How I Went From $600K to $1M and Lost It All to Gambling Addiction at 28

With the rise of gambling apps and increased speculation on meme stocks and short-dated options, it’s not hard to imagine that many of today’s young people have lost considerable sums on bad bets. Undoubtedly, gambling addiction can be difficult to kick for those who constantly chase the thrill. And while it’s difficult to recover, not just financially but psychologically, from a massive $400,000 loss, like this 28-year-old Reddit user who once had close to $1 million saved up, the key is taking the right steps and getting the right support structure in place to set the stage for a recovery. 

In any case, it’s certainly not too late for a 28-year-old to “rebuild,” especially since they’re still in the first or second innings of what could be a lengthy, multi-decade career.

In the case of our Reddit user, they’re not starting from zero. And with $600,000 remaining, they remain miles ahead of the average 28-year-old, especially those straddled by significant student debts. In any case, the important first step is for the Reddit user to realize they have a problem and take proactive steps to address it. After that, they should put their nose to the grindstone, live a frugal lifestyle, and start aggressively saving to get back to their high watermark.

Soured options bets can really lead to quick losses

Undoubtedly, it’s not hard to imagine many young options traders are licking their wounds after the latest steep pullback in markets. Whether it’s a boatload of short-dated call options that have expired worthless or one too many turns of the roulette wheel, the important thing is to make the moves to realize the mistakes made and correct them so they don’t have a chance to happen again.

Whether that entails automating investments in low-cost index funds and pulling the plug on options trading so one isn’t tempted to play the near-term fluctuation in a share price, there are a number of ways to bounce back for such a young person that has clearly had the means to pull head and shoulders above most folks in their age group.

In any case, placing bets on options can be disguised as sound investing. If used as a hedge against an existing position in one’s equity portfolio, options have their time and place. However, for most young investors, especially those with a propensity to fall into a gambling addiction, I’d argue that it’s best to take a step back and go with a “boring” investment plan. Indeed, hiring a financial advisor to take care of the portfolio or just picking up a few shares of an S&P 500 index ETF with what remains after every paycheck can help make investing dull and incentivize less action on the part of an investor.

Seek to make investing boring.

Does that mean an investor can’t speculate (or gamble) with ETFs? Of course not. While some of the more volatile high-flying ETFs (think those that bet on high-multiple innovation stocks that tend to face the most downside risks) tend to be more of a “trader’s playground,” so to speak, one can jump in and out of index funds as they time the markets over the near-term. Indeed, timing the market is so incredibly hard that it’s often not worth attempting to do.

Not only will you be likelier to jump out after most of the pain has already been dealt, but you could also miss out on the inevitable bounces. Indeed, the 2020 stock market crash is a prime example of why it’s so dangerous to time markets. Of course, a V-shaped bounce isn’t always on the table. And time will tell what’s to happen with the current Trump correction. Either way, staying the course with long-term investments and limiting trading activity (perhaps to less than a handful of trades per year) could help one invest rather than speculate. 

What else could make investing boring? Perhaps stepping away from subreddits such as r/WallStreetBets. Sure, it’s entertaining, but if it’s enabling you to gamble on options, it could make sense to unsubscribe, especially if you’re looking to gain karma from the community from your YOLO (you only live once) types of options bets.

The bottom line

This Reddit user is on the right track to bounce back. They’ve lost big money on options bets and are now paying the price.

As they attempt to invest rather than speculate, I’d encourage them not to play the options game and perhaps spend less time on places such as r/WallStreetBets. At the end of the day, there’s a line between investing and speculation. And one should know when they’re stepping over the line. 

Either way, it’s my opinion that boring long-term investments (think index funds) are key to rebuilding wealth without giving an options addict the temptation to pursue quick gains again.

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