Risk, returns & timeframes illustration
1 min read
March 21, 2023
by
Regan Pearson

School’s out for Silicon Valley Bank 🎒

Hindsight is a wonderful thing. How can investors turn Silicon Valley Bank’s ‘what were you thinking?’ moments and incremental failures into life long lessons about how and where to spend and store money? School up on SVB’s lessons learned.
1 min read
March 21, 2023
by
Regan Pearson

School’s out for Silicon Valley Bank 🎒

Hindsight is a wonderful thing. How can investors turn Silicon Valley Bank’s ‘what were you thinking?’ moments and incremental failures into life long lessons about how and where to spend and store money? School up on SVB’s lessons learned.
1 min read
March 21, 2023
by
Regan Pearson

School’s out for Silicon Valley Bank 🎒

Hindsight is a wonderful thing. How can investors turn Silicon Valley Bank’s ‘what were you thinking?’ moments and incremental failures into life long lessons about how and where to spend and store money? School up on SVB’s lessons learned.
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You know you’ve messed up when former treasury Secretary and Harvard Professor Larry Summers thinks you need to go back to school. 👨‍🏫 In a Twitter-worthy hot-take, Summers blasted the executives of failed Silicon Valley Bank (SIVB) on CNN, saying the company committed ‘one of the most elementary errors in banking’. That’s like forgetting to check when your assignment is due, or calling your teacher ‘mum’. 🍎 

What exactly went wrong with SVB? Silicon Valley Bank piled into long term bonds that declined in value as interest rates rose. Then, when the bank’s tech-savvy customers wanted their money back, SVB was faced with a ‘whaddaya mean the bank is outta money?!’ scenario. 😳

While the second-biggest bank failure in US history continues to ripple through shares prices of other key US banks, including First Republic (FRC) and Keycorp (KEY), the ‘limited edition’ remains of the SVB are being flogged off by canny entrepreneurs on eBay (EBAY) - from wine coolers to empty cardboard boxes. 📦

Mistakes are a part of life. But avoiding rookie errors with money is important if you want to get the most out of investing. Like, perhaps, not putting all your eggs in one basket? 🥚 SVB was pretty industry-specific, promoting themselves largely as the bank for tech. When it comes to investing, spreading investments across different sectors, industries and even time horizons, can help reduce the risk of being wiped out if one area takes a tumble. 

Another reason SVB ran into trouble is because they didn’t have enough cash on hand in an emergency. 🚨 When they were forced to sell their investments at the wrong time, they locked in big losses. Keeping an accessible emergency fund could help save you from being forced to sell investments at the wrong time, like when your car’s on the skids and you need new wheels. 🚘

Finally, as investing GOAT Buffett says, ‘never invest in a business you cannot understand’. Being able to identify where risks might be lurking can save you a tonne of stress down the road. 🧘

Regan Pearson
Finance writer
Linkedin

We’re not financial advisors and Hatch news is for your information only. However dazzling our writing, none of it is a recommendation to invest in any of the companies or funds mentioned. If you want support before making any investment decisions, consider seeking financial advice from a licensed provider. We’ve done our best to ensure all information is current when we pushed ‘publish’ on this article. And of course, with investing, your money isn’t guaranteed to grow and there’s always a risk you might lose money.

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