Luka 🦉's avatar
$104.6m follower assets
Rule #1: Never lose money
Do you know this country? Probably not, and neither did I, but this didn't stop me from investing in it and losing 100% of my investment.
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The happy country there is Venezuela; the year is 2017.
This is the story of how I lost $6,000 chasing the Yield.

Even if this is not the most popular type of investment among retail investors, bonds are a pretty reliable way to make money.
Corporate bonds are my first choice if I want to have some good returns, but I buy some sovereign ones from time to time.

Sovereign bonds are guaranteed by a country; in the US, we can call it T-bill or Treasury; in Italy are BOT of BTP, and so on. Every country needs to sell bonds to raise money, and Venezuela was, of course, one of them. When you invest in such a product, you need to ask yourself: can this country default?
That's the one and only worry you need to have.

Full of hope and excited about the high Yield, I jumped on board and bought $6,000 worth of

🔸Venezuela, 12.750% 23aug2022, USD - USP17625AC16

At the time, it was trading at a discount, so the actual YTM was something around 18% 🤑

What can go wrong, right?
In the end, all countries have high debt, but they keep paying it... also Venezuela is the #1 country by oil reserves; how can they fail with all that oil.

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Well, I was wrong.
In November 2017, Venezuela defaulted (I will not enter into the details now, as it's unimportant), and as a result, my investment went to zero.
Yes, that happens when a country default... all bondholders remain empty-handed.

I consider this my worst investment, not because of the loss (6k is not that big) but because it is one of the few where I lost all the capital.
When you can lose all your capital, it means you are not investing; you are gambling.

At least I was able to get something out of this experience:

The return of an investment ALWAYS matters. There is a reason why you get paid more, and it's because you risk your money.
Sometimes you don't even realize that risk is there, but if you get 12%-15%-18%-20% return, believe me, the risk is there.

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PS: Just as a reminder, people are still "stacking stable coins" for up to 18% return, believing it is risk-free...

PS2: I know that the conditions of people living in Venezuela right back in 2017 but also now are far from ideal, and they have much bigger problems than my $6k loss. I don't want to disrespect them with my post; bankruptcy, Hyperinflation, Devaluation, and Dictatorship are not jokes.
Conor Mac's avatar
Great story here. Sadly, I think (in reference to your last point, ps2) that a lot of these projects know this and pray on those most vulnerable or susceptible.
Porchester 🔺's avatar
Sovereign bond trading is super tough (I can confirm this from experience, sadly...) I feel for you!
Luka 🦉's avatar
@porchester before, I thought that sovereign was safer, but honestly, I had more problems than with BBB corporate one...
Joey Hirendernath's avatar
Appreciate the transparency here Luka. I think your takeaway from the experience is one that needs to be really drilled into new investors from the very beginning - "the return of investment alway matters". Thank you for sharing
Todor Kostov's avatar
@stock.owl Thanks for sharing, Luka. Also, to add up on my side, I think any type of investment in a country ruled by communist/socialist regime is bound to go to 0.
Luka 🦉's avatar
@kostofff eheheh yeah when money is "everyone's money," it means they are no one's money. It may be sound wrong in English, but in my language, it has much sense :)
Thoughtful Investing's avatar
Great post Luka. Looks like "you won't lose if you won't sell" didn't work here.
Luka 🦉's avatar
@fi_investor naaaa - such .50cents psychology didn't apply in this case ))
Alex Biestek's avatar
Tough loss BUT also an incredible educational moment for all of us here on the Commonstock platform. Appreciate your insight and honest breakdown of your investment!
Joshua Simka's avatar
Love this post! Thanks for sharing your experience so we can learn. Well-told story, too.



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