A Mistake I’ve Since Learned From

July 24th, 2007

We all make mistakes; we’re only human (or nabloids). The important thing is that we learn from our mistakes. The mistake I made (the one I’m talking about today, anyways) is that I didn’t listen to my gut instinct. This was several years ago, I had just got about ~$4,000 worth of money pooled together and was thinking about investing it. I was lying in bed one night when I asked the question (aloud), “What should I invest in?” To my surprise I immediately, and without thinking, replied “garmin.” I had never heard of garmin and thought I just made this word up, but I said it so confidently that I decided to jump on the internet and do a search. Sure enough, Garmin was a real company involved in GPS. I created a Yahoo fake investing portfolio, named it ‘Intuition’ and bought 124 shares at $33.00. The date was May 18, 2004.

I had every intention of opening a brokerage account right away and investing in this neat company. After doing some research, I understood that GPS was going to be popular and was already cropping up in many places, but I was salivating about the thought a car manufacturer deciding to make GPS a common accessory.

Then came along the Forex craze… The ability to control $100,000 dollars while only risking $1,000 was really neat… that kind of leverage can really make you or break you pretty fast. I read about it and decided, if I was to put the effort in and get good, this might be the way to go! So I opened a brokerage account. Originally I had decided on FXCM, one of the largest. Every time I went on the site it seemed like they had some association with another company, RefcoFX; both used the exact same site and had the same trading platform! So, looking at which one was bigger (and hopefully safer), I went with RefcoFX. It had assets in the BILLIONS. I figured might as go the safe route. I choose RefcoFX, the US division (they have a Canadian division as well).

I then began paper trading and realizing that I was no good at Forex, and wasn’t suited to it, I never got around to making a single real Forex trade, but my money was already in a Forex account. Then it happened; RefcoFX, which was part of the Refco Group, went bankrupt due to the bond division amassing massive losses. I figured, well I’m only a customer, my money should be safe, I didn’t lend them that money, it’s my money. Wrong. According to them, all their RefcoFX customers were considered unsecured claims! I want to state again, I didn’t lend them my money, but when it came time to pay their bills, my money was on the table as if it was theirs. Argh.

Fast forward to today>> I still haven’t seen a penny of that money. In fact, it is still going through bankruptcy courts! I don’t know if I will get a penny. Apparently if I had of used FXCM or even the RefcoFX Canadian division, I would have got every penny back, but I wanted to go with the ’safest company’. Ahh, the bigger they are… the harder they fall. I’ve heard rumours I might get back ~30%, but nothing official. I want it all back. I was NEVER a creditor, I didn’t loan them that money and RefcoFX was a profitable division (they tried selling it but all the competitors just did lowball offers and the creditors didn’t accept the bids… I guess the RefcoFX customers had more money sitting there).

I decided on a Forex account (which I knew was extremely risky, hence the reason I never ended up doing a single trade), but never made a trade. Had I instead invested that money where my intuition told me, I’d be doing a lot better. Let’s recap what has happened to the stock price of Garmin since that time. My original price was $33.00 of which I would have been able to purchase about ~124 shares. Today Garmin is worth $81.26! But, there was also a 2:1 stock split. I would own about 248 shares at $81.26, for a total value of$20,152.48! I would have realistically only invested $3,000, instead of $4,000, so I would have bought about 90 shares. Today, I would have a total portfolio value of $14,626.80!

Guess how much student loans I currently owe? About ~$14,700! In other words, had I listened to my intuition I’d be debt free right now! So my lesson: when the voice inside the head speaks, listen! I have not had a similar experience since that night. Oh how I wish the voice would give me some more stock picks like that! Consider this mistake part of my education I guess…

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