They say that nobody’s perfect for a reason.

Because it’s absolutely true.

Look at any and every great man or woman in history, and they’re going to be flawed. Really, it can get depressing analyzing our heroes, looking at all the missteps they made.

On the plus side, that does mean the rest of us are in good company. Maybe that’s why I don’t mind sharing my own mistakes with you: because we all do it.

“To err is human,” after all.

But much more than that, I share my experiences – both the good and the bad – because I want you to benefit from them. If you don’t have to suffer how I’ve suffered to get to a good place… if you can jump right into a prosperous mindset with a strong and growing portfolio…

Then I’ve done my job well!

Most of the negative stories I tell are from my “past life,” back when I was a real estate developer. Case in point, my Papa Johns franchise disaster, which I wrote about last week.

I lost over $1 million on those eight stores – a painful experience that taught me to stay within my circle of competence. It’s a lesson I learned well, which is why I stay out of companies and even entire sectors that I just don’t understand.

If I can’t wrap my head around what an asset does and how it does it, then my wallet stays closed. And I certainly don’t recommend it to you.

In the same way, I’m never going to tell you to double down on a failed idea. It’s a piece of advice I just applied in my own life, even if it wasn’t the most enjoyable decision I ever made.

But if you want to maximize your investment power, you don’t throw good money after the bad. Not if you know what’s best for you, that is.

My Big Mistake

I wish I could say the mistake I’m about to fill you in on was from decades ago. But to be honest, I’m still winding it down today.

It started in 2023, when I began assembling vacant land in my hometown to construct a new retail project. It was an excellent stretch of property in a well-trafficked area, and I knew I could make something of it.

I immediately leased out space to a billboard company and another small section for a Goodwill drop-off service. But it was U-Haul (UHAL) that was really going to make me money.

Recognizing that there were no truck rental stations nearby, I did my due diligence. And when everything seemed to add up, I asked my college-aged son to run the place for me.

I figured it would give him some income and a taste of real estate ownership – a win-win all around!

Problem was, it took several months to get the property permitted, all while I was paying taxes, insurance, and interest. And, in the meantime, my son changed his mind.

That was disappointing, but hardly the end of the world. I simply hired someone else. What was much more problematic was how the business… when it finally did open… generated very modest revenue.

I’m talking about well below projections, which left me paying down debt, paying off labor, and paying for utilities. Month after month.

Now, most ventures take some time to truly turn a profit. So I did give it some time to prove itself. But as the calendar pages kept turning, I had to face the facts.

This business wasn’t going to make me any reasonable amount of money. Not in the near term. Not in the long term.

So, after I’d racked up around $50,000 in losses, I closed the shop down. Because the value of my money is worth more than my pride.

Bet the Smart Money: Don’t Play the Prospect Theory Game

Have you ever heard of prospect theory?

Created by behavioral economists Daniel Kahneman and Amos Tversky in 1979, it proposes that people hate losing more than they like winning.

Once they commit to a financial decision – whether a business venture, a stock, or even a trip to the casino – they hate to take a hit. So much so that even if they do start losing money, they won’t walk away.

If there’s a chance they can make their money back, they will take that chance over and over and over again… right up until they lose everything.

If that sounds crazy, I’ll refer you back to my opening lines about being human. We’re imperfect creatures with often very flawed psychological tendencies.

But just because we’re predisposed to think and act a certain way doesn’t mean we can’t fight the feeling. In fact, we must fight the feeling if we’re going to be successful in our investments.

My regular readers know I’m not one for timing the market or bouncing in and out of positions. I’m a long-term investor who believes that buying and holding quality assets is the best way to make money in the stock market.

And, incidentally, the research backs me up – a topic I should cover soon.

But the key to that stance is “quality.” The stock (or U-Haul venture) has to hold up against scrutiny before I buy it… and it has to maintain that good standing while I hold it.

If it can’t, then it needs to be sold. Otherwise, I’m throwing good money at a bad idea, which will just lead to further losses as long as I cling to the idea that I couldn’t have possibly made a mistake.

Take my advice on this: Ditch the idea that you’re perfect. And do the same with the notion that you’re never going to take a loss.

Once you’re free from those dangerously unrealistic notions, you can focus on making sure your wins more than outweigh your blunders.

By the way, I’ll keep you in the loop on my land deal which I hope to turn cash flow positive later in the year. As a 30-year real estate investor, I can tell you the most important way to make money in real estate is location, location, location (I’ll be discussing that topic soon in my new YouTube channel, The Wide Moat Show).

Happy SWAN (sleep well at night) investing!

Regards,

Brad Thomas
Editor, Wide Moat Daily

MAILBAG

What are some lessons you have learned through your investing journey? Write us at [email protected].