INSIGHTS GAINED FROM A MISGUIDED INVESTMENT JOURNEY

INSIGHTS GAINED FROM A MISGUIDED INVESTMENT JOURNEY

As you probably know, I’m keen on high-risk, high-reward investments as part of my strategy. Being young, healthy, and armed with a highly-regarded business degree, I know I can always go back to a regular job if my investment plans prove too risky. So far, things have gone well—except for one investment.

I was involved in a hotel development project in the UK. The plan was to buy a hotel room and either resell it for a profit once the hotel opened or keep it to earn rental income. The project seemed promising. The location was ideal, appealing to both business and leisure travelers, and the developer had a good track record with a similar project. I invested just over $30,000 as a deposit.

A year passed, and the construction had not even started. Then the company went into administration due to a global crisis. Administrators tried damage control but didn’t continue with the construction. It took a couple of years for them to start the liquidation process, which finally activated the refund clause in the investors’ insurance. Until then, the insurance company couldn’t intervene because the company was technically still operational.

I recently spoke with the insurance company, and they told me I would get my $30,000 back within a month, but without any contractual returns. My net worth has increased 2.5 times since I invested in that hotel room, meaning I could have turned that $30,000 into $75,000 or at least repaid an old 7% loan and earned a 7% return. With inflation, I’ve actually lost money. Even though I took a risk and it didn’t quite pay off, I don’t regret it. Other similar risks have more than doubled my net worth in under four years, and I’m thankful my full capital is being returned.

Here are the lessons I learned:

1. Only invest money you can afford to lose. I wasn’t worried about this investment because I had other income sources, some savings, and was prepared to write it off if necessary. If you’re in the stock market, ensure you can live without that money. This applies to most medium-level risk investments.

2. Have your contract checked by a lawyer. For real estate or other alternative investments, it’s worth spending a few hundred dollars to make sure all legal aspects are in order. Sellers will always assure you everything is fine, but you should verify the details.

3. Conduct a background check on the firm. In the UK, financial companies need to be regulated by the FSA. If they aren’t, you might not be able to reclaim your money if things go wrong.

4. Ensure the guarantees are legitimate. A company should be backed by a major insurance company, not a sister company that might also go bankrupt. In my case, the insurance was through one of the largest companies in the country, so I felt secure.

5. Don’t count money until it’s in your pocket. When updating my net worth, I don’t include potential returns until I actually receive them. Don’t plan on spending, saving, or investing money until it’s firmly in your hands. Stocks can lose their value overnight—be cautious.

6. Follow up closely. If the company isn’t providing regular updates, reach out to them or visit the site (if, for example, you’ve bought a property on plans) to ensure timelines are being met.

7. Make sure the contract clearly outlines all scenarios. My contract mentioned that default would be covered by the insurance company but didn’t specify how long the wait would be or what would happen if the project was delayed but not abandoned. Clarity is essential.

8. Don’t get bitter. Understand that sometimes risks won’t pay off. Accept it, learn from it, and move on. My experience wasn’t negative as the company was transparent and efficient, even though the project failed.

9. Stay diversified. Invest in different areas—real estate, stocks, retirement funds, startups, etc. Don’t put all your eggs in one basket because even safe investments can fail. Always have multiple backup plans.

10. Seek advice. There are plenty of resources like investing forums, the Citizen Advice Bureau, and the Financial Ombudsman that can inform you of your rights and help with financial products. A quick search can save you from major issues.