The Cost of Uninformed Investment

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INVESTMENT,FINANCE,STOCK MARKET

A personal anecdote about a disastrous investment made in 1973 due to misplaced trust and lack of due diligence. Despite losing money, the experience taught the author the importance of seeking professional advice and conducting thorough research before investing.

In 1973, when I was 26 years old, my older brother – a physician and active investor – told me I could make some “real money” in the market by investing in a particular resource stock. The stock I recall him recommending was Sundance Mining. I thought, “He’s a smart guy. Why don’t I give it a go?” I was a graduate student at the University of Toronto and decided to take a chunk of my grant money and buy $1,250 worth of the stock.

I had no idea how to buy stocks, so a departmental secretary put me in touch with her husband, who was a stockbroker. He said the investment wasn’t a good idea. He tried several times to talk me out of it but with the kind of cockiness that only a twentysomething can have – and the encouragement of an older brother that I looked up to – I told him I wanted to buy it. He finally relented and made the trade for me.Within about three to four months, the stock tanked.

My longest holding is Royal Bank of Canada stock, which I bought in 1984. It is now worth 18.5 times what I originally paid. It’s a stock that gives good and steady returns from a well-managed bank. I have a near-superstitious attachment to the stock and never consider selling it. I also own moderate-risk funds managed by EdgePoint Wealth Management Inc. and medium-to-high-risk funds from Fidelity Investments.

And, if you are new at investing, don’t put all your money in one stock like I did. I recommend buying an ETF or mutual fund instead. They’re more diversified, and there are lots to choose from today. Lastly, take a long-term perspective when investing – and don’t get hung up on the day-to-day price movements.

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