My Dumbest Investment

Since I started investing in October 2003, I have made plenty of mistakes. Thankfully, I have had more winners than losers. One of my losers was Krispy Kreme. I doubled down when it was already down 50 percent, and it proceeded to fall another 70 percent. I doubled down because I saw a picture of a famous investor holding a Krispy Kreme doughnut. I learned that a yummy product isn't always tied to a yummy stock. If only I had bothered to look at the cash flow statement, I would have noticed that the company's free cash flow was diminishing — an obvious red flag.

— Felix E., Singapore

The Fool Responds: Those are great lessons. Lots of failing companies still have customers and even fans — but that's not enough of a reason to invest in them. Even strong and growing companies with loyal customers can be poor investment choices if their stock has gotten ahead of itself and is overvalued. You're smart to examine financial statements now — they can tell you a lot about a company's health and performance.

Do you have an embarrassing lesson learned the hard way? Boil it down to 100 words (or less) and send it to The Motley Fool c/o My Dumbest Investment. Got one that worked? Submit to My Smartest Investment. If we print yours, you'll win a Fool's cap!