My Worst Investments

I've been wrong. Many times. Often for the 'right' reasons. 

Listed Legal Companies

This was straight up a vanity play.

I'd given up working as a lawyer but wanted to be able to claim a residual link to the law. Thinking that economies of scale would smooth out the cashflow problems of law firms - big, infrequent payouts - I threw money into storied plaintiff firm Slater and Gordon (ASX:SGH) and litigation funder Bentham IMF (ASX:IMF). SGH went to zero after its brilliant lawyers turned out to be hopeless businesspeople. IMF went up, then down as post-COVID interest rate hikes smashed its cost of finance.

I survived this train wreck because: I only placed small bets into them relative to the rest of my portfolio.

Lesson learned: To paraphrase Pulp Fiction's Marcellus Wallace, "F*** pride. Pride only hurts, it never helps." 

via GIPHY

I'm not a legal eagle anymore. I'm a passive-investing pigeon. It stings to admit it, but I should get over it. Losing money stings more.

Helping my Ex

I helped her with her studies. I helped her with her job. I even helped her with her Mum's visa application.

Giving is often presented as being its own reward. In her eyes, she was giving me the opportunity to be giving.

I also regretted being a horrible person in my last two relationships, so I gave her money and time, held hostage by my wish to be better.

I escaped this dungeon-basement because: she went on holiday then called me up not to say "Hi", but to demand help with her latest emergency. A light went off in my head that my karmic debt had been repaid and if I stuck around any longer her awful 'luck' might rub off on me. I dumped her on that call while her mum was in earshot.

Pity. Her mum was pretty classy.

Lesson(s) learned: 

• Give by only doing what I was going to do anyway. That way, everybody gets to win or cut their losses quickly. 
• Embrace being a sh**ty person who needs quid pro quo.

Work

Holiday jobs, careers, career pivots. It's a lot of work just to get work. And then it's an indeterminate period of getting condescended to and ignored before redundancy and starting all over again.

Work may have been financially rewarding and fun at first, but it extracted a psychological toll as well as requiring additional spending on transport, education, etc. 

"So what? That's called 'life'. Ditch your ego. Grow up."

And that's called, "misery loves company", bud.

Standard advice is to invest in my own employability. I tried that to find that it perpetuates a neverending indignity of demonstrating relevance. I could be surgeon-President King's Counsel, and hiring managers would still neg me and throw lowball salary offers. 

I walked away from the air crash because: I took the money from work and put it into shares and property. Sure, I made stupid investment decisions (see above), but on aggregate saved enough to nope out early.

Lesson(s) learned: 

• Investing in 'myself' is not real investing. It's vanity. Use ETFs instead.
• I can cut expenses more than boosting salary.

Fixed Income

"Everyone needs fixed income exposure" went the mantra.

So I bought some.

Interest rates go up. The value of lower-yielding debt goes down. 

This is a strange one. Government and corporate debt is objectively one of my worst investments while at the same time being profitable. Just not as profitable as shares or property. 

However, it has always been a small part of my total holdings, and it was also a stabilising force when COVID and other shenanigans rocked global equity markets, so I don't want to dump on it too much while also coming clean about its underperformance.

There is a chance that governments will do better at paying their debts than companies are at choosing initiatives. I don't want to miss out on that chance.

I didn't die on the operating table because: I didn't sell. 

True diversification means always hating something in your portfolio, but aren't I being inconsistent? Why do I happily keep a foot in fixed income but not employment? 

Because the minimum buy-in (and ongoing fees) of employment are huge. In contrast, I don't have to do anything to stay invested in fixed income. I don't have to work on my bond-presentation skills, write bond-tailored resumes, or hob-nob to maintain bond ETFs. I just have to not sell.

Lesson learned: Know when I am making overweight bets. And if I am, make 'em small or don't make 'em at all.

My House

I am Australia's worst property investor.

Despite a multi-decade property boom, my house underperformed local and international shares.

Yes, house prices and rents rocketed up, but so did the cost of rates, insurance, compliance, and repairs.

Don't get me wrong, it was still insanely profitable. It outperformed superannuation, which is compulsory and therefore not a voluntary 'investment' as such.

It was also a roof over my head. A side hustle. A fortress.

It made memories, friendships, conflicts, and taught me nearly everything I know about fixing things with my hands.

For a long time, being a debt-free Torrens title homeowner was part of my identity. 

But as it anchored me, it also locked me down psychologically, financially, emotionally, and geographically.

Talk about hidden costs.

Over time I came to resent being dependent on others to make it work. Twenty-four years of trusting tradespeople, tenants, and agents to not screw the pooch left its mark. Everyone has an excuse for botching a fix (but still charging me for it), failing to make rent ("my car needed repairs"), or letting a dumpster fire of a tenant through the screen ("they promised us they wouldn't"), but the consequences are mine to bear alone.

Companies, even listed ones, rely on people too. Why not apply my misanthropy to them?

I do. Or rather, algorithms do it for me.

I would have a different view of holding direct property if I could purge problem people as simply as an ETF sloughs off struggling stocks. It's not that I'm being selectively soft on shares, it's that I legally can't be ruthless when it comes to housing.

Despite cashing out, I am still 'overweight' property. Instead of being ~50% invested in a single brick house on a quarter-acre block in Adelaide, I am 1.7% invested in local and global REITs, still high in comparison to market cap indices, but with far less friction. Tenants who can't pay can take it up with their publicly listed landlord, not me.

I avoided the mass casualty event because: 

1. I got lucky. Things could have been much worse. 
2. I sold before I got unlucky. 

Lesson learned: Large parts of your life may be past their use-by date. Know how disproportionate they are, know what they bring, and know how much it costs you to hang on to them.

Afterword

My worst investments tend to be in people. Human imperfection in myself and others is a real drag on returns. The solution for many is to seek out better humans or to improve themselves. If that's you, then great! It didn't work for me, though. Instead, that attitude led me to overestimate my own agency.

On a positive note, my worst investments were not total losses. They were nuanced, sometimes bittersweet. My f**k-ups provide learning, stories, and occasionally profit. And even though I regret suffering through them, I don't see many ways I could have chosen differently.

An optimist could see this as human resilience and adaptability. A cynic could it as the delusional ability to spin losses as gains.

It's probably both. So I'll probably still keep making bad investments.