The gains and losses in financial investment are normal, and even seasoned investment experts are no exception. Even if they have once won a huge fortune with their keen investment acumen, they have also experienced paying a huge price for wrong ideas or operations.

The protagonist to be shared below, Kirk Kerkorian, is such a legendary investor. He once created a fortune of 15 billion and quickly rose to become the country's richest man. He also experienced a huge loss of 700 million, and through summarizing the lessons learned from the loss, he hopes to sound a warning bell for every investor.

I. The Glorious Life of the Richest Man Kirk Kerkorian

Time Magazine called Kirk Kerkorian a genius investor who did not graduate from high school but created a fortune of 15 billion. In the 20th century, in the eyes of many people, he was a value investor who could be compared to "the God of Stocks" Buffett.

Kerkorian dropped out of junior high school and has worked in various professions such as amateur boxer and fighter pilot. He also founded an aircraft leasing company, but none of them succeeded. It was not until he turned to investment that he fully demonstrated his investment talent. He once bought and sold the MGM film company three times, and also had many assets such as the West City Casino and the MGM Hotel.

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In the following decades, the industries he invested in have all achieved considerable returns. These achievements are mainly attributed to Kerkorian's investment strategy: he bought an undervalued company, raised its value, and then patiently waited for the macroeconomic situation to improve before selling it. Kerkorian operated this model very well. In addition, he also likes cars very much, and he has had four important car investments in his life.

II. The Experience of Earning 2.7 Billion to Losing 700 Million

From 1990 to 1994, he once bought 36 million shares of Chrysler at a price of 10 dollars per share, and became the largest shareholder of Chrysler. The value of the shares he held increased five times, reaching 60 dollars per share.

In 1995, Kerkorian invested in an automobile company for the second time and made a huge profit of 2.7 billion dollars, with a return rate exceeding the sum of the gross domestic product of all non-oil producing countries in Africa at that time.In 2005, Kirk Kerkorian made his third investment in the automotive industry, becoming the largest shareholder of General Motors and receiving a dividend of 110 million US dollars.

In 2008, Kirk Kerkorian set his sights on the automotive industry again, spending 1 billion US dollars and holding a 6.43% stake, becoming the largest individual shareholder of Ford Motor Company. However, due to poor performance and the financial crisis, Ford's stock plummeted, forcing Kirk Kerkorian to sell his shares. As a result, Kirk Kerkorian's investment in the automotive industry suffered a heavy blow, with a loss of 700 million US dollars.

In the previous three investments, Kirk Kerkorian successfully avoided the bankruptcy of Chrysler and General Motors during the financial crisis. Why did he fall into a huge loss this time? The main reasons are as follows:

III. Analysis of the Reasons for Kirk Kerkorian's Loss

1. The blind spot in mentality leads to an imbalance in objective assessment

Nothing will remain unchanged forever, and investors should have a rigorous and objective assessment of the market. Because Kirk Kerkorian had so many successful experiences, he never thought he would fail, which led to a blind spot in his investment mentality. Once there is a blind spot in mentality, it is conceivable that the insight into the market will also be affected, lacking objective and rational assessment.

The changes in the market are endless, and even if investors spend their entire lives, they cannot experience all market environments. Investors must continuously update economic data and challenge conventional assumptions, assuming that different companies within the same industry represent different business models, to keep their investment models up to date with changes.

2. The investment philosophy that worships experience as paramount

In the investment world, there is no trading strategy that can guarantee a profit without loss. Kirk Kerkorian's strategy itself is not wrong, as the first three investments achieved outstanding results, which is enough to prove this. However, value investing is only a "second-best" strategy and cannot guarantee effectiveness at all times. Therefore, Kirk Kerkorian made a cognitive error that most investors would make.In 2008, the economic environment had already changed, and the positioning of the American automobile market had become uncompetitive. However, he did not adjust and correct his investment strategy in a timely manner according to market signals, but still adhered to the past thinking model for investment, relying on past successful experiences, which is the root cause of his fourth investment failure.

3. Ignoring the risk factors in the market

As the "stock god" who has been in the financial market for 70 years, Buffett once summarized the secret of successful investment in one sentence: "First, try to avoid risks and protect the principal; second, try to avoid risks and protect the principal; third, firmly remember the first two." Emphasizing the awareness of risk in the investment process is the foundation of any successful investment.

In the first three investments, it can be imagined that the reason why Kerkorian could successfully avoid the bankruptcy of Chrysler and General Motors during the financial crisis was that his risk awareness and measures were still worth learning. As for the last failure, it is inferred that there is a great possibility that it was due to his own negligence, which led to a weakening of the awareness of market risk management.