My Worst Investment Ever Podcast

Manit Parikh has worked across sectors on transformational programs with organization-wide impact, leading two companies to reach US$300 million in revenue. He is currently working with number three. This has led him to earn the nickname “The Michael Bay of Business”. Manit is working with Yellow as a director of investment and head of the business. Prior to Yellow, Manit has worked with leading Fortune 500 companies in leadership positions. Along with his current position at Yellow, he is also an advisor to various start-ups’ early-stage investors and an international keynote speaker. “Suddenly, a boy who made a million dollars just saw a million dollars go away. And I think that is when I really truly learned the value of hard-earned money and not being greedy, and actually analyzing everything to the core.”  - Manit Parikh    Lessons learned  Analyze and study the business you are planning to invest in.  Don’t be “cocky”, arrogant.  Ask the right questions, ask the wrong questions, but ask them. Why? Because every question brings an answer that raises another question that needs to be asked.   Never be afraid to say “no” to investment, because there are many more out there.  One occasion of success investing with one person or company is no guarantee that they can or will make you money again.   Analyze every facet of a business model, tear it apart and ask every possible question from the founders, because they are the ones asking for money.    Andrew’s takeaways  Andrew has gleaned from the Worst Investment Ever series of podcasts and blogs six main categories of mistakes made by respondents, starting from the most common:   Failed to do their own research  Failed to properly assess and manage risk  Were driven by emotion or flawed thinking  Misplaced trust  Failed to monitor their investment  Invested in a start-up company    Referring to Start-up businesses are usually very risky, so you have to be very careful about having anything to do with them.   Never be the sole creditor for a start-up. When you are the sole provider of funds or the start-up has very limited sourcing for the fund, the company can run out of cash quickly, and the company becomes desperate.   Never invest in a business whose success is dependent on government policy. The policies and economic decision are changing along with the government. To sustain the business as an investor, do not deal with government contracts as they are not stable.  Warning bells should sound when a start-up’s directors claim they have special access through relationships with governmental or regulatory contacts  Diversification of investment sizes and types is always wise.       You can also check out Andrew’s books   How to Start Building Your Wealth Investing in the Stock Market   My Worst Investment Ever   9 Valuation Mistakes and How to Avoid Them     Connect with Manit Parikh   LinkedIn  Twitter    Connect with Andrew Stotz  astotz.com  LinkedIn  Facebook  Instagram  Twitter  YouTube  My Worst Investment Ever Podcast 

Verawat Kirinruttana holds an MBA from MIT’s Sloan School of Management. He also holds a bachelor’s degree in engineering from Chulalongkorn University with first-class honors and gold medal. Verawat is currently a vice president of investment advisory services at Siam Commercial Bank (SCB). In his role, he provides asset allocation strategies and investment recommendations for private banking and affluent customers. Prior to this, he was a vice president of corporate strategy at SCB where he shaped the direction for the bank by developing strategic and tactical business plans and drove many transformation initiatives, such as the national e-payment. Before joining SCB, he was a management consultant at the Korn Ferry Hay Group (now Korn Ferry) at its Southeast Asia office, where he spent more than four years in human capital management, organizational development, and performance management.   “With a lot of analysis and valuation you would believe that found a diamond but management, the corporate governance of that company might not be good at that at the level on the status” – Verawat Kirinruttana Lessons learned  When investing in foreign markets, expect the unexpected. Things can happen that are beyond the mind’s ability to comprehend, events way beyond your control. This can be the case of a management decision and can happen even after a lot of analysis and careful valuation, which you believe puts things within your power. Management or corporate governance of a target company may not be good and when you try to even try to figure out what happened, the unclear nature of the market and the how you access the information can be very really limited.   Solution: Cut losses as soon as possible but in frontier markets, liquidity can be the problem and may not be able to sell your position.    Andrew’s takeaways  Be careful about frontier markets. They can be very attractive, but the actual performance of an investment target may not turn out as good as is shown by the underlying economy. If you can access that market, it does not mean that it will also give you access to the same returns as those that exist in the market. Also the flow of information can be non-existent or scarce so that you don’t really know what is going to happen, even of you know people on the ground.    Liquidity issues are key. A company that is the target of investment should have about US$ 1 million dollars a day in average daily turnover, or else it is too dangerous to put money into.   Using a stop loss methodology for quantitative strategy doesn’t always work. Even having a stop loss in place makes it hard to execute where there is thin volume.   Looking carefully at corporate governance is crucial. Ask yourself, does the management show any real concern about minority shareholders    You can also check out Andrew’s books   How to Start Building Your Wealth Investing in the Stock Market   My Worst Investment Ever   9 Valuation Mistakes and How to Avoid Them    Connect with Verawat Kirinruttana  LinkedIn  Verawat Kirinruttana Connect with Andrew Stotz  astotz.com  LinkedIn  Facebook  Instagram  Twitter  YouTube  My Worst Investment Ever Podcast Further reading mentioned     Alice Schroeder (2008) The Snow Ball  Michael E. Porter (1979) How Competitive Forces Shape Strategy  

Phuong Nguyen is a CFA charterholder. He is a value-oriented and fundamentally driven investor. He has 8 years of experience in the investment industry with various buy-side firms and has lived through some, a few of the tough market times. In his view, the Asian investment landscape is uneven and investors should sharpen their investing acumen beyond the face value of data or information. He manages his family investment account, which has delivered an annualized return of more than 30%, which is more than 15% over the benchmark. Meanwhile, his portfolio since its inception 4 years ago has only sustained an average 14.1% downside volatility compared to 23.9 for the benchmark. He is currently exploring a global career opportunity to apply his rigorous research process and investment acumen. His core expertise is in Asia-Pacific markets and he is a member of the CFA Society Singapore.   “I make it worse by using leverage, Charlie Munger and Warren Buffett talk about the 3 Ls to avoid, which are ladies, liquor and leverage: leverage I used it. It turned out to be bad for the investment.” – Phuong Nguyen   Lessons learned Don’t forget the 3Ls. Phuong referred to Buffett talking about him and his partner Charlie Munger’s attitude to leverage when he said: “There are only three ways that a smart person can go broke: liquor, ladies, and leverage.” Leverage in Phuong’s case meant borrowing money from a broker in the hope of having the money multiply to the extent that the loan can be repaid with interest to leave enough of a gain to profit from. Look out for all potential headwinds. Avoid emotional bias after meeting a company’s smiling faces. No matter how charming a company’s management is, how convincing and humble they are, do not act to invest in a company right away after you meet the company because at that time you will be suffering from emotional bias. Stay away from them for about a week, do more research and only then can you look at the investment again. Despite a company meeting and your feelings about investment going well, emotions should be kept in check.   “Our aversion to leverage has dampened our returns over the years. But Charlie and I sleep well. Both of us believe it is insane to risk what you have and need in order to obtain what you don’t need.” – Warren Buffet   Andrew’s takeaways Be mindful of the effect of confirmation bias. It’s human behavior to look for information that confirms our original views or hypothesis on a matter, and everyone in all fields suffers from that bias. Therefore, investors especially have to work extra hard to find opposing views or arguments against our thesis on an investment idea. Be wary of cyclical. When investing in cyclical type of companies, it can be extremely dangerous. A lot of people like to invest in consumer-type products because generally demand is steady and supply is steady. But when you’re investing in cyclical, there is a much greater risk, which sometimes is what attracts investors because of the old magnet: “high risk, high return”. On company visits. As an analyst for more than 20 years, taking thousands of fund managers on visits to just as many companies, Andrew says that probably 95% of the meetings he attended added no value. In some cases, it made someone either overconfident in liking the company or overconfident in disliking it. Which either way biased their decisions. Andrew agreed with Phuong but said:   “Go out and visit the company. Fine. You may like the company, you may they hate them, but don’t make your decision right way based on the visit alone.” – Andrew Stotz   You can also check out Andrew’s Books How to Start Building Your Wealth Investing in the Stock Market My Worst Investment Ever 9 Valuation Mistakes and How to Avoid Them Connect with Phuong Nguyen LinkedIn  Connect with Andrew Stotz astotz.com LinkedIn Facebook Instagram Twitter YouTube My Worst Investment Ever Podcast Further reading mentioned: Retire Before Dad (2018) Liquor, Ladies, and Leverage: How Smart People Go Broke Warren E. Buffett (Feb 2018) Letter to Shareholders of Berkshire Hathaway Inc., reporting on the company’s performance for 2017.  

Ian Beattie is currently the co-chief investment officer of NS Partners London, an investment management boutique. He holds a B.Sc. degree in economics from City University of London and started in the investing business in the early days of January 1992 as an Asian equitist. Since then he has been involved in East Asian and Asian emerging markets. Ian joined NS Partners in 1996, and just a year later, he became head of Asia and has since been focusing on the products closest to his heart, emerging markets, and Asian equity investments in the region.    “I think we’ve got to learn from our mistakes … and to learn from them, you need to know what you got wrong. And some of those are un-forecastable genuinely exogenous events. That’s why you have a diversified portfolio, right?”   - Ian Beattie     Investment journey  Ian started investing CAR Inc., a car rental company based in Beijing, despite the fact that there existed a handful of popular and booming ride-sharing companies in the continent, such as Uber and local operators that posed a threat. The balance sheet looked great and it had a good foundation for its name, with training by Hertz managers who helped to set it up.    “There’s nothing like a globally significant crisis to really test your knowledge of markets, whether it’s how our company works, how an economy works, and how those two are joined up. Pretty exciting learning experiences are not always a pleasant one.”  – Ian Beattie    But after a while, his investment started to fall. What caused it? Ian cites his initial positive assessment about the company’s management proved wrong, but on top of that, he underestimated the threat of the competition. Ian failed to see the bigger picture and the impact that the bigger companies would bring to his stock in the long run.   Emotional attachment was misplaced  As part of the peer review process, younger members of the team had been asking him early on what he was doing and why he wasn’t seeing the risk of car-rent apps such as Uber and their China equivalents and why the company was not getting more cash out of its operations (free cash flow (FCF), the cash a company produces through its operations, less the cost of expenditures on assets. FCF is the cash left over after a company pays for its operating expenses and capital expenditures, also known as CAPEX).     “I’m getting hit with this (strong feedback). And I realized I cannot defend it … If you bought a stock – or a valid investment – for a valid reason, that should still be the reason why you hold onto it. And if that story is broken, then you should sell.”  – Ian Beattie    There have been many cases such as this, wherein an investor’s reason for buying a stock suddenly changes midway through ownership. This happens mostly when the stock starts to depreciate, and when it does, it should be a clear red flag that it is no longer profitable and actions should be taken to prevent further damage. Ian, however, failed to see this flag sufficiently early on in the game.    Reassessing the situation  Ian is reminded of the OODA Loop, a discipline he has used to reset his mindset and that of his team to what is really happening. Created by US fighter pilot John Boyd during the Korean War, the OODA loop is a strategic tool used for analyzing situations for re-orientating in the heat of the moment. Part of it came from a theory to achieve success in air-to-air combat developed out of Boyd’s observations of dog fights between MiG-15s and North American F-86 Sabres in Korea. It is a disciplinary method that helps people remain calm and properly gauge what is being faced and because it’s a loop, it allows for constant re-assessment amid changing conditions.   OODA loop as applied to investing   Observe – the situation, what’s going on with the stock. In the business of investing, it’s more like to observe and identify.  Orient – yourself, if you’re a fighter pilot, but for people in investing, “analyze” the situation.  Decide – Plan what action should be taken according to the situation.   Act – Take the necessary action.     Then go straight back into the loop as conditions change  Ian suggests to observe what’s happening now to see if you have made the right change. For fund managers, that would involve risk control and re-forecasting, which is very important. Look at the new data, because usually if the share price has gone wrong, there’s some new information upon which an investor needs to redo their forecast, and he suggests being honest to the point of being brutal.     Peer review helps with that honesty   The great advantage of institutional investors is information on costs and the presence of a team, which Ian’s firm uses to employ a peer review mechanism. He says it does not matter whether investors have been in the business a few years or 30, it is wise for all team members to subject their decisions to assessment by the team, members of which might have power to veto a decision. This process is applied not just when deciding about buying a stock, but when reviewing its progress. Ian says the veto is used to empower and encourage dialogue rather than to score points. He says this process keeps everyone grounded when stocks are going up and the team presenting their idea sees their stock going up, and by doing so, also catches problems before the investment goes “horribly wrong”.   “I know the theme for your series here is how the emotion gets involved. This is an emotional business. So the peer review, as well as obviously … more information,  its most powerful tool is as an emotional check.” – Ian Beattie      Teams always contain people with varying talents   As Ian finished the main part of his interview with the story of the hedgehog and the fox and relates it to today’s market analysts. Hedgehogs make the best out of what nature has given them and use it to their advantage. They were given spikes and they use them for self-defense. They excel at one thing – their specialization. Foxes, however, do not have spikes but are eclectic and use whatever skills they can find to be able to fend for themselves. They take risks and adapt their skills to the kind of environment they are in.  In terms of approach, fund managers must liken themselves to a fox in need of hedgehogs, “because nobody knows that subject better than a hedgehog”. A good team must consist of a diverse group of people with different specializations, and led by someone who can become a good listener and has the ability to make decisions not based on what is for his own betterment, but for the good of all involved.    “I think that’s the thing about our business and about the markets in general, people who are good at it, people who last a long time … have to have an unusual balance of arrogance, because you have to believe you can beat the market, when a lot of academics out there will tell you that you can’t. But at the same time, you need to be need to have a huge  amount of humility.”  – Ian Beattie      Ian

This podcast is dedicated to John Bogle   Michael and Andrew would like to dedicate this podcast episode to the icon who passed away just before this recording was made, John Bogle, founder of the Vanguard Group, and author of such classics on investing as The Little Book of Common Sense Investing was a real Vanguard and revolutionary. Bogle started the world’s first index fund so they tip their hats in tribute.     Guest profile     Michael Falk is a CFA charter holder and a certified retirement counselor. He is a partner at the Focus Consulting Group and specializes in helping investment teams improve their investment decision making, investment firms with their strategic planning, and mediating firms’ successions. Previously, he was a chief strategist at a global macro fund and a chief investment officer in charge of manager due diligence and asset allocation for a multibillion-dollar advisory practice. Michael is an author, co-author and frequent speaker. in 2016.  He wrote the CFA Institute Research Foundation monograph Let’s All Learn How to Fish…to Sustain Long-Term Economic Growth. He is on the CFA Institute’s approved speaker list. In the past, he has taught on behalf of the CFA Society Chicago in their Investment Foundation Certificate program. He has been a contributing member of the Financial Management Association’s practitioners’ demand-driven academic research initiative group and taught at DePaul University in their Certified Financial Planner Certificate Program. He’s frequently quoted in the financial press and presents in industry events.    Moneyball man  Michael was an athlete who played competitive baseball until he was 31 years old. But in his early 20’s, he realized that he couldn’t make a career of this, so he decided to get an education, and graduated from the University of Illinois with a B.S. in Finance, adding to his interest in growing wealth. It caught his attention, but it wasn’t about getting large amounts. It was about how money drove behavior. But still, he played ball and was working on the side until his body’s aches and pains started to surface.      Summary  In this episode, Michael recounts his experiences as a private wealth manager advising a client on what to do about holdings in two big companies. The story revolves around what is seemingly his not-so-lucky share-price level, US$8/share. He shares his take on the fortunes of these huge companies and the reasons why he didn’t take the risk of investing in them, even though he was an educated investor and had advised his client to hang on to the stocks. Andrew will tell add why execution is a vital part of building an investment plan through his six-step process. Inherent in that is how crucial it is to avoid taking huge positions aggressively so you don’t end up in the same sad state as do most investors.      “Lose profitably. Use your takeaways and your learnings from those losses to not repeat the same mistakes. They say there’s no such thing as failure if you’re learning. So, my parting comment is, if you’ve got to lose, at least lose profitably.”  – Michael Falk     W$8/share investments and the odd stories behind them  Apple Inc. (AAPL:US) is now trading at US$199.23/share  Apple was starting to drop, before Steve Jobs returned and saved the company. It was trading at around $8/share. Michael was a fan of Apple computers and so his friend who was curious about the drastic consequences if the company should fall. He was confident that it wouldn’t. Buying the stock was an absolute steal, given these two probable scenarios: 1) The company would rebound, or 2) Microsoft would buy them because of the value of the technology. Surprisingly, he didn’t follow the instructions that he gave to his friend. He didn’t follow the instruction he gave to his friend.     Philip Morris  Philip Morris International Inc. (PM:US, $86.19); Altria Group Inc. (MO:US, $56.94)  Michael started his career in private wealth management. He had a client named Jack, who inherited a stock portfolio from his father. As he was doing an audit on the low-cost basis portfolio, they were unable to decide whether or not to hedge out the risks. One of the companies they were looking at was Philip Morris, which was also trading at $8/share too. Philip Morris had started to take a BD (broker-dealer) at that time because that was when the US government was going after the tobacco companies in terms of the healthcare lawsuits.    Michael’s analysis:  1.The dividend payment at that time was 8%, and he believed it wouldn

Roxana Nasoi is an advocate for community and technology with 10 years’ experience in online business data analytics and marketing. She was an Elance (then Upwork) ambassador between 2012 and 2018. She joined Aimedis as their chief communications officer (CCO) in November 2017 and is co-host at the The CryptoLaw Podcast and the Nothing at Stake podcast.    “Be true to yourself and do not be afraid to start over again.”  – Roxana Nasoi      One lesson learned    Everything you do generates a reaction that has either direct or indirect impact. It’s difficult to predict what can happen in a business or with an investment. If one doesn’t assess every single potential risk thoroughly it will return to haunt them.       “What you did today will come back to you in five years, or even sooner.” – Roxana Nasoi       Andrew’s takeaways    Breaking up is hard to do in business too, but make sure it’s a clean break. It’s important to do the work to truly separate yourself from a partnership or business partner, you want to make sure that it’s a true, clean separation. It’s even hard sometimes to identify where the connections are. But just as a lot of preparation is required to get into business or an investment, so too is it important to have an exit plan, that is well executed.     “When you separate and decide to go different ways, make sure that you invest the time and effort that’s necessary to truly separate yourself from that other business or … business partner.” – Andrew Stotz      You can also check out Andrew’s Books    How to Start Building Your Wealth Investing in the Stock Market  My Worst Investment Ever  9 Valuation Mistakes and How to Avoid Them    Connect with Roxana Nasoi  LinkedIn  Medium  Twitter    Connect with Andrew Stotz  astotz.com  LinkedIn  Facebook  Instagram  Twitter  YouTube  My Worst Investment Ever Podcast 

Tron Jordheim is a business guy, podcast writer, and speaker who spends a lot of time operating RHW Capital. Tron is one of those entrepreneurs who is always making something out of nothing. He started his first business in the sixth grade with a roll of paper towels and a can of window cleaner. He has been at it ever since. He took his boyhood interest in protection-dog training and created a whole new business model that put him through college. Tron was one of the people who helped the New York City Police Department start its K-9 Unit. He ran man-dog contract security patrols for Pan Am airlines at JFK airport and was the captain of the United States team that competed at the European championship for German shepherd dog clubs in 1982 (now called the WUSV world championship).     “What I didn’t do though is a cash flow analysis and a forward-looking pro forma … I didn’t do any of that.”  - Tron Jordheim    One lesson learned It’s very advisable to do some real risk analysis before you invest in a business so that you know that, when risk factors arise, you can recognize them. Along with that, of course, is to have a plan for dealing with the risk or avoiding it.       Andrew’s takeaway    Beware of The Entrepreneurial Seizure, which can manifest itself in the budding entrepreneur doing insufficient research on returns and risks. This happens when they have a great idea, they get so focused on it that they often lose sight of even the basic research, on revenue, on risks and they definitely ignore negative feedback. The result can be that they want to grow fast and don’t bother to test the market.   Someone in the grip of such a seizure doesn’t ask the questions:     No. 1: Do I have a product and service that’s really valuable?   No. 2: Can I execute the idea to create that product or service?     "Sometimes the best ideas are not executable. And what I’ve learned over time is that it doesn’t matter how good the idea is [it’s] how much of it can you do …and that much of it is a good idea.”– Tron Jordheim   You can also check out Andrew’s Books:  How to Start Building Your Wealth Investing in the Stock Market  My Worst Investment Ever  9 Valuation Mistakes and How to Avoid Them    Connect with Tron Jordheim:  LinkedIn  Tron Jordheim    Connect with Andrew Stotz:  astotz.

Dann Bibas is a co-founder at Fountain financial services in the United Kingdom, a digital wealth manager combining new technology was certified advisors to make personalized investing more accessible. He was formerly an equity derivatives associate at Citigroup, working closely with some of the world’s largest financial institutions on equity, cross-asset and volatility products. He is also a member of the Founders of the Future community in London, the Tech Nation Founders’ Network and is a regular speaker at start-up and fintech events.    “Stock picking, for myself at least, is really difficult”  - Dann Bibas    Die-hard passive investing fan adds key points   Dan truly believes that investment in the market for the long term is the maker of winners  He has felt this way most of his adult life since the following story of loss  Started to invest in stocks when he was a student majoring in finance at McGill University (Bachelor of Commerce)     Watching a stock closely becomes a nightmare of ups and downs   As he learned micro and macroeconomic and other financial concepts, he and his friends became interested in investing as they were learning a lot about markets and how to evaluate balance sheets.   Early forays involved using small amounts of money earned during summer jobs through a friend in his group’s TD Ameritrade account.  They bought a few hundred dollars of shares in Citigroup (a fact Dann used later on during his interview for Citigroup’s graduate program.   This was the first ever investment he actually took seriously. Perhaps too seriously, because his strong memory was that it was very anxiety driven, because he was focused on this one company, watching everything that was happening to it.  He had a clean thesis and thought he would become rich quickly. Then the stock was hit by an earnings report that was negligible below expectations.   Then some macroeconomic event happened and it fell further.   Then there was positive news and it bounced up.   But the stock can also be affected by other banks’ earnings reports, impacting the sector.   So he went from thinking he had an effective thesis but his stock was getting “hit on all sides” both up and down.   How’s the sector doing?   How’s the broader market doing?   How are its peers doing?   Is there a specific event that was not factored into the share price that is now happening?   There were too many variables.   Also stressing him out was a Forex issue. The money he was earning was in Canadian dollars, and his band of brothers was investing in US dollars.   So on top of all the above, he was having to look at how the USD/CAD was trading.     “I think it’s safe to say I was very, very overwhelmed. I think we just about sold out of our positions to break even … my first one or two gray hairs came from those couple of weeks or months of investing.”  - Dann Bibas    Definitely after this experience, he follows what Warren Buffett preaches, he converted his investor style from active to passive investments  And, he’s very happy with it.     Lessons learned  1. Stock picking is really difficult: Because:   a. Accounting for all the many variables is a lot of hard work   b. Coping emotionally with the ups and downs of a stock and all the elements that have an impact on a single stock is also very difficult   2. Full conversion and commitment “to the faith of passive investing”    a. Because of the long-term benefits   b. Investors do actually end up outperforming stock pickers  c. He much prefers reading about wider economic growth than looking into the balance sheets of individual companies  3. Such lessons drive the advice he now gives clients at Fountain    Andrew’s takeaways  Work and investing habits must suit your personality. Some people in the market just like to watch the price changes rather than beat the market “What makes you happy?”  It’s amazing how many people put money down (investing) without knowledge of the market. It’s a little bit like jumping in the car not knowing what a seat belt is or figuring out what the gas pedal is, just treading on the gas pedal.     “The end result of that is that you’re taking on risk that you don’t necessarily  know about for that person. And the world doesn’t care.” 

Guest profile     Hansi Mehrotra runs the financial literacy and investor education blog, The Money Hans. She was named in LinkedIn’s inaugural global 10 TopVoices for Money & Finance. More recently, she was included in the LinkedIn TopVoice and PowerProfile for India in 2018 and the year before, the same site’s PowerProfile for Finance in India. Her profile on that site has more than 289,000 followers. Hansi has over 20 years of financial services industry experience, mostly in online delivery of investment research and consulting for the wealth management industry across the Asia-Pacific region. She set up and led the same region’s wealth management business for Mercer’s investment consulting division in Australia and Singapore. And, Hansi has led a number of projects in India, including the design of investment options for the National Pension System. She holds a BA from the University of Delhi, a graduate diploma in applied finance and investments from the Securities Institute of Australia (now FINSIA), and is a Chartered Financial Analyst (CFA).    “Just because we didn’t have data doesn’t mean it never happened.” - Hansi Mehrotra   Prelude to tale of woe and Hansi’s motivations   She finished her degree at the University of Delhi  by correspondence because she come from a very small town.   Her desire to learn finance was due to a “lack of money”. Also, her father had lost a lot of money and she wanted to know why.   While earning her graduate diploma in Australia, she worked as a waitress part time.   Hansi’s drive and skill for self-study came partly from her father, who urged her to help her less academically inclined brother with his work     Asset allocation and sizing of position – went to Zero  Hansi and her husband started a joint-venture company to research tax-effective agriculture schemes.   They became well-known for writing the best research reports on how to receive tax benefits from planting trees, such as in orchards, vineyards, and for pulp and paper.   She joined Mercer and convinced them to employ her husband as a consulting to research agribusiness as an asset class globally.   With the knowledge they gained after reading Rich Dad Poor Dad, by Robert Kiyosaki and became interested in passive investments and income streams.  Thinking about starting a family, they discussed Hansi leaving work and needing support while raising children and managing the home.    They invested their combined life savings into the top rated agribusiness schemes that they had recommended to their clients.  Investments included pulp mills in Tasmania (specifically Gunns), orchards, grapes, stone fruit, and a big outlay in a unit trust in red-wine vineyards in the Barossa Valley, South Australia (premium wine-growing country).   The vineyard investment doubled its value in 12 months and other agribusiness stocks were doing well and achieving high returns, “so we were riding high”.  Hansi and her partner were then re-investing profits back into these schemes they were earning a return of up to 15%.   “All of it got wiped out.”   All three investment areas were hit with either environment factors (hail storms) other bad weather, foreign exchange losses and environmental impact issues and regulatory problems, bring them all to zero.   Because have were unlisted company, they could not recoup their investment in any way.   That was the end of their plans to have children.   Impact of investing and failure     “Learn from mistakes and just because we didn’t have data doesn’t mean it never happened.” - Hansi Mehrotra   Andrew asks about emotional strain on marriage  “Tell us about the emotion between you and your husband as you were going through this – how did you manage to keep the relationship strong, because a lot of times going through financial crisis can tear people apart?”      Hansi’s response   They were both trained analysts.   They forgot that what they had preached to others about investing applied to themselves.  Feels great regret for letting someone else convince her to forget all she had learned, especially about diversification and other safety factors in investing.  Such situations put a lot of stress on a couple and her marriage was no exception because they never got the finances ready to have children. “Now it’s too late.”     Lessons Hansi learned  Diversification should never be forgotten

  Thao Quynh has 15 years of experience in the financial service and investment industry. She was the investment portfolio manager for two European funds with US$280 million of assets under management. Prior to that, she worked as a financial analyst and research manager for leading brokerage houses in Vietnam. She started out with a university tuition loan to create the asset of knowledge and it is this knowledge that has given her financial security. She believes in diversifying across various asset classes and allocates about half of her wealth to investing in the stock market investments. Thao holds a Master’s Degree in International Business from SKEMA Business School in France and an MBA from the European Management Education Center in Vietnam. Today she is serving her country as an investment manager and portfolio strategy manager at Vietnam Holding Asset Management.    Vietnamese stock market booms in youthful exuberance   The year 2007 was a boom time for the relatively young Vietnamese stock market and everyone was excited about the kind of profitability in which returns of double or triple were quite normal.  The VN index chart had soared from around the 680 mark in late 2006 to its peak of around 1179 in March 2007. Several companies were trading at 70 times PE and 100 times PE and what is considered a bubble at that point of time.     [caption id="attachment_2621" align="aligncenter" width="403"] The VN index chart had soared from around the 680 mark in late 2006 to its peak of around 1179 in March 2007. The latter year was when naïve investor Thao started to invest and got caught up in the excitement and greed.[/caption]   Source: Investing.com   In the same year, Thao invested in a Vietnamese start-up brokerage house. It looked a good prospect for the following reasons:  The founders were successful entrepreneurs with rich experience in leading other big financial institutions in Vietnam, one was former director at Merrill Lynch.  The information was transparent and its financial statement was audited by a Big Four accounting firm.  So all up, it had good financing potential, network advantage, and management capability. This investment was at first a big success. Two months after investing, the stock price went up around 18%. But Thao didn’t sell because, by her own admission, she got greedy and expected it go higher. She even rejected an offer to buy her shares on the over-the-counter (OTC) market at 2.5 times her cost price.    Stock market bubble bursts  Thao doubted that the bubble would burst at that time because everyone was expecting robust growth in the economy since the country had just entered World Trade Organization and that this would be a good catalyst for corporate performance and stock prices. However, the unexpected happened when that same year the Vietnam stock market showed for the first time some correlation with the US market. The global financial crisis was showing early red flags with the collapse of Lehman Brothers. Her investment went from a profit of 2.5 times to a loss of 50% in just a year and liquidity was a big factor as nobody wanted to buy after the bubble had burst.    Opportunity loss  Regret hit Thao over this investment but she decided to ignore it. She consoled herself that the stock price would recover one day. But that only happened nine years later. Thao sold her investment in 2016 at the break-even price on her initial price. But she admits that while she in pure numbers didn’t suffer a great loss, the real damage was in opportunity loss for not selling at the right time and holding on too long despite some awareness that a bubble was happening.    “It did recover but nine years later. I sold my investment in 2016 at its break-even price so, although I sufferedonly a nominal loss, I had a big opportunity loss for not selling at the right time and for keeping it for too long with that awareness of the bubble.” – Thao Quynh   Thao’s lessons learned      1.Be aware of a bubble – Typically during such times, market sentiment is overly optimistic and people go a little crazy. We should be careful about that kind of positivity. “We may get crazy with them too”    2.Liquidity is extremely important – Especially when you want to sell your shares.     Andrew’s takeaways  The big picture matters – A lot of times investors get caught up in the small picture about a company they are investing in but even great companies can crash if there’s a shift in the industry or if there’s a bubble. This is critical to know.  Over-the-Counter (OTC) markets – If a company has issued shares but it is not listed them on the stock market, there tends to be an over the counter market where you could.    Vietnam is unique as a frontier market – There’s not much liquidity in most frontier markets. There are a small number of companies at the top of the market that have liquidity. But there are a large number of companies at the other end of the market that do not have liquidity. Liquidity really matters when you want to sell.