How my $50,000 investment made other people money: my story

Many posts in this sub include the phrase, "This is not investment advice." This is my story, and it's an example of what can happen when you borrow to invest.

My wife and I had just put the kids to bed and were sitting around our kitchen table looking at a historical index of the stock exchange. The charismatic guy across the table used a little ruler to show us how over any 10-year period the markets always go up. (I will let you guess what year it was.) "Look, nothing is ever guaranteed," he says, "but this pattern keeps on happening! If you stay in it for the long game you're gonna do great."

He then went on to talk about how rich people make money: "Do you think they use their own cash? Of course not! They leverage Other People's Money^TM and they make a killing!" He helped us set up an investment loan: we borrowed $50,000 to "jump-start our earnings" and put it into a moderate-risk mutual fund. Now we had fuel for the gravy train and we could ride it all the way to a wealthy future. Wheee!

As you've probably guessed, the bridge was out and our gravy train did the long dive into Shonash Ravine. After the sparks had settled down, our $50,000 loan was tied to an investment worth about $35,000. Defaulting wasn't an option, so we spent 7 years making monthly payments on the loan while our investment smoked quietly down in the valley. When the investment and the loan finally balanced out we were happy to bail out and clear the debt.

I'm posting this story in r/CryptoCurrency because I came across a post yesterday talking about borrowing money to invest in a certain coin and then stake them on a certain exchange. The only people guaranteed to make money in that scenario are the ones lending you the money. Even if the value of that coin drops to zero, they are guaranteed to be making a profit at your expense.

The take-away lessons have been repeated often in this sub, but hopefully this story illustrates why they are so important to follow.

• Past results are not an indicator of future performance. I bought into a market during the only period in history where the 10-year average did not go up. You hopefully have better luck than me, but since crypto is more volatile than mutual funds nobody really knows what's coming next.
• Beware of FOMO. There's a lot of hype and excitement about coins going "to the moon" so by all means get excited, but don't let the Fear Of Missing Out push you into risky decisions.
  
• Borrowing money to invest it is a risky decision. It's based on impatience - you don't have the cash for what you want, but you still want something right away and will literally give someone else extra money (interest) so you don't have to wait. Stomp your foot and say, "But I want it now!" That's kinda what you'd be doing.
• DO NOT INVEST MONEY YOU CAN'T AFFORD TO LOSE. If you need a loan to make the investment, you can't afford it. If flushing the money you're about to invest down the toilet would make you miss a rent payment then you can't afford it. Make sure you have the basics of life covered no matter what.
• Dollar-Cost Averaging (DCA) is the way. Making a regular, affordable investment means you keep moving forward a little at a time even if the market is going down; it also lets you 'miss a payment' if your financial situation changes with no consequences.
• Do Your Own Research (DYOR) into the risks of whatever you are doing. Especially pay attention to how easily you can move your assets around - if there are minimum withdrawals, extra fees for certain transactions, or a waiting period. Try to picture a worst-case scenario and then learn what your options would be if it happened.
• And to end on an optimistic note: have some fun with it! There's also a lot of fun to be had in crypto and I think all of us are enjoying the last couple weeks as the market goes up. I'd love to hear your stories in the comments and I hope we can all look back at 2021 as the year Bitcoin was so cheap! :-)