When I was 10 years old, my father gave me a book that would forever change the direction of my life.
The book was Reminiscences of a Stock Operator by Edwin LeFevre.
In the novel, LeFevre brilliantly describes the life and times of the book’s protagonist, Larry Livingston, a pseudonym for Jesse Livermore, one of history’s most famous and successful traders on Wall Street.
The story was my first introduction to the stock market and was the initial seed that fed my interest in investing.
After reading it, my father and I quickly developed a unique relationship based on our shared interest in markets. Encouraged by my enthusiasm and insatiable hunger to learn, Dad graciously gave me a few thousand dollars to “invest”.
For me, my initial interest in investing was the start to a decade of success, a growing ego and, ultimately, unfulfilled expectations.
For the better part of the 1990s, I made hundreds of trades in and out of stocks. I vividly recount the hours spent with my father, reading valuation sheets from the equity research company, Value Line, and scouring through the early morning delivery of The Wall Street Journal.
Some of my best memories as a child were spending time with my dad, researching the next hot stock, and chatting about our next “trade.”
Back then, and now, I saw my father as a hero, not so much because he was knowledgeable about investing, but because he took the time to have an interest in me.
Passion Turns to Addiction
By working together, our research gave us an inside edge on identifying winning investments, or so I thought.
By the late 1990s, the tech boom had started and I transitioned my investment research from Value Line to the internet.
In 1996 I enrolled at Virginia Tech and received early acceptance into the business school where I began studying toward a degree in finance.
My studies didn’t slow down my interest in investing, however. In fact, it only accelerated it. By 1999, I had amassed a small fortune of nearly $100,000 in my brokerage account.
Unlike many of my college friends who were happy to have a few extra dollars in their pocket, I had money.
With increased success, my interest in trading stocks became a passion. It didn’t take long for my passion to become an obsession, and my obsession to become an addiction.
As my account grew daily by the thousands, it became more and more difficult to maintain the dopamine rush to which I had become so accustomed.
Trading, and the subsequent returns that came with it, became a drug. And like all highs, the crash was soon to come.
History tells the rest of the story.
The tech bubble burst, and with it, so did my fortune. In a matter of months, I managed to turn nearly $100,000 into less than a few thousand dollars.
Nearly every stock I owned either went bankrupt or declined so much in value that my holdings were nearly worthless.
I remember sitting in my apartment wondering:
How could I make such a catastrophic mistake?
After all, I'd been studying investing for most of my life!
Never Let a Crisis Go to Waste
I once heard that only fools let a crisis go to waste.
The truth is that I felt like a fool at the time. But, I was smart enough to know that I had to learn from my experience.
So, with a shattered ego and enormous regret, I decided that I would never let that experience happen to me again.
My goal going forward would be to learn everything I could about creating financial security for me, my family, and those who were willing to listen.
History Often Hides the Best Lessons
Often we find that the most memorable side of history fails to shed light on the total story.
As it turns out, the famous trader, Jesse Livermore, made millions playing the stock and commodity markets seeking great returns.
He became famous and remembered for his ability to identify winners and amassed over $100 million during the crash of 1929.
In life, I've found that people like to talk about the great investment decisions they made. Yet, they seldom mention the investments that didn't work out. After all, strong egos don't like to reveal weakness.
As it turns out, the book Reminisces of Stock Operator followed the same story line.
The truth is that in 1940, just six years after Livermore amassed his enormous fortune, he was found dead in the bathroom of the Sherry Netherland Hotel in Manhattan.
That small fact fact never made the book.
They say Livermore had taken his own life after falling into depression. Some speculate it was because he had lost his entire fortune earned just a few years earlier. Others say he died of a broken heart.
In the end, Livermore died penniless because he was a speculator, not an investor. And a speculator who dies rich is a speculator who dies before his time.
Speculation may provide for a great story line just as it did in the book I read as a boy, but it rarely ends up making people wealthier.
What I didn't realize as a young man that I do realize now, is that there is a big difference between speculating and investing.
Unfortunately, most people speculate when they think they are investing. As as a result, they often end up with failed expectations at best. At worst, they destroy their own financial security and are never able to recoup.
Why I Do What I Do
My personal experience is why I do what I do.
I've spent the last 20 years helping families avoid the mistakes I made early in life. I know that educating others on how to prudently invest can have a meaningful and lasting impact.
Today, I feel good knowing that the investment principles we teach and implement for our clients at Covenant are verifiable, prudent, and defendable.
We don't base decisions on speculation and we don't implement investment strategy that isn't backed by verifiable academic evidence.
Some investors are turned off by our approach to investing because it's not glitzy or full of "water cooler" hyperbole.
But, I'm okay with that.
The truth is that prudent investing should be more like watching paint dry than playing the slots in Las Vegas.
Ultimately, this is my passion. When my career is over, I hope the clients we serve will feel we've made a difference.
Mark Fonville, CFP®
Mark has over 18 years of experience helping individuals and families invest and plan for retirement. He is a CERTIFIED FINANCIAL PLANNER™ and President of Covenant Wealth Advisors.