Never Borrow to Buy

Emmet Savage
Jun 11 · 3 min read

One of the greatest lessons in my life came at the age of 25 when I made and then promptly lost a small fortune. At the time, it was more money than I’d ever imagined I would have in my mid-twenties.

A number of elements led to this happening — the most prominent of which was internet access. The internet was a major game changer in the world of investing. No longer did you have to call up your broker to place minor trades, you could do so at the click of a button.

Next came “expert” advice on the latest hot stocks from thousands of message boards and chat rooms.

Finally, there was the entire new dot-com industry bursting with potential, ready for the eager investor in me to jump on board.

It was also around this time that I was introduced to margin accounts, where one can borrow money to buy shares.

Taking a small amount of starter cash I built up a portfolio that was bursting at the seams with unprofitable, pie in the sky, technology companies. I really thought I was the world’s best investor — like I had the Midas touch. Looking back at it now, everyone was the world’s best investor at that stage. Stocks were only going in one direction.

Every penny I made, I leveraged with my margin account to buy more. I was hooked on growth. I spent hours online looking for my next chance to triple my money in a matter of weeks.

I still remember the day I had to watch as it all came crashing to the ground. With so much of my portfolio tied up in debt, I was locked out of the decision-making process when things went sours and forced to watch as my fortune vanished.

Many of those who were investing back in the late nineties have similar stories of the Dot-Com Bubble.

I learned a lot from this experience. The immediate lesson was pretty obvious; don’t borrow to buy stocks and don’t get caught up in the hype of new companies.

The greater insight was the importance of time to all of us. Had I been 65 rather than 25 when this all occurred, that would have been my investing life over.

Many times since, I’ve asked friends if they would give up a decade of their life in exchange for money and the answer inevitably is “no”. There’s so much potential in a decade, so much you can learn and experience, so many great companies you can own a part of. Time is also something you can never earn back.

When you start thinking in terms of decades, investing becomes a totally different animal.

“The goal of investing isn’t to minimize boredom, it’s to maximize returns”, wrote . I wish someone had told me that 16 years ago.

The 24-year-old me was happy to throw darts and hope. It’s that kind of behaviour that leads people to compare investing to a night at the casino. Real investing is about planting trees that will grow over the years. Becoming successful at it means you have to dedicate time to it, and the sooner the start the better.

If you’re not already an investor, make this year the year to start. Here are three tips to ensure you don’t make the same mistakes I did.

  1. Don’t rely on tips from friends or colleagues unless they have proven themselves a successful and diligent investor in the past. Make sure every decision you make is your own.
  2. Dedicate some time to reading about the stock market. I recommend Peter Lynch’s as a great starting point.
  3. Don’t watch the market or your stocks every day. Invest for decades.

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Emmet Savage

Written by

Investor, Entrepreneur, Founder of MyWallSt

The MyWallSt Blog

Investing is for everyone, we show you how. MyWallSt is a multi-award winning company that helps you to become a confident and successful investor.