Irish Financial Independence & Personal Finance Podcast

Thursday 25th April 2019

While I initially started my first investments in late 2017, I didn’t start with what I would consider a serious level of investing until April 2018. This article is going to look back on the last 12 months and share my investing experience.

A massive learning curve

This will sound cliche, but I can honestly say the last 12 months have been a huge learning experience. Investing should be simple, but when it's your first time around it seems so much more complicated.

In early 2018 I had committed to putting €3,000 a month aside for investments. My plan had been to grow my portfolio to around €40,000 by the end of the year.

There is a natural tendency to look for high risk, high returns investments early on. Looking back, this was foolish of me as I didn't have the experience then to know the difference between a safe investment and an investment scam.... I ended up getting burnt a few times along the way.

The ups and downs of forex trading

In May 2018 I started looking for an investment related to cryptocurrency trading. Cryptocurrency had been the hot topic at the end of 2017 and it led me to look into investment companies that were trading cryptocurrency.

I discovered a company called Blue Trading that claimed to be regulated in London and had traders in Japan. All the online reviews looked good, but there were a couple of early red flags that I dismissed at the time.

They claimed to have been around for five years yet had no personal reviews. All their online reviews were just about the Blue Trading company, with no specific real world testimonials from actual investors.

They also claimed to have forty staff, yet I could only find two of their staff on LinkedIn. Neither of those two were the people I was talking to and neither accepted my request to add them on LinkedIn.

I decided that I had to give it a go. Their claims of returns of between 10-20% per month seemed too much to resist. As I mentioned earlier, I didn't have the experience at this point to be taking on such a high risk investment without fully knowing the consequences.

I failed to see for example that this could be a scam and that my capital could be at risk. Blue Trading was in fact a scam, but they had gone to great lengths to cover it up. For example they had a real office in Japan and actual pictures on their website of awards they won and so many positive articles about them on the web. It wasn't until I gained more experience about the forex trading world that I was able to see their lack of transparency and what was really going on.

It is important to note that when investing there is a massive difference between risk and volatility. Most new investors think they are one in the same, but there is a massive difference. For example, my investment in Blue Trading was risky because my entire capital was at risk. Either because Blue Trading was going to end up a scam or because any investment promising the level of return they were promising would involve a very risky trading strategy that could result in "blowing up" one's trading account.

Compare this to say an investment in the S&P; 500 (the top 500 stocks on Wall Street). Yes, the share market will go up and down (that's volatility), but it's extremely unlikely that the share market will go to zero and your entire capital will be lost. Infact, in the case of the share market, you're in complete control as history has shown that a long term buy and hold strategy will result in a positive return - it really is a case of buy and forget!

In the case of Blue Trading I made the decision to give it a go and opened an account with €3,000. Within a couple of months I had seen that grow over 30% and at this stage they had me hooked. I started thinking things such as "if I had an account with €40,000 euro making 10% a month, I could be financially free within the year". I had now thrown any diversity of my portfolio out the window - I was committed to investing as much as I could in Blue Trading.

By the time October came along I had invested €12,500 in Blue Trading and my account balance was now over €22,000. I had made one small withdrawal to date, but decided to make a larger one this time. This was the first major red flag. They claimed to have issues with their bank account and there was to be a delay of a week to get the funds (on their website they promised withdrawals would be sent the same day). I patiently waited the week and eventually was able to receive the withdrawal. It was, however, the start of me finally waking up to what was really going on.

While I had over committed to Blue Trading at the same time I was trying to find other companies or forex traders that promised similar returns. It was from this experience that I learnt about how forex trading works and I could quickly see that there was a serious lack of transparency in what Blue Trading were doing.

By late October I had worked out that Blue Trading was simply a Ponzi scheme. There was no real trading going on and their profits were simply fabricated. I was extremely lucky to withdraw my full balance and the day it hit my bank account I felt a huge sense of relief - I made a lucky escape!

I wrote several reviews about Blue Trading on the web to warn other investors about what was really going on. I think some listened, but many others still got fooled. In February 2019 Blue Trading went under, taking millions of dollars with them - the Ponzi scam was complete.

This was a great lesson about how far into the future one needs to think about long term investing. It should have been obvious that such a high risk investment was going to blow up at some point, but I think it is human nature to think for the short term. I had tried to take a short cut and it nearly cost me dearly.

Unfortunately, while I had escaped the Blue Trading scam, I was going to get scammed elsewhere...

Algotechs and other bad forex experiences

In September 2018 I had decided to try to find other companies like Blue Trading to at least add some level of diversity to my portfolio. An advert came up on my Facebook feed about Algotechs "algotrading". This time my lack of research in Algotechs was extremely disappointing, almost blindly I invested €500 and again early on saw great returns. They encouraged me to invest more and before I knew it, had €4,000 invested with them.

Come November, I had my Blue Trading balance withdrawn and felt a huge pressure to have that money invested again. Rather than taking my time (as I should have done), I found two "experienced" forex traders and decided to have them trade my accounts for me.

By the end of December, one of the traders not only blew up a €4,000 account, they had put it into the negatives by another €800. The other trader had lost over 20% of the initial capital. I realised at this point I had made a huge mistake with these traders and withdrew my funds, losing close to €6,000.

All in all, I had made €10,000 with Blue Trading but lost most of that to other forex trading scams. By this stage I had released Algotechs was also a scam. They made it impossible for me to withdraw my funds and in March 2019 my Algotechs account was eventually traded to zero - completing the scam.

Through all the highs and lows of 2018 I had learnt so much and had been extremely lucky to archive my goal of having a portfolio of €40,000 by the end of the year. One thing was certain though, I had to slow down and take a much more long term approach to investing.

My investment in forestry

One of my initial investments was with an Irish company called Walker Forestry. I initially invested €7,500 with them and added another €10,000 later in the year.

In hindsight, I feel I have placed too much of my portfolio within one company (Walker Forestry makes up 40% of my portfolio at the moment) and this is a risk. As I continue to add to other assets in my portfolio this risk will become less, but it does highlight the importance of managing risk through proper diversification.

January 2023 Update: Walker Forestry ended up being a scam as well. I was again lucky to receive most of my investment back in early 2020 and ended up only losing €1,500 in the scam.

Conclusion

For anyone just starting out and building their portfolio, don't make the mistake I did and look for high risk, high return investments from day one. Start with secure investments, such as investing in the Vanguard S&P 500 or consider investing in property.

I was extremely lucky to not have lost a significant amount of money. While I learnt a lot, I could have saved myself a lot of heartache and stress by following a more long term view. Take your time, do your homework and remember the most important rule of investing is to protect your capital.

This was a difficult article for me to write, as it highlights a lot of mistakes that I made in my first 12 months. It shows that mistakes can be made and investing goals can still be archived, but hopefully this article can guide you not to make the same mistakes I did.

Through all the ups and downs in the last 12 months, one thing I am happy about is that in my mind I was focused on the end goal - to keep investing. Even on the days that I lost significant money, I had no doubt that I had to keep investing and keep trying. I remained largely emotionless about the ups and downs and this is an extremely important attribute to have as an investor.

2018 Portfolio Report

Portfolio Summary (as at 31st December 2018)
Opening Balance	€0.00
New Contributions	€36,006.86
Portfolio Growth	€5,245.28
Closing Balance	€41,252.14

Yearly Portfolio Growth Report

Yearly Portfolio Growth Report
Managed Forex Trading Income	€5,634.78
P2P Lending Interest Income	€237.19
Equities Capital Gains	-€626.69
Total Growth	€5,245.28
Annualised % Return	14.57%

Portfolio Breakdown

The table below shows the breakdown of my portfolio into the various asset classes:

Portfolio Asset Breakdown (as at 31st December 2018)
Christmas Tree Investment	€17,500.00	42.42%
Peer to Peer Lending	€10,361.45	25.12%
Equities	€5,873.31	14.24%
Managed Forex Trading Account	€4,457.38	10.81%
Cash	€3,060.00	7.42%
Total	€41,252.14	100%

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