How My First Investment Cost Me Most Of My Savings

The stock I bought kept going down. I was watching my hard-earned savings dwindle each day...

The stock I bought kept going down. I was watching my hard-earned savings dwindle each day.

It wasn’t supposed to be like this. It was 2000, and buying a tech stock was supposed to be a quick path to riches.

I had spent all of two hours reading a few brokerage reports about this company. Cisco was rumored to be interested in buying it. So why do more work?

There was no easy way to get more money. I was already working two part-time jobs on campus to help pay for my MIT degrees. And then Warren Buffett spoke on campus.

Here was this incredibly successful investor talking about:

• Competitive advantage

• Intrinsic value

• Investing for the long-term

Listening to Buffett made me realize I hadn’t been investing – I had been speculating. I had no investing philosophy. No investment process. I had no idea if the company had a competitive advantage or what it was worth.

I started reading everything I could find on value investing. I was no longer tempted by the hot tech stocks, now I was looking for durable businesses.

I got an investing job at Fidelity Investments. Then I became an Equity Analyst at another firm, then eventually a Portfolio Manager. Now, more than 20 years later, I am the Managing Partner of my own value investing firm.

Along the way, I made numerous mistakes. I didn’t pay enough attention to business and management quality. I got lost in the minutia of the numbers and missed the forest for the trees. I didn’t look for the best bargains in the right places. And that’s just to name a few.

In future articles I plan to share some of these with you so that you can benefit from them and avoid making them yourself. As the saying goes, the best way is to learn from the mistakes of others.

If you are just starting to invest, first ask yourself: Are you an investor or a speculator?

A speculator thinks about what others will pay for something. An investor thinks about what something is intrinsically worth based on the cash flow stream the company is likely to produce.

A speculator cares about the price next day, next month or next year. An investor cares about how the value is likely to change over the long-term.

A speculator mostly cares about the upside. An investor carefully considers the downside.

A speculator wants to make a killing in one or two big bets. An investor wants to let their process shine through and drive their long-term performance.

A speculator wants to get lucky. An investor hopes that over time good and bad luck will cancel out and what will be left is the outcome of the quality of their decisions over time.

If you find yourself leaning more towards “speculator,” you probably won’t find much use for my articles. However, if you are firmly in the “investor” category, I think you will find my experiences helpful in becoming a better investor. And I hope that you will share this article with others so that they can benefit from it and from future ones as well.

About the author

Gary Mishuris, CFA is the Managing Partner and Chief Investment Officer of Silver Ring Value Partners, an investment firm that seeks to apply its intrinsic value approach to safely compound capital over the long-term. He also teaches the Value Investing Seminar at the F.W. Olin Graduate School of Business.