5 Lessons From Investing in Valeant Pharmaceuticals
As I previously opened up about my horrific Valeant Pharmaceuticals story, I committed to compiling a list of the lessons I’ve learned over the course of my holding period of the infamous VRX shares.
So, here’s a list of what I’ve learned – and how, by now knowing these things, I am ultimately a better investor despite my 85% loss.
Only invest money that you are 100% comfortable with losing 100% of. Because chances are, when you’re speculating, you could very well lose your entire investment. Come to terms with what you may be doing is speculating and not investing.
Set a stop-loss limit sale on a “fun money” growth stock. Sure, you may tell yourself (like I did, a thousand times) that the stock will bounce back. But it’s just as, if not more, easy for the price to continue declining than it is to jump back up.
If you realize you made a mistake when your investment has dropped 50%+, then sell and be done with it.
Sometimes it’s easier to reallocate your capital into a better-positioned stock to make up the loss you’ve incurred. Take advantage of that realization.
Don’t invest in an equity that doesn’t return cash in the form of a distribution. While you may be down on an investment for a long time, a dividend will at least pay you to wait as you decide what you’ll be doing with the stock or holding it. I also like to believe it indicates shareholder appreciation from the company / management. It’s also much easier to stomach a huge decline in your stock’s market value with a dividend.
There were a ton of warning signs throughout my holding term, and I heeded none of them; too stuck in the DGI mentality of “Hold the stock as it comes back up” – but it never came back up. And worse of all, I never received a dividend from the company. It was not a DGI stock and so it should not follow DGI rules.
While the money would have served me far better earning me a big juicy dividend indefinitely, the lessons I’ve learned will help prevent me from continuing to make the unintelligent decisions I’ve accrued in the past year.
Now that I’ve gotten rid of my VRX shares, and deleted them from my Google Portfolio; my returns are finally in the green, and it feels pretty damn good. Throughout the majority of the past year my portfolio has been pretty deep in the red, but since February everything has bounced back with a vengeance and my latest investments have performed very, very, very well.
I’ve made up all of my losses now due to almost all of my stock purchases since January 2016 returning 10% to 30% so far and with my lifetime dividend returning around $1000 after calculating this month’s dividends. Thanks to learning from my mistakes, this entire ordeal can be seen as a miniature blip in my investment track record.
This past March marks my 1-year investing anniversary when I bought my shares of Vanguard Total Stock Market Fund (TSE: VUN) and sold not long after to switch to a DGI strategy. VUN shares have not moved much at all since then.
The habit of investing monthly has now been ingrained into my being, I believe. At this point, it’s sort of on auto-pilot, and I find the most helpful things to do for myself right now on this investment journey is to constantly recompile my monthly stock watch lists, pick out a high-quality name in that list and put my money where my mouth is.
Maybe things will get more exciting over time, but for now I’m content with sitting back and investing here and there, tracking my annual dividend progress meticulously, and ultimately reaching for financial independence over the next 10+ years. I’m ahead of my own schedule still, and really hope to keep up the hard work I’ve put into my portfolio so far.
I remember when my net worth used to fluctuate around $20 per day when I started investing. It now fluctuates in the $100 – $300 range per day without scaring me, often times flying to around $400 – $600 on volatile days. It really goes to show you how money really does make money. I’m excited to see daily fluctuations in the thousands come up. Might take a while, but I’m coming for it. I’m not in a rush. There’s no need to obsess over the numbers. They’ll come when they do. I just do my best and wait it out.
I wish the best of luck to all of you in doing the same.
Does anyone else have a horror story investment they’d like to share? Let me know in the comments section.