Vent: my dad's 'invest in what you know' advice backfired hard

My dad always told me to only invest in companies I actually use and understand. So 2 years ago I put $5,000 into a trendy meal kit startup because I loved their boxes. Turns out they had no clue how to manage their supply chain and the stock tanked 60% in 6 months. Meanwhile my buddy who just threw money into an index fund did fine. I should have realized loving their food doesn't mean they run a good business. Anyone else get burned by following advice that sounded smart but was too simple?

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olivia_wilson2mo ago

Posted: This is so me. I bought into a mattress company that had that killer memory foam everyone raved about, dude was going to revolutionize sleep or something. Then I realized their entire supply chain was built on one factory in China that had a fire. Stock got crushed. So yeah @kai602, you're right I totally skipped the unit economics part. Guess I was too comfy dreaming about my victory sleep.

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kai6022mo ago

Hmm, I kinda see it the other way. The "invest in what you know" advice isn't really about loving a product, it's about understanding the business behind it. You knew the food was good but did you actually look at their costs, their churn rate, their unit economics? That's the part people skip. And index funds are fine, but they'd have taken a 20% hit in 2022 too so it's not like they're some magic bullet.

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