What I Learned When My Investment Lost 83 Percent of Its Value (2024)

Investing is in my DNA. My dad first began talking to me about his stock market investing strategy in my 20s. I remember him presenting a Value Line Stock chart to me during our discussion.

When I decided to dip my toes into the investment markets, my cousin, a value investor, recommended a utility stock that had recently suffered a major setback and was selling for half of its previous price. It’s no surprise that I soon became a value investor like my cousin, as I’ve always been a bargain hunter.

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Value investing is an approach championed by renowned investor Benjamin Graham and his prodigy, Warren Buffett. Value investors choose stocks selling for prices below their true value. A value stock might suffer a short-term problem, causing its price to fall. The investor buys the stock after the “bad news” and expects that in the future the firm will return to prominence.

But, picking value stocks requires patience, research, a long-term horizon and a bit of luck. It might be years (or never) before a value stock returns to its former glory. Plus, investing, in general, requires an understanding that there will be winners and losers.

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The end goal is to profit, with the winning investments outweighing the losers. Frankly, if you don’t have the time or inclination for stock picking or investment management, I’d suggest trying a low-fee robo-advisor to handle your investing.

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Ultimately, I became a portfolio manager, buying and selling stocks for a large real estate firm. Despite my overall success, I had my share of failures. Here’s one of the worst.

Nokia: An Amazing Tech Company

Founded in 1865, Nokia was a tech darling from the late 1990s through early 2009. I drooled over Nokia with its 40 percent market share in 2008. I waited and wished for a “temporary” setback so that I could buy shares in Nokia on sale.

In 2008, my wish was answered as Nokia fell to $30 per share from its 2007 high of $40. Thrilled with Nokia’s affordability, I bought in at what I thought was a bargain price. And, then the trouble began.

Not Just a Bump in the Road

I bought Nokia in 2008 at $30 per share. The stock price continued to fall until the summer of 2012, when it hit $1.71 per share. Far from a temporary setback, the cell phone landscape was undergoing a seismic shift. With the launch of the smartphone, Apple’s iPhone and various Android models stole Nokia’s lead. The former cell phone leader became a minor player in a dynamic industry.

“In the third quarter of 2007, Nokia’s market share was 48.7 percent. By the third quarter of 2012, the company’s market share had slipped to just 3.5 percent,” notes Statsitica.com

The total Nokia decline bottomed out on July 16, 2012, when Nokia was trading at $1.71 from a June 2000 high of $58 per share.

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Losing Big

So, to sum up my horrible experience investing in Nokia: I bought shares at $30 and ultimately sold them in the $5 range after I realized that the company was not coming back to prominence. Nokia suffered a permanent setback due to changing market forces — not a temporary one.

My capital percentage loss was 83 percent. Fortunately, Nokia paid a healthy dividend, so my total net loss was a bit better.

Today, Nokia is trading near my sale price at $5.52 and has ranged from $4.51 to $6.41 over the past 52 weeks. It’s saving grace is the robust 4.32 percent dividend.

All told, this was my worst stock market loss during my decades-long investing career

Here’s What I Learned

My two lessons from the Nokia loss relate to both stock picking and the best investment strategy.

When you find out that a losing investment isn’t going to rebound, sell fast and don’t wait to get back even. Nokia was not going to return to $30 per share, and I should have understood that earlier.

By the early part of this decade, I shifted my investment strategy from stock picking to passive, index fund investing. After studying reams of investment research, it was abundantly clear that active investors infrequently beat the stock market indexes and we’re better off investing in passive index funds. That said, I haven’t left value investing completely. I currently own a passively managed value index fund.

Fortunately, the Nokia debacle was a tiny blip in my otherwise successful investment career. After four decades in the investment markets, my investment returns compounded and winning investments trounced the losers.

History has been kind to long-term stock market investors. Over time, the stock market has returned approximately 9 percent per year and the bond market averaged roughly 5 percent. Even if those returns decline going forward, regular passive index fund investing is less time consuming and has a greater probability of outperforming most actively managed investment funds.

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