You’ve probably heard the saying “Rome wasn’t built in a day.”
But those just getting into investing would do well to heed the lesser-known second half of that expression: “But it burned in one.”
Even the world’s most famous investors have been epically burned once or twice as their empires gradually grew.
On the bright side, there’s plenty the rest of us can learn from their mistakes even if we’re just regular folk using investing apps to make deals.
Grab some popcorn and let’s go over these famous investors’ most painful investing regrets.
The regret: Buying his own company. Warren Buffett first invested in Berkshire Hathaway, a failing textile company, back in 1962. He saw an opportunity to profit off more mills closing and he loaded up on stock.
But a few years later when the manager offered to buy back Buffett’s shares, Buffett was enraged by his low offer. Fueled by spite, he ended up buying more shares instead and firing the manager — only to end up the majority owner of a failing business.
Buffett estimates this move cost him $200 billion over the next 45 years.
The lesson: Don’t choose feelings over facts. Buffett, who’s now known for his slow and steady approach to value investing, let the heat of the moment cost him billions. Now, he advises others starting out to only invest in companies they believe in and focus on growing their portfolio with their eyes on the long term.
The regret: Selling stock he believed in. Back in 2012, the Mad Money host’s charitable trust decided to buy Bed, Bath & Beyond stock. Cramer had done the research, believed in the company and bought several thousand shares.
At the time, brick-and-mortar retail was struggling to compete with Amazon, and observers worried Bed, Bath & Beyond was not long for the world. But Cramer had done his homework and held onto the stock as it steadily dipped.
That is, until it hit well below his cost basis and he decided to bail. Well, don’t you know it rose back up, passing the price he sold it at, then the price he’d bought it at and well beyond.
The lesson: Stick to your guns. Cramer says if he had just held onto the stock, it would have been his trust’s best gains that year. Just imagine if he had held onto it until the present day, when Reddit investors using Robinhood have propelled BB&B to meme-stock status.
Now, he advises his followers to stick to their convictions. If you’ve done the work and you know something in your gut, don’t give up because Wall Street thinks otherwise. Chances are, you’re the one who’s right.
The regret: Dumping Amazon. Suze Orman bought into Amazon back in 1997 simply because she liked the name. Talk about great instincts. But when the company really started to take off a few years later, she sold her shares. Though she made a tidy profit on the trade, she now says she gets sick to her stomach thinking about what those shares would be worth today.
The lesson: Don’t duck out early. Orman doesn’t usually suggest buying into individual stocks, but when you do and it’s a good stock, she says you should hold onto it for the long haul.
Even if you can’t afford to buy into those great forever stocks, there are apps that allow you to buy fractional shares so you can get a share on a budget. And some will even give a free stock upon signup — so you could wind up with a free stake in a company like Amazon after all.
The regret: Dealing with debt. Dave Ramsey started his entrepreneurial career at 12, but within a decade and a half, it all came crashing down on him.
In his early 20s, Ramsey had been making serious money flipping houses, but relying on financing to secure his deals. When his largest lender, to whom he owed more than $1 million was sold, the new bank demanded Ramsey pay off his debt within 90 days.
He was able to pay most of it down, but was left with nearly $400,000 outstanding. He ended up filing for bankruptcy at 28 years old, which left him “broke and broken.”
The lesson: Build a safety net. After filing for bankruptcy, Ramsey’s investing approach changed. He still invests in real estate, but he doesn’t deal in debt. And for his followers, he no longer recommends using debt as a tool. Instead, he suggests focusing on avoiding debt, building up an emergency fund, saving for retirement and working with a financial advisor.
How it all applies to you
At the end of the day, even the smartest investors make missteps. But they continue to be successful because they get back up, dust themselves off and keep going. And they always keep their focus where it should be: on the long run.
So whether you’re just getting started or you’re basically living on Wall Street, remember investing isn’t a sprint — it’s a marathon. The point is the make the most money possible by the end of the race, not at any one point in the middle of it
It’s fine to pick individual stocks from time to time if you can afford it — and if you can handle the swings — but if you want your overall investing strategy to look like Warren Buffett’s, you need a diversified portfolio that delivers slow and steady growth.
Lucky for you, a new generation of tools that can help you do just that, and you don’t need a lot of money to get started — some will even invest your spare change for you.
If you follow this program, you’ll eventually find yourselff in a position to look back and laugh, not cry, at your own investing mistakes.