In this newsletter, I share content I bumped into the past month that’ll help you become more financially savvy.

This is not financial advice, so please think through your situation before applying anything you read here.

This month's recommendation:  

This Man Lost Over 1/5 of His $800k Inheritance In 1 Day

https://old.reddit.com/r/wallstreetbets/comments/1ehjuzj/i_bought_700k_worth_of_intel_stock_today/

Commentary

On August 1, 2024, 11am in New York time, Reddit user u/Sad_Nefariousness10 posted a thread titled "I bought $700k worth of Intel stock today."

In the thread, he recounts how his grandma recently passed away, leaving him with a hefty $800 thousand inheritance:

"I always heard about people losing their inheritance by spending it on garbage instead of investing. So I told my parents I'm not going to spend a cent of this money and I'm going to invest all of it and they were proud of me. I put 100k into a high yield savings account and bought 700k worth of Intel stock at market open. I plan on holding this for a decade depending on how it performs."

He then proceeds to talk about why Intel is a great investment.

At the time, the company was in the middle of a turnaround, having lost market share to competing chip maker AMD.

To try to get things back on track, Intel spent a lot on R&D and manufacturing. The investments were still somewhat uncertain at the time. While many believed Intel would eventually become a market leader again, they still hadn't shown any decisive results.

The Reddit user, however, felt certain that Intel would succeed over the long run. So, on August 1, at 11 a.m., he decided to put $700 thousand of his inheritance in Intel stock.

Around 5 hours later, at 4:05 pm of the same day, the Wall Street Journal tweeted: "Intel stock fell more than 17% after hours as the chip maker said it will cut thousands of jobs and pause dividends".

Intel would continue to fall after the announcement, opening on August 2 down by around 28% compared to August 1. This effectively wiped out over 20% of the Reddit user's inheritance.

Despite being well-informed, he lost because of how concentrated his position was.

Putting all your money into a single investment is dangerous because you can never be 100% certain of any outcome. Things can always go south even if you do your due diligence.

So even if you have a great investment idea, stay diversified. There's no such thing as a guaranteed investment, so it's always a good idea to spread your bets across multiple opportunities.

Assume your investments can fail, and you'll make safer decisions over the long run.

KEITH LIM