My Money Mistakes: Buying GM Stock

We all make mistakes! In these posts, we’ll explore money-related mistakes. Shame and embarrassment cause many of us to avoid talking about money. However, we learn just as much (if not more) from our financial screw-ups. Sharing our mistakes can help others avoid making similar moves in the future. And we’ve all had them - making a misstep with your personal finances is inevitable. Here’s one of my many money mistakes:

I purchased my first investments in the summer of 2000, at 19, with money I had been squirreling away from part-time jobs. I had $8,000 to invest. To spread my risk, I invested $4,000 in one mutual fund and $1,000 each in four individual companies. One of the companies was General Motors (GM).

I bought GM stock because I knew they’d never go bankrupt. I’m a native Michigander and am very proud of our auto industry. I also considered buying Ford stock but didn’t because I had more family and friends that worked there. My rationale was that by investing in GM, I’d be spreading my risk. Also, there’s a common saying in Detroit - “what’s good for the country is good for GM.” This would prove oh so true eight years later.

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I invested at just over $60 / share, shortly after the GM’s all-time high on April 28, 2000, at $93.625. My $1,000 purchased 16 GM shares, after commissions and fees. Over the next several years, GM stock puttered along, generally declining, but regularly spinning off dividends.

Between 1999 and 2003, I was working my way through the University of Michigan and subsequently, focused on starting my career in Washington, D.C. As a staunch “buy-and-hold” investor, I didn’t act on the general decline of this individual stock in my small portfolio. Enter the 2007 financial crisis. My little portfolio was not immune to the tidal wave of bad news.

As consumers struggled to keep their homes and jobs, GM was hit hard. They offered a wide portfolio of expensive, large vehicles that relied on readily-available credit and low gas prices. With foreclosures steadily rising, Americans weren’t rushing out to buy $54,110 2007 Hummer H2’s which boasted an average MPG of 15. At this time, I was also struggling to keep my job, and largely ignored my portfolio, which was in the toilet.

On June 1st, 2009, GM went bankrupt and my shares converted into Motors Liquidation Company stock (ticker symbol: MTLQQ). Because I stupidly did not sell my GM shares before they converted to MTLQQ, nor did I act on the MTLQQ shares, they became worthless. I had to complete and sign a form entitled “Request for Removal of Worthless Securities” to get them out of my account. Ouch! GM issued new stock in 2010. I did not line up to purchase.

This money mistake cost me both the original investment and the opportunity cost associated with the several years I held a losing stock. But, I’m grateful for the lesson. I’ve since sold all individual stocks and now only invest in low-cost mutual funds and ETFs. It’s very difficult for us individual investors to pick winners and losers in the stock market, and I no longer try. 

This isn’t my biggest money mistake, by far. Stay tuned as I share even more financial stumbles! What money mistakes have you made?

xoxo, Ms. Financier