The Biggest Investing Mistake I Made That You Need To Avoid

Don’t lose more than $10k as I did.

Around this time last year, I made the biggest investing mistake of my life.

I spent more than $10k to buy an online dropshipping store and have not made any money back from it. That’s $10k I wish was in stocks or just sitting in my bank account.

Buying an online dropshipping store isn’t a mistake in itself. There are people out there who do buy e-commerce stores successfully.

For me, the mistake was with how much I invested in proportion to my finances and the mindset I used to buy the e-commerce store.

At first, I thought it was just a me thing, but after extensive conversations with my parents about renovating our house, I realized how easy it was for other people to make the same mistakes as I made.

The Biggest Investing Mistake I Made

Around October 2021, things were great. I made $30k off a mansion I sold and had just gotten on another project which meant about another immediate $10k in the bank.

Both my tax-deductible accounts — my RRSP and TFSA — were maxed out, and I was still sitting on nearly $20k.

With my experience in dropshipping and e-commerce, I decided that using that money to build an e-commerce store would be a great idea.

To me, e-commerce was the online business model that could produce massive success the fastest as long as you had money. All you had to do was find a niche, build a store, test as many products as possible with paid ads, and eventually, you’ll find successful products whose sales pay for your ads.

And after looking at my bank balance, I thought I could shortcut my way to success. What if I bought a store that was already making money? I can easily start running ads for products proven to sell and profit immediately.

What could possibly go wrong?

Well, lots of things could and did go wrong. I talked a lot more about it in this article:

The problem was that while I had experience building e-commerce stores, I did not have experience building profitable e-commerce stores. Thus, I also did not have experience running a profitable online store.

The store flopped, and $10k disappeared from my account overnight.

Fast forward to 2022. I had to pay taxes, my travel plans were screwed up multiple times (rebooking flights, multiple $500 COVID tests, VISA fines, etc.), and I failed to convert on all the auction assignments I got.

I was now living with no savings. My money disappeared as fast as I got it.

My biggest investing mistake was not considering all the risks in relation to my current situation.

All investments come with risks, especially the ones in uncharted territories. You will inevitably make mistakes when doing something new, but that doesn’t mean you hide in a box and never try new things.

Why do we fall? So that we can learn to pick ourselves up. We just need to make sure the fall doesn’t kill us.

Too many of us chase the dream of what we could have, throw away the things we already have, and end up having nothing left.

Know What You Know And Take Baby Steps

My parents were about to make the same mistake.

We sold our old house last year, moved into our rental house, and my parents devised a grand plan to do a crazy redevelopment.

My parents are always complaining and arguing about the lack of money. Flipping our house seemed like a fix-all solution.

“If we spend $150k, renovate our house, and resell for $1.2M, we can profit more than $200k in one year! Other people in our neighborhood have done it already and sold their houses for more than a million. Why can’t we?”

It seemed logical at first. My dad has experience as a contractor. He has renovated multiple homes. My mom owns numerous rental properties in this neighborhood, so we know the real estate market well.

The problem is the scale of this redevelopment. It’s nearly the same as building a brand new house, which we have never done before. Our budget was only $170k as well, which is all the cash in my parents’ account.

Yes, we might double our money, but the fact that we’ve never done a redevelopment like this and we have the risk of losing all our cash at hand makes this project a terrible investment.

Various contractors have estimated that this project will cost at least $300k too, which makes this project even more absurd.

“But Kevin, look at the potential… if we do this successfully, we can repeat and fix all our financial problems.”

This line of thinking is the path I went down when I bought the e-commerce store. The consequences of failure matter too much.

Now I want to clarify that I’m not against taking big risks. I can respect the all-or-nothing mindset, but the difference between investing and gambling is how smart we are about managing risks.

For my parents, I can respect if they decided to use all their cash for a down payment on another rental property. They’re already managing seven units, so it’s safe to say they’re much more experienced in managing rentals.

Or if they really wanted to try and flip houses, why not buy a cheaper property and flip it on a smaller budget? That way, if the plan completely flops, you’re not stuck in a hole you can’t get out of.

Instead of buying an e-commerce store, it might have made way more sense for me to buy a blog. I already run a profitable WordPress blog, so I have more experience in what to look for when buying a blog.

So even if I overpay due to my lack of experience in actually buying a blog, there’s a good chance I still end up with a website that cashflows every month because I know what’s needed for that to happen.

Taking risks and learning new things is encouraged, but take baby steps.

If you want to invest a considerable sum of your money, invest it into something you know.

If you want to venture into something new, carefully consider the risks and adjust how much you invest accordingly. Make sure you’re not just considering the risks of the investment but also the potential domino effect on your life.

Inevitable Mistakes And Your Mindset

Losing more than $10k on the e-commerce store sucks. I wish I could go back to the past and not throw $10k into the store.

But I can’t. The only thing to do here is learn from the mistake and do better next time.

Making mistakes will be inevitable. No matter how much knowledge you put in yourself and how many mistakes you carefully avoid, you will make a mistake eventually.

And that’s fine. Suck it up, learn from your mistakes, and never double down.

If you enjoy reading stories like these and want to support me as a writer, consider signing up to become a Medium member. It’s $5 a month, giving you unlimited access to stories on Medium. I’ll earn a small commission if you sign up using my link.