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Halloween Horror Story: Hopefully I Will Die Young And Not Have To Worry About My Savings

We all know the scariest stories are true stories, so gather ’round kiddies as I tell a tale of investing horror that will haunt your dreams and send shivers through your portfolio.

The collapse of Royal Bank of Scotland (LSE: RBS) (NYSE: RBS.US) must surely rank as one of the most gruesome stock-market tales of recent years.

The bank’s downfall has, of course, been documented extensively, and the shares today remain down 95% from their 2007 peak.

At the depths of the share-price lows during January 2009, a Fool started a thread on the discussion boards called “I am broke“.

In his message, he admitted he’d lost £47,000 on another share and owned up to having put everything he had left into RBS:

After many months nursing my burnt fingers I decided to stick a last punt on RBS thinking that it’s been oversold. But now I have lost another £35K in 3 weeks.

He then acknowledged: “I am broke. Totally. Who can really afford to lose £80k odd?

And added: “Hopefully I will die young and not have to worry about my savings.

Clearly the Fool in question, like the shares of RBS, had hit rock bottom.

And no doubt he had learned two old lessons about the stock market — never invest more than you can afford to lose and always spread your risk.

The Fool’s post triggered a response from an RBS staff member in a similar situation:

I am an employee and I’m afraid I’m £120K down. That’s my lot, all my savings. I know I should have diversified but I saw colleagues retiring with generous savings on the back of buying every share option going so I did, too.

I’d cheerfully dance on Fred’s grave but ultimately it is my — your — fault as an investor. Caveat emptor.

Once again, no diversification and no cash safety net if it all went wrong. Caveat emptor indeed.

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> Maynard does not own any share mentioned in this article.