Special thanks to Kapitalust for sharing the link that brought me to one of the craziest stock mess stories I’ve read in awhile. Maybe you heard about this incident in the news, but I promise, it looks different up close.
What happened to GTAT stock?
The following is not for the faint of heart. I actually felt legitimately sick reading these posts and watching the story unfold.
To summarize, a whole bunch of eager-investors dumped a ridiculous amount of money in a tech stock that went bad. Really, really bad.
In the beginning, this group was practically high-fiving each other through their screens thinking they’d all become instant millionaires. They spoke confidently about catching one of those rare opportunities that change your whole life.
It’s really easy to get carried away trying to decide what kind of yacht you’re going to buy.
If you read the forum, some investors exited early and the ones staying in smugly waved them goodbye, chastising them for missing out on the money train that was headed their way. If only they know what was coming.
I don’t fault them for being overly optimistic, but it cost them dearly
Many had dumped their entire life savings, and that of their family into the shares. Some even went above and beyond gambling their own money and purchased options in the stock. I’m going to let them tell you how that unfolded when GT Advanced Technologies unexpectedly filed for Chapter 11 bankruptcy. The posts below are merely excerpts from the thread as the group realizes their losses.
They are heart-wrenching.
I hesitated a bit sharing this story because I’m generally a really big advocate of millennials investing in the stock market, and sharing such a terrifying story of loss isn’t going to inspire confidence in young investors who came of age during the crash of 2008.
But I’m hoping this grisly tale serves as a tale of what NOT to do.
For those of you that want to invest and want to make sure you do so wisely, heed the following:
- Never invest more than 3% of your portfolio in a single stock
- Stick to index funds to diversify your portfolio and reduce your risk
- Always, always, always keep a percentage of your net worth in cash
- Never risk an asset you can’t afford to lose, like your retirement accounts or your house
- Make sure you understand the risks of investing in options or trading on a margin before you invest
- Do true due diligence in researching an investment before you buy
- If something seems too good to be true, it probably is
One of the most cringe-worthy moments of the $GTAT debacle is when one poster asks if things would be different if they hadn’t been encouraging each other in the forum:
It’s a poignant self-reflection, and one that readers of personal finance blogs should take to heart. The personal finance community is a receptive one — so receptive you’re bound to find a blog that will support you in making really dumb financial decisions.
Only yesterday I was linked to a blog written by a woman that cashed out retirement savings at a huge penalty to buy a car. Her 401K was irrevocably damaged, but her comment section was filled with words of encouragement and congratulations for following the Dave Ramsey way.
I’ve expressed some criticism for the personal finance blogger community before, but I feel the need to reiterate that we also need to be careful not to continuously heap praise on each other for bad decisions just because we like each other.
That said, the $GTAT forum is not the time to be honest about someone’s financial idiocy. A lot of those people lost everything, so I’m going to second Joshua Kennon and urge you not to kick them while they’re down by commenting in the forum. Let it serve instead as an up-close look at what it really feels like to make a huge money mistake — may you never know it first-hand.