Forbes’ 10 Biggest Losers: 4 Wealth Protection Lessons From Bankrupt Billionaires

by Louis Basenese, Advisory Panelist
Senior Analyst, The Oxford Club

Last week, Forbes magazine released its annual list of billionaires. No surprise, the rolls shrank.

“(In 2007), there were 1,125 billionaires. This year, it’s down to 793,” says CEO Steve Forbes.

An NPR broadcast tried to put an optimistic spin on the news suggesting, “All those empty spots… mean more room for the rest of us to move up.” In good fun, it even provided five secrets to do so, based upon the business activities that propelled 38 new billionaires into this year’s rankings.

But in all fairness, I don’t think a single one of us stands a chance of becoming a billionaire in the next year. So let’s put the Forbes list to better use than invoking a fanciful daydream about joining the lifestyles of the rich and famous.

Turns out, by focusing on the 10 biggest losers - who lost a combined $238 billion - the list contains four timeless investing lessons we can put to work immediately to prevent a similar disaster (in relative terms, of course).

Lesson #1: Have an Exit Strategy

While some can argue averaging down - buying more shares as prices fall to reduce your average cost per share - is a smart move, it’s stupid if you don’t ever stop. Just ask Carlos Slim Helu. To his detriment, he couldn’t resist buying more of luxury retailer Saks or The New York Times as shares plummeted.

Instead of endlessly throwing good money after bad, cut your losses and move on. It’s hard to do, that’s why we recommend using trailing stops. They take all the emotion out of the decision and provide much needed discipline to exit an investment gone bad… before it gets really bad.

Lesson #2: Don’t Try to Time the Market or Make a Few Big Bets

We know it’s tempting.