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Your Dumbest Investment Mistakes

Lisa Scherzer
Personal Finance Editor
The Exchange

Even the most disciplined, experienced investor can get it wrong. They sell at the wrong time, heed a stock tip from a friend that turns out to flop, or sit warily on the sidelines while others ride the market higher.

We asked Yahoo readers to share their most regret-worthy investments. And there was a deep pool of investments-gone-wrong to mine.

Often what was lamented the most was actually a missed opportunity – an action taken too soon or one not taken at all. “If only I hadn’t sold Priceline when I did…”

“If I'd just put that money into Apple…”

Fear of missing out on the dot-com boom of the late 1990s also drove a fair amount of investment decisions. As we know, hordes of retail investors piled into once-highflying tech companies such as Cisco Systems (CSCO) and Nortel Networks (NRTLQ), thinking there was no ceiling on those stock prices. History and experience taught them a hard lesson, indeed.

Taking a friend’s advice was another common source of regret. On the list of universally accepted bad financial advice, taking a stock tip from a buddy (or relative or co-worker) ranks pretty high. But still it’s hard to pass up a recommendation – especially when it’s from a trusted source who seems to be doing well for himself.

Good thing there’s an entire academic field, behavioral finance, devoted to studying how social and emotional factors impact our economic decisions and, its practitioners hope, help explain why we make these mistakes.

Everyone knows taking a friend’s investing advice is unwise, so why do so many of us do it? Part of the reason is “we feel if we don’t follow the advice and we see the stock goes [higher], we’ll have such regret because we were warned,” says George Loewenstein, professor of economics and psychology at Carnegie Mellon University. “When you don’t follow it, you feel really stupid and like you missed out on an opportunity.”

Of course, it’s easy to reproach oneself for a missed opportunity after the fact: “I bought some Netflix (NFLX) and it went way down, then went way up. I sold half of my shares, and now it’s up more,” Loewenstein says by way of explaining a common investor response to loss. “I should be happy [about the gain], but I’m lamenting the half that I sold.” In that way, investing is sort of a no-win proposition, he says: You buy a stock and it does well, then you kick yourself for not buying more. If you buy it and it goes down, you kick yourself for buying at all.

Indeed, it’s likely every investor – no matter how successful – has at least one “what was I thinking?” episode. Here are a few of your stories.

Kevin Hanrahan, New York City

I bought 100 shares of Dell (DELL) stock at $7.25 per share on March 15, 1990. I sold those shares in 1992 (I think they had split 3-for-2 by that time) and grossed something like $3,500. I had no reason to sell, didn't need the cash, just stupidly sold. Had I waited until 2000 to sell, those 100 shares from [1990] would have become 9,600 shares at a high price that year of $59.69 [comes to] $573,024 gross (before taxes) on what was a $725 (before commissions) investment on March 15, 1990. That's my dumbest sale ever…. DELL is a dog now, but it was a very good investment throughout the 1990s decade.

Jeff Morosetti, Milpitas, Calif.

From Vietnam at the beginning of March 2000, I asked my mom to buy some stocks in tech with the cash I had in my account. She had made a killing on Cisco (CSCO) and I wanted in on the party. She bought a variety of tech stocks like Applied Materials (AMAT), Intel (INTC) and Cisco at prices that will never be seen again. Some 20 days later the bubble burst... I didn't know how much I had lost until I came back to the States in July. I was making $150 a month in Vietnam for two years and when I came home my savings had been wiped out. I lost about $25,000.

Brian Goluska, Perry, Mich.

When British Petroleum (BP) had the platform explosion and disaster in the Gulf of Mexico [in 2010], underwater oil was leaking and the stock had dropped. Then, one day, they were sending a huge plug down — actually, some sort of heavy box — to cap the leak. "They're not stupid," I thought, "they'll stop the leak and the stock will jump up, at least 10 points or more."

And since I expected to make a quick $3,000 or more, I made the investment from one of my retirement accounts. So I bought BP the morning of the day the plan for the plug was announced. Days passed as they sailed the plug and slowly, slowly lowered it into the ocean.... After the plug failed, there was no quick way the BP stock would recover. I lost $6,000. And I couldn't even deduct the loss, since the loss was in a tax-deferred retirement account.

Bryan and Sara Lewis, Fairfax, Va.

I invested approximately $10,000 in Syntax-Brillian stock, against the advice of Jim Cramer, who I distinctly remember commenting on the poor fundamentals of the company. I chose Syntax-Brillian over Apple (AAPL), which, at the time was red-hot with iPod sales, and was releasing the iPhone. Apple stock was at the time in the $60 range and was also a hot growth stock... [Syntax-Brillian] offered a great product, solid price points and within a short timeframe signed distribution deals with a major warehouse club and a big-box retailer. They offered a flat-screen TV at a lower price point than Sony, Panasonic, Hitachi and others, yet ended up getting rave reviews from Consumer Reports. I simply fell in love with their growth prospects.

I made purchases on two dates in August 2007 for an average purchase price of $6.69 per share. I acquired a total of 1,500 shares, which ultimately dropped to a value of fractions of a penny per share after the bankruptcy was announced. We liquidated the Syntax-Brillian shares and [lost] the entire $10,000 investment minus the $17.80 (net after fees) that we sold the stock for after the Syntax-Brillian bankruptcy was announced.

Had I wisely invested in Apple, my $10,000 investment would have grown to over $80,000 in five years.

Dennis Frost, Appleton, Wis.

My dumbest investment occurred 27 years ago when I was about 35 years old. I was starting to earn enough income to have excess available to invest. My mistake was totally trusting someone else in advising me about investments. I allowed a person, who was a friend of mine at the time, to convince me to invest in Real Estate Limited Partnerships. There were current tax advantages. Before I knew it, I had turned over $35,000 that I allowed him to invest in three separate partnerships. Within a few years the federal government reversed their favorable tax advantage and shortly thereafter all three partnerships converted to worthless stock and dissolved.

I was left with a $35,000 loss. There was a $3,000 annual loss limit allowance on my tax returns so the only thing positive that occurred was a 10 years annual $3,000 loss that I took against my income.

Tess Vlaeva, Chicago

Early this year Avis (CAR) acquired Zipcar at $12.25 a share, which doubled my initial investment at $6 and resulted in a $5,500 gain. Unfortunately, as a result of getting overconfident, I invested all my savings ($30,000) into 16 different stocks. Unfortunately, that resulted in some losses because I couldn't monitor all 16 investments wisely and properly research them… I bought $10,000 of Vitamin Shoppe (VSI) and lost $1,000; I bought $10,000 of Cirrus Logic (CRUS) and lost another $2,000 — these two were my biggest losers.

Bobby R. Frischman, Rio de Janeiro, Brazil

I bought 10,000 shares of Priceline (PCLN) in 2002 or 2003 at $1.23, day traded it. I sold the 10,000 shares at $1.27. I must have made around $1,000 day trading the stock a few times. Today Priceline will hit $1,000 a share soon. 10,000 shares of Priceline would be worth today $10 million.

Readers, have you succumbed to similar investing slip-ups? Share your story in the comments below.