My painful investment journey before I discovered FIRE

As I began to write up my February 2019 Net Worth update, I thought to myself: “I’m really not telling the full story here”. I realised was painting a false portrait where it looked like I was a diligent saver, carefully tracking my net worth for the first time, while gradually building up a responsible diversified portfolio of LICs and index funds.

The truth is I have already been tracking my net worth for over two years now. The reason why I was only showing my net worth from Dec 2018 onward is because that is when I first decided I wanted to achieve FIRE. It represented a fresh start; the moment where I realised I had enough with high risk investments. The moment when I decided going forward I would only invest in safe, tried and proven asset classes. Prior to this decision, I had made every investing mistake in the book trying to get rich quick.

So here it is. My net worth journey from Oct 2016 to Jan 2019.

Warning. It involves many financially cringe worthy decisions, such as:

  • Investing on borrowed money (acquired using credit card balance transfers)
  • Trading volatile US tech stocks on margin using up to 20x leverage
  • Margin calls, a.k.a. waking up to realise your entire portfolio was liquidated and you owe your broker 3 months’ worth of salary
  • And of course, going all in on the one asset class no millennial investing failure story wouldn’t be complete without: cryptocurrency

At least the journey wasn’t boring.

Part 1: Margin trading US tech stocks

24 Feb 2017: This was one expensive night. I lost over $11k USD trading $NVDA, more than 3 months’ worth of salary at the time. I was holding 950 shares on margin. Absolutely mind boggling to think I was holding more than $100k USD worth of extremely volatile shares in a Silicon Valley tech company, at a time when I had a negative net worth (*facepalm*).

March 2017: Yes, I bought 5000 $AMD shares on margin (over $70k USD worth) at their peak price, after it had already skyrocketed over 500% in the prior year.

Part 2: Beginning of the crypto journey

Jan 2018: Bought 10k ICON ($ICX) at $0.14 each during the ICO in Sep 2017. Four months later, they were worth $10.70 each, resulting in a 7500% ROI. I don’t think I will ever see an investment return like this (at least % wise) in my lifetime.

Part 3: Crypto market peak and crash

Dec 2017: Not a bad phone notification to get woken up to
Jan 2018: Absolute peak of my crypto portfolio just before the crash. Crazy times. This was all profit too as I had taken out my initial investment the previous month. Why oh why didn’t I sell…

Green bars below the $0 mark on the horizontal axis represent a negative cash position, i.e. short term debt exceeding cash at bank.

Closing thoughts

And that’s a wrap. Now that I’m on the path to FIRE, I’ve been gradually selling off my cryptocurrency portfolio and redirecting new funds to LICs and Vanguard ETFs.

At the time of writing this post, I am down about $10k on my overall crypto investment. It really does sting when I realise I had over a year after the bubble popping to cash out at a profit, including being over $200k in profit at one stage. However one point to consider is that my crypto portfolio was never truly worth $200k, even if I had sold at the peak. As the assets had been held for less than 12 months, I would have been liable to pay 47% CGT on the gains. Therefore the actual cash value if I sold would’ve been $106k (which is still a huge amount of profit I wish I had taken of course).

Further, you can see that all my investments to date have been extremely short term focused. CFD trading involves borrowing money from the broker (with interest charged daily), and the crypto bubble lasted only a matter of months before bursting. Despite being in the share market for over two years now, I have never been eligible for the 50% CGT discount (for holding an asset over 12 months before selling), nor have I ever received a dividend. This short-sightedness in my investing horizon is definitely a behaviour I want to fix. As part of my journey to FIRE, the only investments I make going forward will be for the long haul; true buy and holds.

In conclusion, despite all the stress involved in losing such a huge portion of my net wealth over the last year, if nothing else, I am grateful for the learning experience. Better to make mistakes and learn a painful lesson while I’m still (relatively) young.

Thanks for reading!

10 thoughts on “My painful investment journey before I discovered FIRE

    1. Thanks mate, I’ve read your blog. I think I first saw it as a case study on Money Flamingo. Our prior mistakes in get rich schemes (speculative shares, crypto) do sound quite similar!

      I really enjoy reading all the lesser known Australian FIRE blogs, I think everyone has a very unique and interesting story. Keep it up, and all the best!

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    1. Thanks mate, I hope so too.

      Back in those days the first thing I’d do when I woke up was check my portfolio. Seeing your net worth swing by +/- $30k each morning is definitely something I want to avoid going forward! It definitely wasn’t healthy for my mental state.

      I’ve only invested about $20k so far into LICs/ETFs, but I love the fact that I don’t even need to check on them. Just keep buying a set amount each month, and hopefully one day I can live off the dividend income.

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  1. Wow, that’s quite the rollercoaster! My current portfolio is almost all speculatives, but now I’m making different choices with my money. Fortunately, overall, my investments are small and, taken all together, are in profit, but that’s only thanks to Afterpay really – most of the others are down.

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    1. That’s good that you are still in profit overall on the speculative portfolio. Do you have plans to build a larger base of index ETFs or similar?

      One added benefit of no longer stock picking for me has been all the extra time that I get back. I used to spend my train rides (1 hour each way) reading up on the latest hot tech stocks. Now I spend that time working on some of my side projects, which produce a guaranteed steady income.

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      1. I’m certainly looking at moving in that direction, but there are a couple of things I need to prioritise first (mortgage mainly, and getting my super on track). Doing the speculative thing was a bit of fun, but I’d much rather set and forget.

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  2. This is really fascinating. I used to be into CFDs and forex trading so I have definitely experienced the margin calls and the crazy highs as above (but not quite so high).

    It’s taken a toll on my financial health but like you I’ve started to be more sensible with my investments. I’ll definitely be following your progress

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