Tyler Stewart has always been an educator at heart; whether it was his previous life as a stock trader, or his current life as head of investor relations at RealCrowd, an online commercial real estate investing platform with more than U$6 billion in deals, Tyler has made teaching investing fundamentals his life’s mission. This calling led him to the founding of two nationally recognized platforms: the RealCrowd Podcast – where top investing minds discuss the most pressing issues facing investors today – and RealCrowd University, a free, in-depth educational course that will teach you the fundamentals of real estate investing.
“The quickest way to grow your bank account is to save money, don’t spend it, have a monthly budget. Once you start saving, find a financial advisor and have them help you build out a portfolio and figure out what your goals are and what your risk tolerance is.”
Worst investment ever
Tyler catches fear of missing out from teacher’s story
One of Tyler’s memories from his first-year high school business class was that the teacher said that back in the 1980s he had received a tip to buy Microsoft stock. The teacher said: “I didn’t move on it. Had I done so, I would be worth millions.” Tyler never forgot that lesson and since them, all he could think was: “The first tip I get, I’m all in.”
College kid gets ‘big break’ stock tip from workmate
Later, during his college years, he did construction work in the summer, seven days a week, 10 to 12 hours a day. He was making enough to pay for college and to put a little money aside, for what he was as yet unsure. Then one day, a co-worker said: “Hey Tyler! I got a stock tip for you.” As soon as he heard that, he recalled what his teacher had said and the promised he had made to himself. This was the first tip he had ever received, so he had to go “all in”. The tip was about a drug company that could “cure any disease”. Cancer, HIV, whatever the illness, apparently the company could cure it. So he read about it and thought: “This is it! I’m rich.” So he invested all his extra money when the stock price was at about US$1.10.
Feels like a genius as stock is up 10% in first week
Within a week, the stock went up to $1.20. It was the first investment he’d ever made and he had seen a 10% gain in a week; one, he thought he was a genius. Two, he was certain he was going to be rich. He started doing calculations on his TI-83 plus calculator, trying to figure out what a 10% gain would mean in a week, in a year, and how rich he was going to be.
Stock hovers around the purchase price for a year
A year went by and the stock hadn’t moved beyond the range of around $1–$1.20. He finished that year of college, returned to the construction job, made more money and continued to plough it into the stock. When the stock went up, he believed he was the smartest guy in the world. When it went down, he wanted to hide.
Stock falls to 30 cents despite all his scientific research
Alas, the stock eventually went down to 30 cents, which is a considerable percentage fall for an investment. And the whole time, he was reading every piece of news and press release about the stock. He checked online forums and read reading anything he could about the science behind the stock, even though he was studying a major course in business. He read journals, and was trying to pretend he knew what he was doing and trying to reassure himself that he was involved in the right stock. He read forums and saw people question whether the science worked, and all he could think was such people didn’t know what they were talking about because he had become an expert. He knew “that this science was going to work out” and that this stock was going to deliver a big result for him.
Five years on he realizes tip will bring no gold
It took probably about five years for him to see that the first tip he’s ever received was not going to make him rich. Eventually, the company dissolved and no longer exists as it was. After the firm folded, he only received pennies on the dollar back.
Tyler’s investment know-how
- You have to know why you’re making an investment
- You have to know why you’re holding an investment
- You have to know why you’re exiting an investment
Don’t base all those stages simply on a tip
The decision at each stage must be based on fundamentals and plenty of research.
Your investment’s performance does not define you
When a stock price is climbing, it doesn’t mean you are the smartest person in the world. When it’s going down, you’re not the dumbest person in the world. What your investment does is separate from who you are.
Know why you’re venturing into an investment
Separate your ego from the investment
Research before you invest
Tyler admits he only started the research when he already held the investment. He adds that the research was not about whether to sell or buy more, it was research to just validate his decision for being investment, so it was very much a case of confirmation bias.
After conducting many interviews of many people, Andrew has collated the six most common mistakes that people make. Andrew suggests that Tyler made mistakes one and two.
No.1: Failed to do their own research
And in this story, that’s mainly because it came from a tip. Tyler did do some research after he bought the stock. But the time to do the research is before the investment, not after so.
No.2: Failed to properly assess or manage risk
This situation highlights serious problems with the word “Tip”.
- The first idea implied by the word is that an investor is receiving inside information). If the investor acts on that information, it is an illegal transaction (insider trading).
- The second idea is when a friend who likes a company and has researched it tells another investor about it. But if investors find investment ideas in this manner, it’s really dangerous, because people are promoting the ideas that they like. This does not mean we will never take a tip, but if a really attractive tip comes along, the investor must go to the step of researching the return and researching risk as well.
When you hear the word “tip”, alarm bells should be going off. It’s either not a tip because it’s actually a piece of inside information and what you’re about to embark on is an illegal transaction, or it comes from someone you know, so you must do your own research.
One way is to size your position or set aside a small portion of your portfolio for more adventurous stocks. Taking 5% or 2% of your portfolio and allocating it toward that risky bet is perfectly sensible. Another way is managing risk through diversification.
Create an investment paragraph which asks and answers these questions
- What am I looking for?
- Why am I looking for it?
- What’s the location?
- What’s the risk?
- What type of stock is this?
- What type of real estate product is this?
This investment paragraph is your filtering system of determining if the investment passes the test. If it does then it’s worthy of the time you should spend in due diligence. If it doesn’t, walk away from it. It’s all about being disciplined enough to write and look at that investment paragraph you create and stick to it.
No. 1 goal for next the 12 months
At RealCrowd, Tyler’s focus is real estate investing so his sole focus for the next year is building his university courses to help his audience to make better investment decisions in the real estate world. So Tyler will just be putting his head down and building out the courses in the aim of really helping investors to learn the fundamentals of commercial real estate investing.
The quickest way to grow your bank account is to save money, don’t spend it, have a monthly budget. Once you start saving, find a financial advisor and have them help you build out a portfolio and figure out what your goals are and what your risk tolerance is.
You can also check out Andrew’s books
- How to Start Building Your Wealth Investing in the Stock Market
- My Worst Investment Ever
- 9 Valuation Mistakes and How to Avoid Them
- Transform Your Business with Dr. Deming’s 14 Points
Connect with Tyler Stewart
Connect with Andrew Stotz
Further reading mentioned
- W. Edwards Deming (1982) Out of the Crisis