Who doesn’t like getting insights into the balance sheets and investment portfolios of other people – especially when those other people are successful professionals or financial experts?

CEO and co-founder of Ritholtz Wealth Management, Josh Brown, recently compiled a collection of exactly that in his book, How I Invest My Money, edited by Brian Portnoy and illustrated by New York Times’ columnist Carl Richards.

The book shines a light on 25 financial pros and how they use their own money to invest in capital markets. It’s a great look at how people who often give financial advice actually manage their own assets.

That inspired me to share my own strategy. I recently produced a video about how I invest my money. In telling my story and experience, I realized there were two specific events that helped shape the investor that I am today.

Developing My Current Investment Strategy Was a Process

Today, I invest for the long-term using a broad basket of ETFs that track broad market performance. I don’t try to time the market, and I don’t try to pick individual stocks.

Developing this investment strategy didn’t happen overnight. It took time to develop my personal investing style.

It also took two formative experiences that I can credit as the big reasons I am where I am today. In short, I learned the hard way why trading individual stocks is not the best way to grow wealth for the long-term.

My Investing Experience with Webvan

If you remember the early 2000s, you likely remember the dot-com bubble. A lot of investors felt overly confident in the futures of tech companies that were riding the wave of growing adoption of the internet and the spreading of personal computers in households all over the U.S.

I believed the hype; I was fully immersed in the boom and believed that it would never end. At the time, I worked as an analyst in Morgan Stanley’s Private Wealth Management division. It seemed like investors were simply printing money by jumping into IPOs.

Anyone could get rich by holding onto anything with a .com after its name. Of course, I wanted to do the same.

The company I got behind was Webvan Group, an online grocer that looked destined for success (but was, in reality, at least two decades before its time).

Webvan had an all-star management team and funding to back it up. At one point, its shares soared 65% over its initial offering price. And then they started to fall.

Justifying that this was just the stock going on sale, I bought in. And I kept buying. I bought shares at $15, $10, and $5. And I held them all the way to the company declaring bankruptcy.

Failing to Buy and Hold with Amazon

I made mistakes on the other side of the coin too. Instead of hopping into a bad bet and riding it to the bottom, I bet on a big winner… but didn’t stick around to see it pay off.

I bought shares of Amazon in 2012, when the share price was about $250. Over the next year, Amazon’s stock price shot up to over $300 a share.

I sold my shares in 2013, feeling pleased to get out before anything bad happened – and with a 20% profit to boot.

Fast forward to 2021 and we can clearly see that what seemed like a brilliant move at the time was actually a pretty terrible idea. Amazon now trades at around $3,000 per share.

That’s roughly 1100% higher than when I originally bought it!

What My Misadventures in Stock Picking Taught Me About Investment Strategy

These two stories illustrate a clear point: without the benefit of hindsight, it’s almost impossible to tell which individual stocks will turn out to be winners and which will go all the way to $0.

It’s easy to look back and laugh at my investment in Webvan. Clearly, that was doomed to fail as part of the dot-com bubble… right?

The truth is, that’s only obvious today. It’s easy to forget that Amazon was also an internet/tech company of that same era.

The problem with individual stocks is that you must know precisely when to buy. And that’s only half the equation. You also need to know exactly when to sell. Again, you can only know either, with certainty, when you look back with the benefit of hindsight.

This is why I no longer engage in the guessing games that individual stocks require you play. I also invest with intention and a plan, and don’t let emotions (like fear of a stock price dropping) make my decisions for me.

Instead, I rely on sound strategies based on my goals, time horizon, and risk tolerance. I combine those specifics about my own situation with experience and education about market history and new research and data that supports more passive, long-term approaches to investment management.

We use this same facts-based approach for our clients, too, to design investment strategies that meet their needs and take into account unique factors like their individual appetites for risk.

My process for investing will continue to evolve, but it won’t be influenced by randomness, chance, or emotions. Instead, we’ll continue to refine and hone our approach based on the facts and studies that highlight smart ways to grow wealth over time.