I was recently asked this in an interview and thought am curious to hear how some of the forum would respond.
At the moment, I thought it’d best to avoid the “I bought a stock and it quadrupled” type of response, as I thought I’d come off sounded like a putz or extreme risk taker. I gave two responses; 1) gave professional example of how recently contributed to adjusting our asset allocation, and 2) gave personal example of how hedged some investment risk, and talked about how just keeping the hedge on until Summers vs. Yellen gets sorted out.
Left thinking it was a decent response, but didn’t get the job so now second guessing everything I said (undoubtedly just one of 1000s of things that could’ve blown the interview). Also, thought it’d be fun to see some of the forum stories (including the quadruple-winners).
I reckon it’s a trick question or at least, a pretty horrible question to receive.
By trick question I mean the interviewer is probably going to have a plethora of answers about ten-baggers. Sure that’s great, but how much of that is sheer luck? (Cue hindsight and self-attribution biases) I would invert the question and answer with an investment that was horrible but where you learned a heap. It would be more impressive and shows humility.
Or alternatively, just remember the Ben Franklin quote: an investment in yourself pays the best interest. So maybe it’s a bunch of books that set you on the path where you are now. And think about it…a $30 book would probably return more than $300 in the medium to long term.
Anyway, a bit of lateral thinking involved. Will be interesting to see what other responses people have!
I would tell them the Lucent stock I bought in 90’s that lost over 90%. After watching it crash and burn, not touching the financial markets for a good while and then finally researching and reading a book on the company and it’s problems, that I probably learned more about the financial markets and myself from that decision than any other decision I have made thus far. And it only cost me $2k (I was like 12 yr old and it was my life savings hah!)
I’m proud to finally admit that I was foolish and shouldn’t have been investing in something I knew nothing about. At the time it was a loss but in the long run it was an investment. If I would have never made it, I might got caught up on the housing boom or something.
Then I’d ask them if that answered the question, if not, I’ll tell them about a success.
It depends what kind of interview you had. When I ask questions like this to potential candidates (I work at a long/short equity hedge fund), I’m really interested in hearing more about the process they used to generate alpha, how they got comfortable with the downside, and what led them to make a differentiated or contrarian call. The results are certainly nice, but what matters more is the process they used and how creative they were in terms of developing an actionable view that the market didn’t see. I also enjoy hearing about catalysts as well – a savvy analyst will identify opportunities that are not only undervalued, but also have a view about what would cause the market to eventually recognize the value so that they can monetize their investment.
Since I am at a hedge fund, I would not be interested in a response involving asset allocations or hedging. I would want to know how someone developed conviction in an idea, was about to both characterize and quantify margin of safety, and prove to me that they didn’t just get lucky. Savvy fund managers want to hire people that have a process that’s repeatable and that have the analytical know-how to unearth insights that the market just seems to be missing.