
Then I started watching the stock. It was about ten cents give or take. Over the next few weeks it slowly creeped up and I finally decided to buy in at 25 cents per share thinking I would get a quick double once the FDA approval was secured. I decided to dip my toe in at first but spent something like a grand buying stock. Quickly it went up a few pennies and then stayed there for a little while. It then dipped.
I didn’t know what to do. Everything seemed the same with the stock and company. So I decided to buy more! What a dumbA$$. Let’s just say I ended up putting a bunch of cash in it (like more than a couple thousand dollars…). And the same thing happened. It bounced up a bit. I felt great. And I already started spending my millions in my mind!
To end the non-existent drama the stock tanked. Eventually my thousands of dollars was worth less than seven bucks. Why was that seven bucks important? Because that’s my commission on TD Ameritrade (I asked for a lower commission and they gave it to me – try it.). So it actually cost me money to sell the stock!
And to add insult to injury, before I sold my stock they decided to scrap the hospital biotech project and open a rib joint! That’s not a typo they opened a rib joint!!! They had a website and an actual location and used whatever cash they had left they opened a freakin’ rib joint!!! (In case you’re wondering the rib joint went out of business eventually.
I remember sitting in my office and getting some e-mail (I don’t remember who sent me the e-mail) to check out the stock news (a few of my friends invested, so it might have been from one of them). And then I saw the headline. It was something like “Company scraps the hypo-needle project and opens fast-casual rib restaurant.” I remember pausing for a second – not believing it. From hypodermic needle treatment to a rib joint?!?! What the heck!?!?
The saddest part was I thought at that point that there may be a chance to make my money back. Then about six seconds later I decided to cut bait. I was done. I lost the cash and figured “just realize it Nick and take the deduction. How many times would your six bucks need to double before it would equal the value of the tax deduction if you realize it now?” Yeah – the answer was a bunch.
So that’s the second-dumbest thing I’ve done with money. I invested in a penny stock. I got hyped up and put some real cash into it. And I got my A$$ handed to me. I deserved it. I learned a bunch from it. Never again.
What about you? What’s the second dumbest thing you’ve done? 
A few words of advice: the earlier you make mistakes the better. You’ll have longer to make up for it and learning lessons like this give you a lot of time to do things the right way. I was in my early twenties. I sure could use the cash but I’m glad I learned this lesson before I started making real cash and end up swindled to the tune of thousands and thousands of dollars.
Until next time, put your credit card down and slowly step away from the mall!
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