It is 1999. Besides some punts made with my flatmates, I have not invested in any stocks. I am getting interested in stocks, but I think the stock market is a gambling den.
I have a visitor for dinner, a friend of mine, a senior guy at a broking house with experience at a mutual fund. We start talking about stuff after dinner, and the topic moves to stock investing. I am all ears. I will get a tip from the man who knows it all.
He does have a stock recommendation—a hot stock in a hot industry. Y2K is around, and it will make all the IT companies worth hundreds of billions if the world does not end on the last night of 1999.
The stock is DSQ software. It is one of the hotshot upstarts in IT, at its highest price – 2800 per share. But it is only a beginning, according to my friend. He is confident that this will be a multi-bagger.
At its lifetime high, I invest roughly half my net worth in DSQ Software, knowing nothing about the company, not even the name of the CEO, its revenues, its profits, or the segments they are in.
“Who am I to dare to have an independent opinion on the subject that involves a high degree of expertise?”
DSQ falls a little. I pat myself on my back to be a long-term investor by my demonstrated perseverance.
It does not last very long, however. DSQ is down to 2300, and I start sh*tting in my pants. It is a substantial loss for my financial state, and I call my friend.
“Don’t worry, it is just a technical correction,” a confident voice tells me.
I go back a little less worried. Those were the days when cell phones did not exist, thankfully. So I have to wait for the evening to call my friend at his home.
DSQ is down to 1500. In my emotionally mindf*cked state, I just freeze, not doing anything.
It is down to 800, and I have given up the desire to sell. The loss is too much to book. I secretly hope that it at least comes back to 2000, and I will sell. It does not matter if it is a loss; I will get back at least some bit of my money.
It never even comes back to 1000. It just keeps falling.
After 22 years, it is still in my DMAT account, and I can not sell it since trading on the counter has stopped. DSQ is established as some kind of a fraud, and I have lost every bit of my money invested in it.
I hear you getting frustrated and angry. How is this your best investment?
My behavior changed utterly after this incident. I read every book on investment that I could get my hands on. I never followed ANY advice blindly. I read all the possible documents for the companies I invested in. I started diversifying and taking minimal bets. It made me an active, although a hobbyist investor. I remember asking another friend about 10-year financials of companies, and he told me I would not get them anywhere since no one looks at them.
Most importantly, I started taking accountability for my decisions regarding investments. It was a costly lesson, but I realized my money would go down the drain if I did not understand what I was investing in.
The money lost in DSQ came back many times over in the following years. More importantly, I got a hobby/profession that I could pursue for the rest of my life. I thank my friend and the stock in consideration for a game-changing event in my life.
What is your best stock investment?