How a lot of people lost their life savings on a “sure” stock

GT Advanced Technologies (GTAT) was a sure thing.


They’d just last year signed a contract with Apple to provide sapphire glass for a number of Apple products, and investors hoped among them was the new iPhone 6.

GTAT’s stock price jumped by a factor of 6.5x last year.past-year

You were a fool if you didn’t buy their stock, so many people did.

And two days ago they lost their shirts.


Something went wrong — the iPhone 6 didn’t have sapphire screens after all — and GTAT filed for bankruptcy.  Trading was stopped as their share price plummeted from around $11 to below $1.

I’ve gotten into investing of late, by necessity. It’s a long story I’ve only touched on before, but I discovered this year that my dad’s broker did a real number on both dad’s and my IRAs. While everyone else’s retirement funds doubled in the last 4-5 years, ours dropped. (My balance went down even though I kept contributing money every year.)

Long story short, I learned a lot about investing, about the usury fees brokers charge you, and how even a 1% annual fee is enough to reduce your final balance at retirement by 28%.

And most of us are paying far more than 1% per year.

Not only are our brokers taking their fees — sometimes they’re annual fees, sometimes they take a percentage of each transaction (and that means buying and selling), and boy you should see how that adds up, dad’s last year alone took half of my entire IRA contribution as his fee — but they’re investing us in funds that also charge annual fees, and some even charge a fee as high as nearly 6% for the privilege of buying the fund.

Suffice it to say, you probably have no idea everything you’re being charged, and you have no idea how much lower your final retirement savings are going to be as a result.

But putting that aside for a moment, today I’m going to talk about gambling with your retirement savings — about putting it all in one stock. Because that’s what a lot of people did with GTAT, and they lost it all.

There’s a thread on the Contrarian Investor Forum that is a blow-by-blow of Monday’s bankruptcy announcement. It’s gripping, and sad, to watch people suddenly realize their life savings are gone.

What could they have done otherwise? One person suggested that the lesson learned was to make sure next time you invest in 3 or 4 stocks:


Another had something similar happen before, and had learned the valuable lesson of only putting 25% of his life savings into one single stock:


And another still can’t figure out what they did wrong:


You don’t have to be Warren Buffett to understand the danger of putting all your eggs in one investment basket. The thing is, there was an alternative. It’s not very fun. It’s downright boring, actually. And they’re called index funds.

Index funds basically mirror an aspect of the market overall, and simply track it. The most popular one out there is probably Vanguard’s Total Stock Market Index Fund, one share of which contains a portion of 3,742 different companies, representing nearly the entire US stock market.

As the stock market goes the index goes. And not only have studies found that index investing tends to beat the advice of all the experts, but it’s also cheaper. I’m paying around $300 per year to have my IRA kept at Vanguard instead of the $6,000 I paid dad’s guy last year (and that doesn’t count the other fees I was charged by the various funds he had me in). So I’m already making $5,700 more per year, not a bad deal.

(That extra $5,700 will sock another $114,000 in my IRA. But it’s even better than that. If it grows at 7% per year over 20 years, that’ll add another $136,000. That’s $250,000 more I’ll have at age 70 because I ditched dad’s guy. This ain’t chump change we’re talking about.)

The topic is more complicated, and I don’t want to get into all of it in this post. But there is a better way out there than investing in individual stocks, and letting brokers rob you blind for “expert” advice that a cat can beat.

In the meantime, here are a few of the comments from that other thread, where people suddenly realize they’d lost their life savings. There really is a better way:

























There really is a better way.

CyberDisobedience on Substack | @aravosis | Facebook | Instagram | LinkedIn. John Aravosis is the Executive Editor of AMERICAblog, which he founded in 2004. He has a joint law degree (JD) and masters in Foreign Service from Georgetown; and has worked in the US Senate, World Bank, Children's Defense Fund, the United Nations Development Programme, and as a stringer for the Economist. He is a frequent TV pundit, having appeared on the O'Reilly Factor, Hardball, World News Tonight, Nightline, AM Joy & Reliable Sources, among others. John lives in Washington, DC. .

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44 Responses to “How a lot of people lost their life savings on a “sure” stock”

  1. MyrddinWilt says:

    I never thought the Apple deal was very likely. Apple just does not do business that way. They are notorious for demanding secrecy. So why would they ink a deal and show their hand on iPhone 6?

  2. Jackie Hill says:

    Thanks, I was considering Vanguard.
    Seeing it broken down like you’ve shown,
    I need to do it sooner rather then later.
    But just wanted to start saving in the meantime.

  3. Yep I think I even posted the embed øf that. And yes, that’s because fees are always over 1%. 1% eats about 26%. So 2 or 3 percent, which is the average, is going to eat a lot more. People have on idea.

    Now, a bank account isn’t the answer, depending on how long you’re saving for. I moved my money to Vanguard, and my fees are now 0.08% per year, versus nearly 2% plus that I was paying dad’s guy.

    I did a calculcation. $100,000 invested today, sitting for 20 years, at 2% annual fees gives you a total fee of: $48,594

    My fee of 0.08% per year means my total fee over 20 years would be: $1,612

    If you had that $100,000 sitting in a bank account at 2% annual interest (and good luck getting that), you’d have after 20 years: $148,594

    If you had that $100,000 sitting at Vangaurd, in a safe total stock market index fund, making conservatively 5% per year, you’d end up with: $265,329 — and after you subtracti my $1600 fee, it’s still $259,000 vs the $148,000 you’d get from a bank. That’s 75% more growth. And I’ll take it.

    Unless you’re 80 years old, the bank is not your friend, at least not for 100% of your retirement money.

  4. Jackie Hill says:

    Guess you guys didn’t see Frontline about a month ago a rebroadcast from 2013 telling us that if you saved $100,00.00 over your life time you’d only get $36,000.00 after fees and the like when you cash out. Over 63% of your money is taken by your broker, investment firm whoever whatever it’s not coming to YOU!!! I decided to save my money in a freaking bank account.

  5. And the Apple deal was their Hail Mary?

  6. Yeah, I’ve learned how to analyze which bond funds go where. The general rule is that if you’re below the 25% tax bracket, a general “total bond market” fund should be fine, because yields are so low. Above 25%, they recommend a tax exempt municipal bond fund (Vanguard has a short-term and an intermediate, I chose the intermediate for my parents). And if you’re in the 25% tax bracket, which my parents may be after I sell off some of their goofy investments dad’s guy had them in, then it’s 50-50, really depends on the math. But yes, the rule is that you generally put bonds in tax-deferred accounts like IRAs or tax free accounts like Roth. Or you buy tax-exempt bonds (that are tax exempt federally (munis) or in the states. And the same frequent turnover problem exists with stock index funds. Some like small value and I think emerging markets have higher turnover, which I believe creates capital gains (or capital losses). The bigger ones, like total stock market and S&P 500 indexes, have low turnover, so they’re good for taxable and tax-deferred accounts.

  7. Always interested in the topic, though the Fed is definitely not my expertise (even though I got offered a job there as a lawyer way back in 1989 :)

  8. Well, I think it depends what you mean. One should invest their retirement money, in principle, or it will never grow. If it sits in the bank, it loses to infation (quite a lot in fact). So the question is what to invest in: how much stock vs bonds (and other fixed income, such as money markets, CDs, iBonds), and then what types of each kind of investment. Even among index funds, you can buy riskier funds (emerging markets or small value), or boring safer ones like total stock index or S&P500. As Bejammin noted above, if you invest in the total market via a total market index you only do as well or as poorly as the market did that year. So you never lose all your money unless it’s 1929 all over again. You can lose all your money investing in an individual company. Now, you stocks can still swing up or down by as much as 50% in one year (in a very good or very bad year), so depending on when you need the money, you might want to buy bonds or even ibonds or a CD, something safer to temper the volatility.

    But I don’t buy the argument that people should avoid the stock market overall. Your money cannot keep up with inflation otherwise, and if you’re pre-retirement, or even in retirement, it’s going to be difficult to have enough to live on, unless you have a LOT to live on already, without having some investments. You simply keep them very very safe and very low cost.

  9. bejammin075 says:

    John, glad to see you recommending index funds. It’s the way to go for at least 99% of us. I’ve primarily only ever invested in index funds, and have been satisfied. The only way I lose everything, like those painfully sad GTAT posts above, is if the entire market crashes like nuclear WW III, and in that case, there might be bigger concerns than money. What I love about index funds is that they are incredibly boring and simple. There is very little homework to do. I don’t have to worry. I have plenty of other things I’d like to do with my limited free time than study the nuances of individual stocks. And the GTAT fiasco above shows that you can put a lot of time and effort into it, and come up way short.

    Buying individual stocks, you are swimming with the big boys, the wall street sharks. It can be thrilling to swim with the sharks, but sonner or later, you have your arms and legs and head bit off.

  10. dcinsider says:

    I am truly sorry for everyone who lost their life savings in this foolhardy venture. However, we know what happens when greed is the motivation. It’s sad, but I can’t get all worked up over people who are so stupid but to put money they cannot afford to lose into a single stock on a hunch. You have better odds placing it on black on the roulette wheel.

  11. MyrddinWilt says:

    Apple might end up having to buy the company assets to make their watch. But shareholders won’t see any of that.

    Odd that they would go into bankruptcy though. Must have been more going on than just a lost deal.

  12. jared says:

    John, I sincerely love your passion and AB and I hope your newfound interest in investing will prompt you to investigate the way currency works in this country. I deeply hope that if you discover the truth about the FED, you can refocus your powers with respect to solving wealth inequality to measures that can have the most impact. (Hint: taxation, at any rate, can never overcome a cartel that can print money unobstructed and with congressionally issued immunity.) If you’d like to discuss this further, this is my favorite of all political topics. As to proof, I can provide endless references to any claims I make.

  13. jared says:

    It’s easy to make the stock “fraudulent” market rally, when you have a congress and population that allows the central bank to quadruple its leveraged beyond belief balance sheet, buying all the toxic assets of the banks that caused the financial crisis, and taking up the slack of the international community on buying treasuries, essentially taking advantage of a flagging deflationary economy to shuffle wealth up to the elites at the expense of the common man.

  14. OtterQueen says:

    I never had a desire to play the stock market, even if I had money to play with. So I never put my retirement funds into the stock market. That’s idiotic. This whole scam was cooked up by Wall Street. 401K’s etc. were invented to part the public from their money.

  15. GarySFBCN says:

    I lost substantial percentages of my total investments in 1988, 1990 and 1998. After that, I decided that the system was rigged and I really shouldn’t believe anyone who claims to be an expert.

    In 1992, I bought a lot of US Savings bonds – 6% interest each year for 12 years and then lowered to 4.75% until I cashed them this year. And they are exempt from state taxes. My friends laughed at me at the time, but I think for me it was a wise investment.

    In 1998, I shifted the remaining investments into to CDs or super conservative investments. I also modified my investment income projections (for retirement) to 4%.

    I’m now semi-retired, and earning about 3.5%, which is fine. Once I reach Social Security age, I should be able to avoid withdrawals from my retirement accounts, until the forced withdrawals begin at age 70.

    My advice:

    *Investing requires a lot ot time – care and feeding. If you don’t have the time you should probably look for options such as savings bonds, CD, etc. I hear that Vanguard has some good funds but because I’ve lost so much money over the years, I’ve never checked them out.
    *Experts are usually full of shit.
    *Have reasonable goals. During the recent downturn, my goal was to not lose any of my investments.
    *Start saving as early as you can – even $10 a month will make a difference in the long-run.
    *Everytime my salary increased, so did my rate of saving: That $10 went to $15, then to $20, etc. Not all of my salary increase went to savings – only some of it.
    *Create a budget that has some flexibility. Before spreadsheets, I used to have a folder with envelopes for non-monthly expenses – one was for vacations, another for gifts, another for insurance, another for gym membership, another for emergency purchases, etc. Each month I’d tuck some money into each of the envelopes. When the time came to pay for any of those things, I had the money.

  16. RepubAnon says:

    The next time somebody talks about privatizing Social Security, these stories are the ones to tell everyone about.

  17. BeccaM says:

    I don’t recall, but probably.

  18. Rambie says:

    Agreed, index funds is what my 401k is set into. We don’t have access to Vanguard’s in my 401K but some that are similar.

  19. Rambie says:

    I think, “Savings” is the account my money goes into before it goes out to pay bills.

  20. Jafafa Hots says:

    What is this “savings” you speak of?

  21. Other than Wealthfront? ;-)

  22. Wow. I heard about the sapphire screens, and then read a review earlier this week about why they may not have used them, but didn’t realize the company delcared bankruptcy until today. Looking at those returns last year, and “knowing” that they signed a deal with Apple, I’m not surprised people threw their money in. But yeah, after seeing what dad’s guy did to our accounts these past 4 years, it’s index funds all the way for me.

  23. Yeah, the last five years have been amazing — well, outside of my and my dad’s IRA :)

  24. Did you have it in a taxable account?

  25. Yep, I’m doing the same (though am tilting to small cap value and emerging, and have split up total international for the rebalancing benefit that Rick Ferri talks about :)

    And you would have gotten 32% last year with the total stock fund — that’s rockety :)

  26. JaneE says:

    People have been singing this song since 1929.

  27. Hue-Man says:

    One bright spot in my portfolio. Although Mr. Gross did leave – neutral term – PIMCO because his inflation fear investment strategy proved to be wrong and led to huge losses in his funds.

    I have no pension benefits other than Canada Pension Plan which maxes out at $1,038.33 per month, assuming you worked at maximum salary for all working years (excluding 8 lowest years) and assuming retirement at age 65. Canada doesn’t have a “poverty line” which in the U.S. for a single person is about USD 11,500.

    My investment success/failure is more than a nice-to-have since my CPP pension is significantly less than the maximum.

  28. 2karmanot says:


  29. BeccaM says:

    Well, if you’re looking to reduce your risk even further, there are bond-based funds. Often they’re labeled as “income & security” rather than “growth.”

    As my wife and I learned to our detriment though, you have to be careful to find one that doesn’t have frequent turnover or reinvestment periods.

  30. Naja pallida says:

    I don’t even think it’s really a matter of ‘putting all your eggs in one basket’. All tech stocks have been volatile, since about 1993. All it takes is one burp in the market for any tech/software company’s stock to tank, or even evaporate entirely. Sometimes even if the company isn’t doing particularly bad. They’re simply not the kind of investment you should be making if you’re looking for safe, long-term growth. They’re almost universally short-term investments where you get in, make some cash, and get the hell out – wait for their next possible product, reinvest, make some cash, get out. You have to watch them constantly or you run the risk of being left trampled on the floor when the crowd clears. If you’re counting on some random tech company to leave you set for retirement, you’re going to be sadly disappointed, with a lighter wallet, every time.

    Not that others aren’t correct. It’s a giant casino, and the house always wins. Even when you feel like you’ve been successful with it, someone else made even more money off of your success.

  31. Tim Adams says:

    Buying individual stocks, even a dozen or two dozen of them to “diversify,” is still like gambling. Ditto investing in actively managed mutual funds, whose expense ratios are too high for the returns you get, on average.

    About a year ago, I switched over to the “Vanguard Three-Fund” approach that is discussed in detail on the forums — you buy 3 Vanguard index funds including the total U.S. stock market, total international stock market, and a total bond fund. Reallocate a few times a year as necessary. It captures most of the economic activity that happens in the world (good and bad) and the expense ratios for these funds are miniscule (0.20% and below).

    You’ll never get rocket-ride returns this way, but you’ll likely never lose your house like some of these investors will. It provides great peace of mind and after a while you find you don’t feel the need to monitor the ups and downs of the stock market.

  32. Hue-Man says:

    I’ve avoided index funds – to my detriment – because I’ve assumed I would buy on the equivalent of Oct 1, 2007, and watch my index fund lose half its value. Dow Jones.
    Oct 1, 2007 13,522
    Mar 2, 2009 6,627

    It reminds me of the old joke: How do you accumulate $1 million of wealth? Invest $2 million in the stock market.

    I would much prefer a fund that earned 16.5% in the 12 months ended 3/31/2014, 11.7% over 5 years, and 7.1% over 10 years (which includes the index crash that worries me). Unfortunately, Canada Pension Plan doesn’t allow voluntary pension contributions – this would be the solution to the exorbitant broker/adviser fees, the risk of loss of your entire portfolio, and meager interest income in the current economy.

    The TeaParty/GOP plan pushed by Bush Junior was a criminal plot to enrich the financial services industry paid for by the very people who could least afford to be ripped off. Even with my college degree and advanced training, I don’t feel that I can make sensible investment decisions. What chance does the person have who quit school at 16 and has trouble balancing their check book?

  33. Naja pallida says:

    Nice to see I’m not the only major investor in Dildoes International here! Though, I’ve been keeping it in my long-term portfolio.

  34. hippysuperstar says:

    About a month or so ago, they announced the new iPhones, but revealed they wouldn’t be using the sapphire displays that gtat made. They went from about 15 to about 11 that day. Turns out the company bet the farm on the Apple deal. I’m done with individual stocks now too, too much risk. Lots of folks keep telling me about wealthfront, might look in to that, other than that I’m with you: index funds all the way.

  35. BeccaM says:

    We also have an international fund. :-) Our money is spread around quite a bit, but absolutely no individual stocks.

  36. That’s the most important thing. If you’re in a few good index funds, tell him to leave them the F alone. And it’s okay to be in just one index fund if it’s, for example, the total stock market. Because it’s not “one” fund in that case, it’s the most diversified investment you could have (short of also having an international fund).

  37. When was the Apple announcement? I’m assuming that’s why the stock dropped in the past month?

  38. BeccaM says:

    Yep. Even with brokerage houses, you need to pay attention. We actually do have a decent broker, but one time we saw some ridiculous churn happening in the bonds part of our portfolio. The fees were more than wiping out the small amount of interest being earned on the bonds.

    We got out of those ASAP and are now not just in one index fund, but several. And of course told the broker to stop moving our money around.

  39. hippysuperstar says:

    Lost quite about myself on this one. Fortunately I got out post apple announcement. Best loss I ever took apparently.

  40. nicho says:

    Some facts to remember:

    1. The stock market is a casino — and a rigged one at that. Treat it like any other casino. Some people make money. More people lose.
    2. Those that win 1) Are lucky, 2) Have enough money to play with, or 3) (Most likely) have access to insider information. (Example: The CEO of GTAT sold a ton of stock the day before the crash.)
    3. The stock market is going up, but that is no indication of the health of the economy. The economy still sucks. The stock market is going up because so many companies are buying back their own stock. This drives the price up — and also increases the CEO’s salary and bonuses.
    4. Many companies are borrowing the money to buy back stock. This is creating an unsustainable debt situation for them.
    5. Some day, this will all come due and all hell will break loose. Company stocks will start falling, and they companies won’t be able to get enough cash to meet their obligations. And we will enter a downward spiral.
    6. If you thought 2008 was bad, just wait until that happens.

  41. Yeah, and the lesson to learn from all of this is to invest your entire retirement in 3 companies rather than 1?

  42. SkippyFlipjack says:


    I feel really bad for these people but I don’t understand how anyone could put all of their retirement savings in one, or even 3 or 4, stocks. There’s no investing guide, no matter how simple or dense, that would recommend such a thing. I think people succumb to the same urges that strike them when looking at a roulette wheel — ‘Imagine what would happen if I put $5000 on Red 17, and it hit!!’ Well, right, but the likely result is that you’ll walk away without your $5k. You’re not going to get rich at the $5 blackjack tables, but you might have fun for a few hours and if you’re lucky walk away with a couple hundred bucks. Similarly, it’s not sexy filling up your retirement portfolio with some index and no-load mutual funds, bonds and a few fun stocks, but a balanced is highly likely to grow your money steadily over time. Yes, you could have the bad luck of entering retirement in 2008 when everything cratered, but at least you would know you did your best to invest intelligently. (Full disclosure: I’m crappy at investing and have consistently made the wrong moves when it comes to managing my meager retirement savings, which I basically ignore. So I do feel for these folks.)

    Going to a big discount broker like Schwab or Fidelity seems like the best way to manage money. They can help people go over their portfolio and pick a balance of investments that match their risk tolerance and years to retirement. The problem is that even this level of involvement means an investment of time and effort that many people don’t or are unable to invest. This brings me back to thinking about the GOP’s vision of Social Security — an investment account like any other, with the risks of any other. Their vision was “Hey, anyone can manage their own Social Security investment!” Except that many people can’t, and for many it would mean the loss of that safety net. What a crap plan.

  43. BeccaM says:

    The ‘better way’ used to be guaranteed pensions. Until they did away with the ‘guaranteed’ part some years back, and then eliminated the entire concept of a pension. And by ‘they,’ I mean the plutocratic 0.01% class whose only credo is “If there is a pile of money anywhere, it must needs be plundered.”

    After all, there is almost no doubt whatsoever that those with money and access to information bailed on GTAT immediately. And in all likelihood, they even made money as the stock price was plummeting through the immoral practice of short-selling.

    I do feel sorry for the people who foolishly put every penny of their savings into just one stock…but it really is foolish to do that. There’s no such thing as, well, a sure thing. Even index funds can perform poorly if you pick the wrong ones, and even they’re not immune to the effects of a market crash, but in general they’re the way to go.

    For regular 99% folks, investing in individual stocks — or worse, just one — is like the sucker’s game of roulette. With a rigged wheel.

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