One of My Worst Investments Ever and Lessons Learned

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Let me begin by saying that my Blockchain and Cryptocurrency investments have yet to fall into this category despite the bear market we have experienced over the last couple of months. One of the reasons why the decline in the Cryptocurrency space has not been as bad for me is because of lessons learned in the past from prior experiences in investing. In addition to some education, lessons learned is a key factor in being a successful investor. Although I am not calling myself a Warren Buffet, I have been able to stay net positive in this market despite many similarities with my experience in the Dotcom bubble of 2000.

To set the stage, let me show you the market I got involved in when I started to invest for the first time in 1998:

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I was putting money in many of the technology companies listed on the Nasdaq in 1998 which as you can see did very well towards 2000. I felt that I was at the top of the world and that I had the Midas touch as there were times that my investments would increase 10-20% in a couple of days after my purchase. So my confidence was at a very high level as we entered the peak of the market. As the prospect of the internet companies started to wane, I started looking at the next hot sector thinking I can get ahead of the curve.

That sector was Biotech and given the development being made in the mapping of the Human Genome, I thought an investment here would surely be the next best idea. So I went very aggressive and moved all of my technology positions into Incyte Technologies (NASDAQ: INCY). It was going to be my main position while the technology sector “rebounded” as I was expecting. As you can see from the history of the NASDAQ and INCY, I was hugely mistaken:

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Sorry for not providing the exact dates and prices (since they are still quite painful to think about) but I bought my full position around $105 per share. I thought to myself that this was at $150 a couple of weeks ago so a good 50% return would be great! I was horribly wrong as a couple of years later I sold below $5 per share! That’s right, I held it all the way down for a 95% loss! As I have matured in both mentality and in my professional career, there were glaring lessons that I got from this experience.

LESSON 1

Prior results do not guarantee future returns.

I should have read into the details of what I was buying as the company had no product, nor revenues as they were still conducting research for a potential product. While the stock had hit $150, it was part of the NASDAQ bubble prevalent in the moment.

LESSON 2

Don’t put all your eggs in one basket.

I put half of my money into INCY which was too much given I only had 2 other technology positions. My portfolio was not properly diversified.

LESSON 3

I bought my whole position at $105 instead of scaling into the position.

Dollar Cost Averaging is one of the best strategies to setup a position as it allows to adjust your positions as the price moves.

LESSON 4

If an investment thesis fails, cut your losses soon and avoid investing in emotion and being overconfident.

There were clear signs that the bubble had burst and that it would have taken years for the thesis to become a reality (more on that later). However, I thought I was right and held on thinking it would ultimately come back to new highs.

The interesting and ironic fact of this is what happened to Incyte a decade after I sold. They were finally able to get a business model to monetize their research and products created in the biotech space. It in fact went back up to its highs last year! However, even if I held it, it would have been a failed investment as it was dead money for a decade after I sold.

The question now remains for me about how I have approach my cryptocurrency investments as there have been many similarities in this previous experience. First, I am feeling confident given that I have had positive gains since starting in the space in 2016. I also truly believe that blockchain technology will disrupt and transform many industries. The issue becomes how long will it take for the technology to achieve mainstream adoption and create value. Will it be 10 years like Incyte or much quicker? Interesting scenarios to consider. However, I have implemented a lot of these lessons as I have diversified my holdings in cryptocurrencies with other asset classes and even within the cryptocurrencies themselves. I have also taken the approach to scale into my positions and execute a dollar cost averaging strategy in my main positions like #STEEM. Given these approaches, I am confident that this time, these investments will end differently. I also hope to gain additional insight from sharing with this community in order to adapt to my thoughts as the environment changes.

What are your thoughts on these learnings? Have I missed any? What are your thoughts of the future of blockchain technology and the value it can create? I look forward to your thoughts and feedback in the comments below.

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