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One Fatal Investment Mistake and His Life Savings Was Gone

fatal investment mistake

I spend a lot of time demonstrating how to invest in a sensible, reasonably safe way. Diversify, keep fees low, and be consistent. I should add to that: avoid fatal investment mistakes.

This tale from across the pond reminds me a bit of the physicians who lost tens of millions to a cryptocurrency scam. In this case, however, no one intentionally scammed anyone. It was just one person making a large, ill-advised investment with a friend.

You may have heard not to mix business with pleasure, and when you go into business with a friend, that’s exactly what you’re doing. It can work out great if all goes well, but when it doesn’t, financial lives can be destroyed and friendships irreparably damaged.

This Friday Feature, a cautionary tale, was originally published on Mouthy Money and authored by Nick Daws.



Let me tell you about my dad. He was a kind, thoughtful man and I learned many important things from him. But money was, sadly, never his strong point.

Here’s an example. Some years ago a family member persuaded him to invest all his spare cash in a media services business a friend of a friend was setting up.

I didn’t hear about this till the investment had been made. But even though I was much younger then, I could still see it was insanely risky.


It was a new business with no track record. And Dad knew nothing whatsoever about the media – he was a carpet-fitter turned hydraulic machinery salesman. And perhaps sensing that his wife (my stepmother) would disapprove, he didn’t actually bother to tell her about it.

For the next year or so, any time my partner Jayne and I went to visit, Dad would find an opportunity to take us aside at some point to give us an update. Inevitably this would begin with a conspiratorial, “Don’t tell Shirley, but…”

At first, the news seemed encouraging, but soon it became clear the business was going south and Dad’s money was going with it. I’ll never know the full story, but it seemed to me he was badly advised (to put it kindly) by the relative concerned and quite probably cheated by the main shareholder, though it was all technically within the law.

Eventually, he had to confess to my stepmother that he had lost most of their life savings. This inevitably caused a rift between them and had further ramifications that continued for the rest of their lives.

This entire incident was, of course, deeply traumatic for the whole family. The one good thing it taught me was the folly of putting all your eggs in one basket when investing.

I vowed I would never make that mistake with my own investments and have therefore always aimed to diversify as widely as possible. To date, that principle has served me well.


I've got my 2 acres of non-leveraged, crop-producing, cashflowing farmland via AcreTrader. Get yours.


How to diversify


There is no one single recipe for successfully diversifying your investments, but here are some guidelines I have tried to follow myself.


  • Don’t even think about investing until you have paid off any interest-charging debts. You should also have at least three months’ of income in easily accessible form, such as an easy-access savings account, in case of sudden, unexpected emergencies.
  • Don’t invest more than a small proportion of your portfolio in single company’s shares. You will get much better diversification by opting instead for a fund, exchange-traded fund (ETF) or investment trust, all of which work in roughly the same way and essentially invest your cash in a broad range of shares or bonds.
  • Aim to invest not only across different companies but different countries, sectors, and so on. A well-diversified global fund can do this for you.
  • Make full use of your tax-free ISA allowance. This is currently a generous £20,000 a year. Investing via a reputable stocks and shares ISA can save you thousands of pounds in tax.


With a well-diversified portfolio, you greatly improve the chances that if one or more of your investments fails to perform, others will compensate. And whatever happens in the world, your overall investment pot will hopefully build over the years into a substantial sum.

Whatever you do, though, please don’t make my dad’s mistake and put all your money into a single business (or other investment), especially if it’s one you don’t understand. That really is the fast track to financial meltdown!


Disclaimer: I am not a qualified financial adviser and nothing in this post should be construed as personal financial advice. All investment carries a risk of loss. You should always do your own ‘due diligence’ before investing and consult a professional financial adviser if in any doubt how best to proceed.

Nick Daws writes for Pounds and Sense, a UK personal finance blog aimed especially (though not exclusively) at over-fifties.

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11 thoughts on “One Fatal Investment Mistake and His Life Savings Was Gone”

  1. Pingback: The 10 Worst Cases of Hyperinflation in History - DrDons 'Selected News You Can Use' Media
  2. Subscribe to get more great content like this, an awesome spreadsheet, and more!
    • Agree to disagree.

      The term “savings” is not typically treated as plural. It’s not like you combine one saving and another saving to get two savings.


  3. Opportunity & risk are tied together. Timing is paramount. We are all trained to be conservative in our approach. I must have listened to dozens of venture investment “scams” over my career. Private placements are on the high scale of risk even if opportunity presents.

    For those of us who work hard, pay off our debts, children’s colleges & mortgages it is emotionally difficult to risk savings, Almost on anything. The current environment offers two additional risks that I THINK OUTWEIGH THE REST. Firstly are taxes. Secondly is a nearly worthless bond (municipal, treasury, corporate and now even high yield) bond market. These really change the landscape for accumulating wealth.

  4. It is hard to admit to family when you made a mistake. A lot of times people feel like such a fool that there is a lot of shame which hides people from coming forward sooner.

  5. I’m sorry about Nick’s dad. Mine was just the opposite. He was a middle class earner, selling insurance from a home office. But he was a savvy diversified investor. He only bought one individual stock, Walmart, which he watched grow from a $1,000 investment to $80,000. But mostly he was in broadly diversified mutual funds and bonds. There weren’t many, if any index funds for most of his investing career. But one thing stood out to me, he didn’t have over 10% of his portfolio in any one thing. He did invest in a friend’s business, but only a small percentage of his assets, and that turned out well. He turned a modest single family income into a two million dollar estate when he and my mom had passed. And he never came close to making six figures in his job. I followed his example, except I do have index funds in my portfolio.

    • Diversification is key.

      The problem isn’t necessarily that this man invested in a friend’s business. It’s that he did it with most of his money! This type of venture should only be taken with money one can afford to lose.


  6. Bill- it is an almost certainty that you are much better off today getting out of just bonds and diversifying even though the timing appeared bad.

    Also, the comment in the piece above that you should “not even think about” investing until you have paid off all interest charging debt is debatable. I really don’t agree with that all too common dogma, especially in the case of a mortgage. The answer should be “it depends”. It depends on the interest rate. It depends on what the debt is for. It depends on the alternative opportunities in which to invest the additional funds. It depends on the overall financial plan. It is never wrong to pay off debt but it may not be the optimal decision to focus all available funds on it in all cases.

    Thanks for what you do!

  7. I have seen many friends put money into businesses they know nothing about solely because they were introduced to a smooth talking con man.

    They were greedy. They were looking for easy, big returns rather than simply working the business that made them wealthy or expanding the business they know.

    Dance with who brung ya!

    I think it was Fortune magazine that once said, “If you want to become rich, find something you love and are good at and do it a lot. If you want to stay wealthy, invest in a S&P 500 mutual fund.”

    That struck a chord with me and was my compass for my entire working career.

    Today there are better options with total stock market ETF’s, but the principal is the same.

    The eleventh commandment should be, Thou shall resist the urge to get something for nothing.

  8. Just an FYI. I was 100% in bonds until just before the crash in 2001. I attended a company sponsored investment seminar and diversified a few months before the crash. . Lost a ton of money BECAUSE I DIVERSIFIED. Now i have since done much much better but be careful. Life is full of surprises…

    • You probably also lost a ton of money to opportunity cost in the amazing bull run prior to 2001 if you were in bonds in the 1990s. Diversifying earlier would have helped greatly.



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