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Mustard Seed Money

Mustard Seed Money

How My Dad Lost Out on Millions Because of Bad Advice

February 2, 2018

THIS POST MAY CONTAIN AFFILIATE LINKS. PLEASE READ MY DISCLOSURE FOR MORE INFO.

 

Growing up, I watched my Dad dabble in the stock market.  I didn’t always understand all of his picks since he mainly bought tech companies.  He was working at Cisco Systems at the time, so he would come across all sorts of interesting new technology in support of the Internet.  

 

At the time, I was young and more interested in playing basketball outside.  In hindsight, I wish I had been more of a tech nerd.  Knowing how to code would have proved a much more useful skill than basketball for me.

 

One time during dinner, as I scarfed down my food as quickly possible so I could run back outside and play, I remember hearing my Dad discuss purchases with my Mom.  He had bought into a local company.  My ears perked up because I actually recognized the company’s name.  

 

One of our neighbors had recently taken a leadership role in a small home building company.  That company had just emerged from bankruptcy.  At the time, the stock was going for about $5 a share.  My Dad thought that it could be a low-risk, high-reward company, due to the fact that our neighbor was hopeful for the company’s bright future.

 

NVR Homes

My Dad thought this neighbor was a hard worker and could straighten out the mess with the right amount of time.  He trusted in our neighbor’s abilities within the company.  Plus, housing had just come out of a big downturn and had stabilized.  That company was NVR homes.  The stock price is currently trading for over $3,500 a share.  And oh, by the way, my neighbor became the CEO of NVR in 2005.  

 

The last report of his net worth is from 2007, which said he made $30 million and had 300,000 NVR shares.  If he still holds that many shares, that means that he would have $1.05 billion.  I knew a future billionaire.  How crazy is that?

 

The funny part is that I use to drive to school with his two daughters since they lived on my street.  For anyone who is thinking that I grew up in the lap of luxury, I didn’t.  The stock price of that company didn’t explode until the 2000s.  

 

Missing Out on Huge Earnings

Okay, back to the story.  To put this into perspective, if my Dad had bought 2,000 shares at $5 each, which he was planning to do, he would have spent a grand total of $10,000.  That $10,000 investment would be worth $7,000,000 today.

 

However, my Dad was talked out of the investment by a friend.  Instead, he encouraged my Dad invest in a new restaurant business that he had planned to invest in.

 

That company was trying to change up the fast food game by promoting healthy eating, better food, and convenience for busy adults everywhere.  My parents became big believers, and we ate there a couple times a month.  

 

Boston Chicken

The company was rapidly expanding and using debt to fuel their growth.  The stock was flying high for years, until the weight of debt caused them to become bankrupt.  That company was Boston Chicken, today known as Boston Market.  

 

That $10,000 investment that my Dad made in Boston Chicken, became virtually worthless overnight.  It took our family quite a bit of time to eat there again after being crushed like that.

 

Looking back, my Dad wished he had not taken the bad advice from his friend.  Of course, his friend was in no way being malicious in his advice-giving, but clearly, my Dad should have gone with his gut in this case.

 

The Impact of that Mistake

This experience definitely had an impact on my investing.  Early on, I picked my own stocks while investing (something that I don’t do anymore).  But, I avoided any companies that used large amounts of debt to fund their growth.  On top of that, I was extremely hesitant to buy any restaurant companies.  Although, I broke that aversion one time when I bought Chipotle.  The result?  I got slaughtered.  I should have known better, I know.

 

Both my father and I have learned a lesson or two in investing over the years.  Sure, some lessons are more expensive than others, but hopefully none are ever forgotten.  

 

So readers, what investment lessons did you learn from your parents?  Do you know any billionaires?  Share your thoughts below.

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Comments

  1. BusyMom says

    February 2, 2018 at 6:06 am

    It could have gone either way. That is why I invest in index funds.

    Reply
    • Mustard Seed Money says

      February 2, 2018 at 6:51 pm

      Great point BusyMom!!! It also could have gone to zero 🙂

      Reply
  2. WealthyDoc says

    February 2, 2018 at 7:19 am

    Reminds me of a couple who lived next to (a very young) Warren Buffett. Buffett offered to take $10K of the guy’s money and invest it for him. The guy’s wife thought that was a crazy idea. Who is this guy? He hardly ever leaves his house? I don’t think he even has a job? Let’s pass …..

    Reply
    • Mustard Seed Money says

      February 2, 2018 at 7:03 pm

      Hahahah…hindsight is definitely 20/20 and I wish I had the foresight to as well. Especially if it was Warren Buffett 🙂

      Reply
  3. Leo T. Ly @ isaved5k.com says

    February 2, 2018 at 8:09 am

    I made my fair share of investment mistakes. The last time I checked, it cost me more than $260K. These investment mistakes were not because of bad advice or anything, it’s just lessons learned for when I I was learning how to invest.

    Those investment lessons were expensive, but the returns that I got out of ithem were much greater. I just hope that I won’t make those rookie mistakes again.
    Leo T. Ly @ isaved5k.com recently posted…DIY Investing Or Using A Financial Advisor’s Service?My Profile

    Reply
    • Mustard Seed Money says

      February 2, 2018 at 8:39 pm

      I’m right there with you Leo!!! I definitely don’t want to make the same mistakes that I did in the past. I’ve made my fair share and like you said they were expensive lessons 🙁

      Reply
  4. Ms. Frugal Asian Finance says

    February 2, 2018 at 8:09 am

    That is indeed a huge amount to miss out on. I feel your pain. This is a valuable lesson for all of us. Take others’ advice into consideration but stand our ground if there’s s strong evidence. Thanks for sharing!
    Ms. Frugal Asian Finance recently posted…Why I Love & Don’t Care About Money At The Same TimeMy Profile

    Reply
    • Mustard Seed Money says

      February 2, 2018 at 9:07 pm

      Thanks for stopping by!!! It’s a painful story but one that I think is important to remember 🙂

      Reply
  5. Tom @ Dividends Diversify says

    February 2, 2018 at 8:19 am

    Very interesting story Rob. I will take it in another direction. If we weren’t both happily married, I would suggest you get in contact again with your neighbors daughters. Assuming they are unmarried, maybe you get us set up on a double date. After they fall madly in love with us, we marry them and fall heir to the family fortune. It’s just one of many possible paths to financial independence. 🙂 Tom
    Tom @ Dividends Diversify recently posted…Work, Save, Invest, Build Wealth, but Never RetireMy Profile

    Reply
    • Mustard Seed Money says

      February 2, 2018 at 9:18 pm

      Hahhahaa…you know I haven’t really caught up with them in awhile so I have no idea what they’re up to…if I hear I’ll be sure to let you know…

      Reply
  6. Church says

    February 2, 2018 at 8:24 am

    My parents are nothing but savers. They were brought up by their depression-era and WWII parents. There was no such thing as investing only hard work and saving.

    I don’t know whats worse, saving up a bunch of money and being content with what you have or investing and losing, which int turn, leads to learning, trying again and becoming successful.
    Church recently posted…Net Worth Jan’18My Profile

    Reply
    • Mustard Seed Money says

      February 2, 2018 at 9:25 pm

      I am right there with you that investing and losing is one of the best lessons to become more successful 🙂 Hopefully I have big success with all my losses 🙂

      Reply
  7. Dora says

    February 2, 2018 at 9:00 am

    This story reminds me of when I sold 400 shares of Symbol Technologies back in 1993. In eight years’ time, it split twice and skyrocketed before being acquired by Motorola. I could have paid off my house and had $50,000 left over.
    I didn’t even need the money, that’s what bothered me the most.
    When it comes to missed opportunities, no one should feel alone. My husband has a friend that was talked out of buying Google in the early 2000’s.
    Dora recently posted…5 Things You Need To Know About BondsMy Profile

    Reply
    • Mustard Seed Money says

      February 2, 2018 at 9:30 pm

      Oh my gosh those are awful stories. I know hindsight is 20/20 but it’s tough to not wonder what if…

      Reply
  8. Paul says

    February 2, 2018 at 9:09 am

    Nice cautionary tale with lots of what-if’s. I’ll offer another – what if he had put 1/2 in NVR and 1/2 in Boston? You can diversify with active stock picking, and while it lowers your crazy upside with winners, it does increase the chance of producing one.
    Paul recently posted…Why I Took My Son to VegasMy Profile

    Reply
    • Mustard Seed Money says

      February 2, 2018 at 9:30 pm

      That’s a great point Paul!!! Nothing like a little diversification to spread out your risk 🙂

      Reply
  9. CJ says

    February 2, 2018 at 10:01 am

    When I started working at my company 8 years ago the stock price was $17 a share.
    Now it hovers around $200.
    I did not buy any shares back then and I was not given any stock options.
    Coulda,shoulda, woulda

    Reply
    • Mustard Seed Money says

      February 2, 2018 at 9:31 pm

      Ugh…I like it when companies provide stock options and some incentives. I know I’d be a little more “invested” that way 🙂

      Reply
  10. SMM says

    February 2, 2018 at 1:16 pm

    My parents never really had enough to invest. But I think we all have situations where we regret investing or not investing. For example, I regret investing in FB when it IPO’d for around $40. I would have never thought it would hit close to $200 due to other IPOs, but I did have a good gut feeling about it, which I didn’t follow through on. I try not to think about it and instead focus on consistently Dollar Cost Averaging.
    SMM recently posted…Top 4 Financial Milestones to Consider Reaching Before You RetireMy Profile

    Reply
    • Mustard Seed Money says

      February 2, 2018 at 9:34 pm

      Thanks for sharing SMM!!! I’m right there with you on FB. Although I also thought that Twitter and Snapchat would do better 🙂

      Reply
  11. William Whitaker says

    February 2, 2018 at 1:19 pm

    Great post…this should also be a lesson in diversification. Had he of split his money between the two, he would still have $3.5M… I really enjoy your stories and writing style! Keep it up!

    Reply
    • Mustard Seed Money says

      February 2, 2018 at 9:36 pm

      You are absolutely right. This is a great reason why diversification is so important 🙂

      Reply
  12. Revanche @ A Gai Shan Life says

    February 2, 2018 at 3:57 pm

    My dad dabbled in day trading and that was all a waste of time and lots of money. I didn’t learn anything about the market from him but I learned to be a buy and hold investor, instead, and my picks have all but one been good! Buying GE when I did was out of character and not surprisingly, it took a nosedive.
    Revanche @ A Gai Shan Life recently posted…Just a little (link) love: emu + dog editionMy Profile

    Reply
    • Mustard Seed Money says

      February 2, 2018 at 9:40 pm

      Thanks for sharing!!! I’m a big fan of buy and hold. Day trading is legalized gambling as far as I’m concerned 🙂

      Reply
  13. fin$avvypanda @ finsavvypanda.com says

    February 2, 2018 at 4:35 pm

    Wow, that is insane!

    Everything just seems so clear when we look at hindsight, doesn’t it? Those are some crazyyyyy returns!!

    In terms of lessons from my parents? They are extremely risk averse, so I learned not to be as risk averse as they are. They live paycheck to paycheck and don’t invest (not even in index funds) because they say they are poor, and they are also scared. It’s because they don’t know, and still don’t know. So, I learn to do the opposite of what they do.

    My parents were also brought up and grew up poor, so what I learn from them is to build wealth and not be poor. As Bill gate says: “If you are born poor it’s not your mistake. But if you die poor it’s your mistake.”
    fin$avvypanda @ finsavvypanda.com recently posted…The Epic Tool You Need To Retire Early Like a King!My Profile

    Reply
    • Mustard Seed Money says

      February 2, 2018 at 9:43 pm

      Thanks for sharing!!! I definitely agree that fear is a huge contributor to not investing. I can’t tell you the number of people that refuse to invest b/c they don’t think they can afford to lose money. In reality, they can’t afford not to invest 🙂

      Reply
  14. Chris @ Duke of Dollars says

    February 2, 2018 at 5:46 pm

    Ah man what a story. Temperament like Warren Buffet makes me think of not dwelling on the mistake but learning from it!

    Thanks for sharing.

    Reply
    • Mustard Seed Money says

      February 2, 2018 at 9:44 pm

      Great point Chris!!! We definitely need to move on and let go 🙂

      Reply
  15. FullTimeFinance says

    February 2, 2018 at 7:07 pm

    A friend of mine on college was a nanny to a billionaires kids. I was over once and saw the million share cashed stock certificates. I also have a friend who worked for awhile for someone who sold his company for a few hundred million. Both were pretty cool folks. I never had the opportunity to invest alongside them though.
    FullTimeFinance recently posted…Administrative Steps of Starting a Business Part 1My Profile

    Reply
    • Mustard Seed Money says

      February 2, 2018 at 9:46 pm

      That is a crazy story and that’s really too bad that you couldn’t pick their brains. That would have been fascinating to hear how they did it…

      Reply
  16. Mrs. Groovy says

    February 2, 2018 at 8:14 pm

    That’s an unfortunate situation for your dad, to say the least. Did it make him bitter?

    I’m too old to make comparisons between my parents and yours, LOL. Interest rates on CDs were 11 to 12 percent when they were working.
    Mrs. Groovy recently posted…Honor Begets Financial DividendsMy Profile

    Reply
    • Mustard Seed Money says

      February 2, 2018 at 9:47 pm

      Honestly he’s not really bitter. I think he looked at as a learning opportunity and has looked for opportunities along the way to not miss out 🙂

      Reply
  17. Jason says

    February 2, 2018 at 10:56 pm

    Wow that is quite a story. Don’t you wish sometimes you could rewind history to just one moment for stock investing. Mine would’ve been to invest in Apple when I thought about it in the late 1990s. Oh that was a mistake not doing so.
    Jason recently posted…A Cryptocurrency ExperimentMy Profile

    Reply
    • Mustard Seed Money says

      February 3, 2018 at 8:40 pm

      I definitely think about snagging the car from Back to the Future and investing in all sorts of things. Plus to get the self lacing Nikes would be amazing 🙂

      Reply
  18. Ms ZiYou says

    February 3, 2018 at 6:19 am

    It’s great that you grow up with parents who invested, mine were (and still are) far too risk adverse for any sort of investment.
    Ms ZiYou recently posted…Feminism and Money …. are they compatible?My Profile

    Reply
    • Mustard Seed Money says

      February 3, 2018 at 8:41 pm

      Thanks for sharing Ms. ZiYou!!! I was fortunate that they invested I know not everybody was so lucky to grow up in that environment 🙂

      Reply
  19. Dave says

    February 4, 2018 at 6:57 am

    An individual can get lucky with individual stocks and make a fortune. The flip side of that is that the risk is so concentrated when you only own a few stocks. My plan is based more on trying to save as much as possible and to expect modest returns. If the markets perform better than expected, I will retire with more than enough instead of just enough.

    Reply
    • Mustard Seed Money says

      February 6, 2018 at 7:02 pm

      I’m right there with you Dave!!! I prefer to spread my risk out in the S&P 500 instead of a single stock. Although with the way Amazon has reacted over the years I wouldn’t have minded owning a little bit of that 🙂

      Reply
  20. Money Beagle says

    February 9, 2018 at 1:56 pm

    Bummer. Truth is, though, that a majority of people would have probably sold when it doubled or tripled, so chances are your dad wouldn’t have ended up with the $7m anyways. Maybe that’s a comfort?
    Money Beagle recently posted…Why It’s OK To Get A Tax RefundMy Profile

    Reply
    • Mustard Seed Money says

      February 10, 2018 at 9:39 pm

      Hahaha…great points…I do wonder how long he actually would have held on to it 🙂

      Reply
  21. Bernard says

    June 5, 2018 at 7:32 pm

    I too bought Chipotle a few years back, at $600 a share. Thereafter the rollercoaster went down. Still holding them today, watching them sloooooly go up again. Once they get close to my purchase price, I’ll jump ship for good.

    Reply
    • Mustard Seed Money says

      June 7, 2018 at 1:45 pm

      Hahah…Chipotle is slowly climbing back up. Hopefully it won’t take too much longer to cross the $600 mark.

      Reply

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