Ontario Teachers' Pension Plan took a $95-million write down on its investment in the crypto currency exchange FTX. What can we as individual investors learn from this event?
1. Picking stocks is really hard - even well-established investment firms who employ experienced professionals make mistakes. How can individuals investors like us hope to do better?
2. Diversification is essential. FTX made up only 0.05% of the pension plan's assets, so the loss has little impact on the fund. For individuals, though, one bad stock pick can really hurt.
3. Track records matter. Looking at the history of how a company has performed can tell you a lot about how they will do in the future. FTX had no track record, and the information available was completely unreliable.
Leave the high-risk investing to those who can afford to take a loss. For the rest of us, getting broad market exposure using ETFs will help us avoid these mistakes.
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