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Speculation failures improve investing
Speculation failures improve investing by changing our thinking and behavior for the better. That changes bad stock market experiences into valuable lessons using investment failures to improve markets and our results. That helps us to develop the thinking and behavior of superior investors.
Do investment failures improve markets?
Money Choices That Grow Wealth course 250, Lesson 11, answers the question, do investment failures improve markets? At the end of the lesson, links to related content help you learn more.
What you learn:
By looking at examples of investing failures we learn the high costs of losing speculations. Speculation failures improve investing by helping you avoid the expensive experience of making poor speculation decisions. Knowing speculation risks and when to give them a pass keeps your money in your pocket. Better yet is to keep earning returns from producing investments.
Ouch! Losing speculations cost real money!
The example of a speculation failure can be an example of any investing miss. In any case the bottom line and your pride can take a hit when a failed investment or speculation crashes and turns capital into smoke. Speculating losers can deliver lessons including fast failure, courts kill money, never average down, sell losers, and avoid psychology games and litigation.
6 Lessons from a speculation loser:
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Speculations fail fast and often completely!
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Courts are always expensive and kill money-dead!
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Never average down!
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Sell a speculative loss and get the money to work!
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Psych games cost and are never good investments.
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Litigation is painful, frustrating, always a gamble and risky!
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Dad taught me lessons in life!
A very long time ago, when I was a boy, a running family joke developed about my Dad’s misadventures. Dad was a creative guy, receptive to new ideas, approaches and always willing to experiment. At times some projects went spectacularly off the rails!
On such occasions, when something did not go as well as hoped, he would look at me and say, “let that be a lesson to you!” It was as if the latest disaster was arranged specifically to teach me another life lesson! I learned to, “be careful around this man”!
Passing on Dad’s lesson
After a speculation blowup turned money into smoke, I felt like my Dad must have felt on some of those occasions. So to pull some good from my disaster, I hope, this can be a lesson to you!
Once, one of my speculative technology flyers, lost a major court case. Although management was confident the case was theirs to win, they didn’t! The jury said no! In the minutes after the announcement almost 30% of the stock value evaporated! Hard to think speculation failures improve investing when my 50% upside was gone in a blink!
Lesson 1: Speculations fail fast
When speculations don’t work, consequences are quick and costly. Losing in court also made the stock a loser. When you have a loser, it is best to take the hit, accept the loss, and move on.
Most often, when you are on the wrong side of a deal, taking that first loss is the best loss. It is the cheapest lost because most often the stock falls further. Sell to avoid the continuing decline, clean-up and aftermath.
The technology sector has dozens of companies with shareholders still “holding on” as they wait for the big inevitable come back. That money is dead. The facts are, most of the time, the comeback does not happen for the shareholders at the time of bad news.
Speculation failures improve investing so get out what you can and get that money to work earning you returns.
In the case of technology company setbacks, the technology may very well survive. But frequently refinancing or restructuring separates or diminishes early investors from the later opportunity.
In such cases, sticking around only delivers more loss. Existing shareholder investments can get effectively wiped out. So the company and technology survive but the shareholders get financially hollowed out. Most do not come close to making back the loss let alone delivering any gain.
Even when there is no risk of going out of business, the market reaction can be overdone and usually punishes the stock. Shareholder opinions and even the facts may not matter much in such cases. You lose. The company could very well come back and develop financial strength. But, making that bet runs the risks even higher. Experience says, move on, do not let possibilities give you false hope. Get the money to work in producing investments.
Lesson 2: Courts kill money
Lost court cases turn funds invested into dead money. The speculative bet was wrong so salvage any money you can by selling. Bring the money back to life; put it into a positive producing investment situation.
Lesson 3: Never average down
That is never, NEVER average down by buying more at lower prices on the theory that your average cost gets you closer to break even. The average down theory says that a much smaller recovery gets your money back.
Even when that approach works, you neutralize even more money than the initial investment in the speculation. That is putting good money after bad. Stocks take time to recover. Averaging down means you have even more under-performing capital tied up for a long time. Combined, these factors harm your overall portfolio performance.
Better to sell out. Stop the pain. Most importantly, get that money working for you in a performing investment. The net result will be better returns.
Lesson 4: Sell a speculative loss
If or when you speculate and have a failed speculation, sell to improve your investing. When a speculation or trading position does not work as you wanted, sell. Face facts; the speculation did not work. The only response is to sell. Get out of a loser. Recover the capital you can and move on by putting the remaining money to work in a positive position. Your speculation lottery ticket didn’t win. Accept it. Move on and make money.
Lesson 5: Psych games lose money
Playing a psychological game with yourself in the market is very costly. Do not go through any mental gymnastics pulling a mid-stream strategy change. Do not begin to call a losing speculation a long-term investment. Do not rationalize or try to explain why you don’t or will not sell. Losers should be sold. Sell, be done with it and take it as a speculation failure to improve your overall investing performance.
Lesson 6: Litigation is high risk
The majority of my operating business career was managing turn around situations. Litigation was often part of that business. As a result of a string of successes, I grew comfortable and confident around litigation. That gave me the false confidence that I could make investments when litigation was part of the scenario. I began thinking I could pick the winning side in business litigation cases. That was a foolish mistake.
A record of success when controlling the situation was very different from being an investor in a company involved in litigation. That is why every competent litigation lawyer advises, litigation is always a crap shoot, you can never know what a court will do or decide.
Betting on the outcome of litigation is very high risk. Trying to make money betting on the outcome of a court case is a very high risk bet closer to buying a lottery ticket than to investing. Lets hope my speculation failures improve investing for you so my losses become lessons that you profit from!
Failures improve stock markets
In dynamic ever changing stock markets, investing continually evolves while recording many success, some failures and a number of struggling listings. By clearing out failures, investors move on to other opportunities and markets gain strength by leaving the weak behind. That cleansing effect of capitalism supports greater economic strength. By removing failures, the effect improves markets and the economy that enables investors to move for improved returns.
Do investment failures improve markets? Answered!
We learned that investment failures can improve markets. The effects of investing and peculation failures taught the high cost of losing plays. Being aware of such failures helps you avoid the expensive experience of making poor speculation decisions. Knowing speculation risks and when to give them a pass keeps your money in your pocket. Better yet is to keep earning returns from producing investments.
Lesson takeaways, Speculation failures improve investing:
Speculation failures improve investing by changing our thinking and behavior for the better. That changes bad stock market experiences into valuable lessons using investment failures to improve markets and our results. That helps us to develop the thinking and behavior of superior investors.
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Exciting speculations can be fast and complete failures!
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Courts make money for lawyers but kill investor money dead!
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Never average down! It increases portfolio under performance.
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Sell losses to get more money working in producing assets!
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Don’t play mental mind games to justify bad speculations.
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Litigation is a painful costly, bad bet. Always avoid this risk!
- Failures improve stock markets by getting removed.
Other lessons related to: Speculation failures improve investing
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Money Choices Grow Wealth,
lesson links:
Introduction to Money Choices That Grow Wealth Lesson 1
3 Stock market approaches Lesson 2
Income, value and growth investing Lesson 3
3 Distinct investing approaches Lesson 4
Aggressive trading chases profit Lesson 5
Momentum investing trading play Lesson 6
Speculation returns for big risks! Lesson 7
Risks complicate spectacular returns Lesson 8
Speculation failures improve investing Lesson 9
Middle trader thinking differs Lesson 10
Investing trading and speculating differ Lesson 11
Buying ETFs accelerates returns Lesson 12
Next lesson 10
Middle trader thinking differs
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About the Author Bryan Kelly
Bryan Kelly uses White Top Investor to share his extensive investment knowledge and experience. He introduces strategies like the No-Worry Investor and the Index-Plus Layered Strategy, which encourage investor growth through personalized investment plans aligned with their unique circumstances and goals. By helping investors make money work for them and avoid common pitfalls, he aims to support the individual growth of wealth-building investors who can create secure, comfortable financial independence. With decades of experience, Bryan is committed to making stock market success accessible to anyone ready to take control of their financial future. The About page shares the story of his daughter's question that inspired the creation of White Top Investor.
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