4 Ways to Avoid Building an Investment Portfolio… That Loses Big Money

Learn to safeguard your retirement nest egg, no matter how small, at all costs.

Over the years, 2 big themes hit me repeatedly as a retail investor.

• It is easy to lose money in financial markets.
• It is difficult to earn money via investing.

Now for the fun part.

Avoiding one is not the same as excelling in the other. You can, strangely, earn and lose money at the same time with the same investment.

Gagged?

Well… so was I.

Let’s dig in.

Want to Lose What You Have? That’s Easy. Consult Many People. (Don’t Do It!)

Randomness produces random results.

This is fairly apparent in the financial markets.

By randomness, I mean consulting others for advice.

Firstly, we should consult for advice. The financial markets are confusing, and financial news is not always on our side. Yes, seek counsel.

But I have an issue with the word others.

Who da’hell do we seek counsel with?

This is where we open a big can of worms.

Imagine, for a moment, that you are a monkey.

(I’m not saying that you are, of course. Just bear with me for a second.)

And you are lost in the new tropical forest you are thrust into. You decided to consult fellow primates on food to eat and the journey to the Giant Water Lake, the haven you set out to reach.

• You ask a chimp — It says worms and roots are delicious, and you can swing across the taller trees to avoid predators.
• You ask a gorilla — He says snails, ants, rotting wood, and stems. You can barrage through the forest, and everyone leaves you alone.
• You ask a baboon — She says shellfish, hares, and smaller monkeys are unabated protein sources. She advises you to move in a pack for social safety.

You dutifully note down what your fellow primates tell you.

By the time you are done with She-Boon — You have gotten more confused than you were at the start.

Take a pause for now… and strip off their monkey suits.

You can relate the chimp to a stock-only investor, the gorilla to an options trader making directional bets on big tech names, and the She-Boon to a die-hard fan of ETF investing.

Everyone is going to tell you what works for them.

Only the more experienced ones will tell you…

• What works for them,
• What didn’t,
• And why.

Here, we pass out.

Why?

Simple.

Because we get mesmerized by a load of information without the experience to process what the other monkeys are telling us.

Everything they say sounds so logical and correct.

This is my recommendation.

Do this if everything everyone says sounds ooh-so-right.

• Listen first.
• Hold on to your money.
• Take time to research then act.

Ask generic questions to other experienced retail investors and absorb their experience. After that, work on your study.

Commit funds only when you are comfortable with what you are doing.

The keyword is comfortable.

Takeaway # 1 — Every individual is different. Hence, everyone has a different approach to investing. Consult, listen, and filter before full-scale adoption.

Takeaway # 2 — If you don’t have an opinion, you get swayed by other people’s opinions. Acting on other people’s opinions is a guaranteed way of building a lose-money portfolio. Why? Because you don’t know what you signed up for.

Another Way to Build a Lose Money Portfolio? Adopt the V.C. Approach.

Are there any Shark Tank fans here?

I love that show. I do because I,

• Run my 1-man consulting practice on the side,
• Co-found 2 private tuition agencies,
• Run a 1-person entity in my 9–5,
• Invest in small-scale startups.

I learned a lot about venture equity and debt deal structures from these anchor star V.Cs.

But that doesn’t mean I invest the way they do.

Here’s why.

• I do not have towering piles of cash to buy over 15%, 20%, or 35% stake in startups.
• I invest primarily for income, not alpha (or growth).
• I do not wish to suffer from expected losses.

Expected losses? Yes, expected. I have seen many young startups die before recovering my seed funding. I don’t want that.

I don’t have that much spare cash to burn.

I’m at the stage where I need to actively prepare for my retirement.

Henceforth, I do not invest like a V.C.

And you might be thinking…

Not everyone throws money like a V.C.! What are you babbling about?

Get ready to be surprised.

Many retail investors think like a V.C. when they invest in the stock market. Or into other asset classes.

They chase growth.

• High growth.
• Supersonic growth.
• Astronomic growth.
• Stratospheric growth.
• Moonshots.
• Mars-shots.

Trends are their friends.

Trends are also… their biggest enemies.

We can fact-check ourselves too.

Did we throw money on,

• Companies producing silicon chips supporting the growth of A.I. technology?
• Other E.V. companies… thinking they will follow Tesla?
• What about space travel?
• Maybe robotic taxis?
• Or inverse ETF bets?

If you did, how did you do?

I have a friend who bought Dogecoin for $0.60 per coin. He genuinely believed that this coin would be used for daily transactions in the online world.

He was mistaken.

And he was upset that Elon Musk did not mention Dogecoin during Saturday Night Live.

He thought that would be a moonshot moment.

It did not happen.

Dogey crashed.

He lost money.

This story points me to the following.

Takeaway # 3: Buy and Hold is not dead. It just does not apply to trend-chasing and shiny objects. Why so? Because everyone in that world is looking for a sucker to sell their stuff to.

Takeaway # 4: Avoid chasing and adding high-growth investments in your portfolio. Or limit it to 5% of total holdings. Life is fair. If you can get a moonshot… you can also get an explosion straight on your face.

Don’t.

You took a lifetime to accumulate what you have. It is painful to lose what you have within hours or days.

And I quote Warren Buffett.

Money Rule # 1: Don’t lose money.

Money Rule # 2: See Rule # 1.

The Close

No one wants to build a money-losing investment portfolio.

No one. Not you, not me, not any retirees.

But we get seduced by the promise of instant wealth or big money… from time to time.

Here’s how we can avoid that.

• Consult, listen, and filter before full-scale adoption.
• Always have an opinion. If not, you can get swayed easily.
• Avoid chasing after hot trends. You lose big money when they turn frosty cold.
• You can get a moonshot. You can get an explosion. Always know your downside.

When in doubt, hang on to your money.

Remember.

Stay within your circle of competence.

That way, you can sleep well at night…

… even when your portfolio takes a temporary 25% hit.

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This article is for informational purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any major financial decisions.