The Wall Street Journal asked people who have been successful in finance and other areas about the best investment and the worst investment in life.
The former Chairman of the Federal Reserve Board, two Nobel Prize winners in economics, eminent investors and executives of companies answered about their best investment and worst investment in life.
Anyway, you can learn important lessons from successful investments and failed investments. This article was edited with reference to the Wall Street Journal’s “The Best(and Worst) Investments They Ever Made”.
Former Chairman of the Federal Reserve Board 1979-1987
“The worst investment in my life was in the government too long and the best investment was in the government too long. That’s why I have had enough frustration.”
Neurologist, Fund manager of Efficient Frontier Advisors
“The worst investment in my life was a platinum trade about 30 years ago. Platinum prices collapsed and we had to lose a few tens of thousands of dollars. Here I got a valuable lesson on why individual investors should not invest in futures. Thanks to the lesson, we have never been speculative since then and we are concentrating on dividend investment.
The best investment in my life was in 1994 when I invested in Telmex, Mexico. I bought the stock at a very low price, but the profit was more than five times the share price. After that, I got a profit about 20 times with the dividend yield and share price rises.
But later realized that buying index funds in emerging markets was much safer and smarter. Telmex can easily bankrupt but it is difficult for the entire market to do so.”
President, Ariel Investments, mutual fund
“The best investment in my life is graduating from college. I was the youngest of the six children, and my mother who is single mom continued to work hard. But we did not have enough money to pay the bills, so we was often kicked out of house and phone service was restricted.
I went to college and got tens of thousands of dollars of student loans. My first salary after graduation was $ 35,000 and I was able to repay all the loan on five times.
Many people question the need for university education. But if you do to think of it briefly, the need is certain. It is because there is a direct correlation with income.”
Professor of Finance at the University of California, Berkeley
“The worst investment in my life was buy a put warrant for the Nikkei Index (betting on the Japanese stock market declining).
In early 1989, I read that the Imperial Palace in Tokyo was more expensive than the whole of California. I called my stockbroker and asked him how I could take a short position on Tokyo real estate.
A stockbroker told me that in a few days I could buy a put warrant for the Nikkei index, and I did not do any further thought or research and bought a put warrent in $ 20,000.
But the Nikkei index continued to rise and my warrants plummeted to $ 2,000 from $ 20,000. But I did not sell it. I thought, after selling the warrant, it would be much more painful if the price rises again.
In 1990, the Nikkei fell and my warrants recovered to $ 6,000. It was only one-third of the principal, but it was the result of tripling the floor price. It was only one-third of the principal, but it was the result of raising tripling from the floor price. I sold one-third of the entire position and sold a little more during the stock price rising process.
Eventually, when I dispose of it all, I lost about $ 2,000, but if I kept the warrant, I might have made a profit of about $ 100,000.
Thanks to that, I have learned that it is impossible to get a market timing and learned that no matter how good a bet is, I can not get a reward if you can not keep that bet to the end. However, the bigger lesson I learned here is that it is much harder to sell with losses than to sell in profit.
Singer-songwriter, dollywood theme park co-owner
“The best investment in my life is Dollywood. It helped me achieve my personal dreams and gave great fun and joy to the whole world’s families. It also provided a lot of jobs for local residents and helped to grow the entire region.”
Loews Hotel & Resort President
“The worst investment in my life was a restaurant in Meatpacking District in New York. The restaurant was closed due to the Wall Street recession and the subsequent impact of 9/11. My wife and I often groan about how we can not anticipate the future ahead when we eat food at Meatpacking District.”
Investment Company Research Affiliates Chairman
“The worst investment in my life was a strategy that sold large leveraged S&P put options and call options from 1997 to 2002.
Since the option price was high in 2001, the funds invested in this strategy accounted for 10% of total assets. Eventually, on the morning of 9/11, 35% of net assets had disappeared. But it was also a moment of great awareness of the importance of life, family, love and health for all of us.
The best investment in my life was also at this time. It was because I was able to realize what was really important and led to a buck the trend investment in which I actively bought stocks that were out of the market.”
Former chair of the American Art Fund, Professor of poetry and popular culture at the University of Southern California
“The best investment in my life was in Oct. 1975, at Stanford University Treesider Memorial Union, where I bought two cups of coffee at $ 0.83. I met a beautiful graduate student at the bookstore on the college campus and wanted to talk more. After that, both of us could keep talking. This investment has continued to consume significant funding since then, but with a much stronger return on investment capital.
The worst investment in my life was a $5 gold coin carved with Indian faces that I bought it for $53 in 1964. Because, in the eyes of a thirteen-year-old, it looked so nice. The coin was definitely a good investment, but I dropped it on the floor. The coins were badly scratched and the value of the collection was lost. It is important to invest in that experience, but I learned that it is more important to manage the investment well.”
Chief Executive Officer, CalPERS
“The worst investment in my life is when we realize that the company we invest in is a bad corporate governance. Sometimes, the link between governance and shareholder value is too strong. Such companies perform worse than companies with goals for improving corporate governance and improving financial structure.”
John C. Bogle
Founder of Vanguard Group
“The best investment in my life was to start saving. Since July 1951, when I started working at Wellington Investment, I invested in the Wellington Fund. I have saved $ 37.50, 15% of my monthly salary, in this retirement fund.
However, in the late 1960s, we began actively investing in risky assets instead of investing in safe dividends. The investment eventually ended with the worst performance that did not even outperform other balanced funds for 10 years.
By 1978, this fund was in crisis and we had to fix it. We have established clear objectives and strategies for this. We increased the portion of bonds and added 50 dividend stocks. The funds have recovered and have outperformed other balanced average funds for 35 years from 1979.
This fund, now called the Vanguard Wellington Fund, has undergone substantial revival and is personally very proud of it. I am still receiving a thanks letter from the Wellington Fund investors. The fund also includes about 20% of my total retirement savings assets so far.”
Winner of the 2013 Nobel Prize in Economics, Honorary professor of Finance at the University of Chicago
“The best investment in my life was decision that I determine not to invest in active funds for the past 50 years.
The worst investment in my life was to invest private oil exploration companies in the 1960s. I lost $ 15,000. The shale revolution could have been salvation, but the company had already gone bankrupt.”
Winner of the 1990 Nobel Prize in Economics, Honorary professor of Finance at the University of Stanford
“When I was teaching about investment in the Stanford MBA, the first lesson would start with a phone number on the board. And then I told the students that it was the most valuable information I could tell.
That number was Vanguard’s phone number and now it should probably include the phone number of another company. However, my belief in a diversified index fund that can be invested extensively at low cost remains the same.”
The author of “A Random Walk Down Wall Street”, Honorary Professor of Economics at Princeton University
“The best investment in my life was index funds in the entire stock market. I bought individual stocks for a lifetime. Some have risen sharply and some have dropped dramatically. However, it is clear that the best investment is the index fund of the entire stock market.”
Dartmouth College Finance Professor
“The best investment in my life is education. There seems to be nothing better than the return on investment in education. Thanks to the very generous scholarship system I was able to learn at Lehigh University and Rochester University almost free of charge. Adding to the value of my time and effort here, the investment cost is only a small fraction of expected rewards. Perhaps the actual monetary rewards and non-monetary rewards would have been several times larger.”
CFA Association Research Foundation Director
“The best investment in my life is to ‘keep’. After an old Mustang in 1979, I walked and I was hit by a traffic accident in 1982. I filed a lawsuit against the perpetrator of the traffic accident, received $ 5,000 the compensation money, deducted attorneys’ fees, and saved the remaining money in the Vanguard S&P 500 Index Fund. I subscribed to fund almost at the bottom of the market and still have it.
Since I have used my personal retirement account, I will not have to pay a capital tax. This account is currently valued at nearly $ 100,000. It is the best investment to pay for a small fee and keep it forever.”
Active Investment Company, Third Point CEO
“The worst investment in my life was investing in medical mask makers. When I was in college, I made $120,000 in stock investments and invested all of that money in medical mask manufacturers. However, the company had several deaths due to product defects and I suffered serious investment losses. It took me a few years to make up for the loss, and I was able to get an important lesson that I should not put too much weight on one position.”
Former hedge fund manager, CNBC ‘Mad Money’ host
“The worst investment in my life was investing in Memorex Telex. The company’s business model, which was a manufacturer of computer storage devices, was great, but too much debt. Eventually, it broke down in 1992 and the shareholders suffered great losses..
I waited for bond holders of the company’s bankruptcy stock to sell the stock, and after the transaction started I bought several hundreds of thousands of shares for $2 per a stock. But the share price has dropped to $ 1.50, and I bought several hundred of thousands more shares again. A few weeks later the stock price fell to $1.
I gauge how much loss is from $1, and I bought 1 million shares more. Stock prices have fallen to $ 0.625 again. I checked how many losses I had and I bought more shares again. Thanks to that, I hold 2 million shares for $0.625 per a stock.
However, Memorex Telex eventually went bankrupt. Of course, it became the fastest recovering company after bankruptcy proceedings. If you have a cheap stock, you should not think ‘how much more can you lose?’ The stock price falls further and you can lose everything.”
Tony La Russa
Arizona diamondbacks director, Baseball Hall of Fame director
“The worst investment in my life was investing in Balcor. It was a company of my boss Jerry Reinsdorf at that time and I did not make money. I vaguely thought that the boom of real estate would come. But in the end, it was my choice, and it was my fault.”
Online Direct Deal Loan Company Prosper CEO
“One of the worst investments in my life was investing in a drilling company in Texas. Needless to say, the likelihood of a rise was great, and the risk of a drop seemed to be low. The participants were very smart and wealthy natural resource investors.
But I arrived at the party too late and was ignorant of the danger. Through this investment experience, I was able to focus on what I know, be sure I understand what I am investing in, and learn the lesson that I should not follow trends.”
Financial consultant, advisory firm Wealth Logic founder
“The best investment in my life was gold coins that bought it for $664 an ounce in 1980 as a college graduation congratulatory money. After a year, I was confident that at least $2,000 per ounce would go, but it could not catch up with even the inflation. That time, I was then able to learn that I was not smarter than I thought.
The worst investment in my life was money that won from the slot machines of the casino. At the age of 11, on a cruise trip with my family, my father gave me a handful of coins and I ran to the empty slot machine with it. I won $15 with slot machine from second coin. I thought it was so easy to earn gambling then that I might not be able to wait until I turn 21 to go to the casino.”
Co-founder of Boutique Hotel and Studio 54 (Studio 54), President Ian Schrager company.
“The best investment in my life is definitely the time spent with my wife and family, and the time I spent with those who worked with me for so long. The profits I get here are far more than the sum of everything I have ever gained from all my investments.”