I quit my job and lost about $400k on a bad investment and I’m trying to figure a way to dig myself out of this hole

The desire to get rich quickly can set many people back financially by some number of years or even decades. Undoubtedly, investors should look to build wealth at a slow and steady pace while keeping the risks they’ll bear in check. Of course, the late, great Charle Munger once said, “It is painful to watch a friend get rich.” If one lets envy and emotion get the better of them, one may give into the fear of missing out (FOMO) by following the herd into the wrong sorts of investments. Undoubtedly, this is the type of lesson that is far better learned from someone else’s mistakes.

In this piece, we’ll check in with an individual on Reddit who got hit with a nasty one-two punch to the gut, losing their employment and close to $400,000 on a soured YOLO (you only live once) investment in Bed Bath and Beyond. As you may know, shares of the home goods retailer got pummelled when the firm filed for Chapter 11 bankruptcy protection back in April 2023. 

How to move on from a massive $400,000 loss

The Reddit poster is seeking out advice and a few pointers from the r/wallstreetbets community on how they can dig themselves out of such a deep financial hole. Indeed, r/wallstreetbets can be a rather lighthearted place that can help ease the emotional toll. Still, with a nearly 85% loss on the portfolio (one of the steepest losses I’ve seen on Reddit), it’s tough not to feel second-hand pain from looking at the screenshot of their portfolio’s value over time.

On the plus side, the individual recently started a new job and will be busy rebuilding the sum they lost in their 401(k). Indeed, it’ll be quite a steep climb to get back to where they were. And given they’re posting on r/wallstreetbets, I’m hoping they’re relatively young, with decades of earnings still ahead of them.

In any case, I’d suggest grinding and aggressively saving to make up for lost time. It won’t be easy, and it could take well north of 10 years to get back to where they were before their Bed Bath investment soured. But that’s the price that needs to be paid for being on the losing side of a massive all-or-nothing sort of bet.

Though there’s only so much one can do in such a horrid situation, I do think that steering away from YOLO types of bets in the future is wise. Further, I’d suggest allocating only a small portion of one’s net worth towards high-upside meme stocks, if any at all. Indeed, you don’t want to have to start from zero more than once. 

This Redditor isn’t the only person to have to start all over again.

Financial guru Dave Ramsey, a renowned figure in the personal finance space, hasn’t always been good with money. In fact, he takes pride in picking himself off the canvas after making mistakes in his past that ultimately led to bankruptcy in his 20s.

With time on his side and plenty of money lessons learned in the ensuing years and decades, though, Ramsey was able to recover and then some. In the case of the Redditor, I’d strongly encourage going down the route of mutual funds or index exchange-traded funds (ETFs), regardless of whether they’re passive or actively managed.

With such funds, you simply will not have the single-stock risk to worry about. For the Redditor, it was ultimately overexposure to one name that caused their financial downfall. By striving to keep things boring and steering away from those r/wallstreetbets types of meme stocks, I do believe the individual can get back on the road to recovery.

Finally, this Redditor shouldn’t beat themselves up over the loss forever. While difficult to get over, I do think that treating the loss as a “lesson learned” and committing to change is all one can do. This Redditor won’t be the first to start from zero, and they won’t be the last. The main takeaway is to never put yourself in a position to have to start over, even with the odds seemingly in one’s favor—it’s just not worth it.

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