Barbara Corcoran Admits Big Money Mistake After Selling Company for $66 Million
Written by
John Csiszar
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Chris Cluff
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Barbara Corcoran, one of the popular investors on the TV show “Shark Tank,” made her fortune selling her real estate firm The Corcoran Group in 2001 for $66 million. In spite of this huge success, Corcoran admitted during a 2024 podcast on “Earn Your Leisure” that she made a major mistake after selling her firm.
As Corcoran has always been outspoken when it comes to teaching investors how to manage their money and avoid mistakes, it’s worth it to heed her lessons regarding her own failings. Here’s a look at the error Corcoran regrets and how you can avoid making a similar mistake with your own finances.
Corcoran Kept Her Money in Her Checking Account
After Corcoran made her big sale, she kept her money in a checking account for a full four years. That, she admits, was a choice that she regrets. It’s also somewhat surprising for someone with her level of financial sophistication. But as Corcoran explained in the podcast, “I was scared. I figured, ‘I don’t have my golden goose laying any eggs anymore.’ All of my staff was gone and I had no way to produce money. I thought to myself, ‘Heck, I better hold on to this money.”
Corcoran’s reasoning is understandable. After selling her business, she felt like she had no source of income and needed to hold onto what she had earned. While not many people have businesses that are worth $66 million, the same principle applies to anyone who sells a company or even receives a lump sum of cash. In most cases, the instinct to hold onto that money is strong.
Why Was This a Mistake?
While Corcoran did make a financial mistake with her $66 million by simply keeping it in a checking account, she did avoid the much bigger mistake of simply blowing through her money. Anytime someone receives a large chunk of money, there’s the risk that they don’t budget and plan and end up spending it faster than they imagine. Corcoran didn’t do this, but she did make an error.
Keeping that much money in a checking account is problematic for two main reasons. First of all, it’s unlikely that all of Corcoran’s money was protected by FDIC insurance. The limit on FDIC insurance is $250,000 per depositor, per bank, per ownership category.
So, for example, if Corcoran had kept all that money in a single checking account at a single bank, only $250,000 of it would have been insured. That’s a sizable risk. While some banks do offer additional levels of insurance, it would be hard to find a bank willing to cover $66 million.
But the real reason that Corcoran refers to keeping her money in a checking account as a mistake is that she failed to invest it. In fact, she even deemed that move irresponsible. This is because most checking accounts don’t pay any interest at all.
Unless Corcoran was planning to use most of that $66 million in the near future — which obviously wasn’t the case since she kept it there for four years — it should have been earning at least some type of return. By keeping it in a checking account, Corcoran actually lost purchasing power due to the effects of inflation.
How Much Could Corcoran Have Had?
If Corcoran had invested her $66 million into the stock market at the end of 2001, she would have experienced returns of minus-21.97%, plus-28.36%, plus-10.74% and plus-4.83% over the subsequent four years. Although starting off with a huge loss, she would have ended up with about $76.7 million at the end of that four-year period, a return of over $10 million.
Given the size of her account, however, it’s likely that Corcoran would have invested at least part of her money more conservatively, perhaps in short-term CDs. As of November 2001, six-month CDs were paying about 2%. Although rates fluctuated a bit over the subsequent four years, if she had earned an average rate of 2% overall, she would have had about $71.4 million in her account, a gain of over $5 million.
The bottom line is that Corcoran likely would have earned somewhere between $5 million and $10 million if she had invested her $66 million rather than the $0 she received from leaving it all in a checking account.
How Can You Avoid the Same Mistake?
The main lesson from Corcoran’s experience is that sometimes acting too conservatively can actually cost you. This doesn’t mean you should swing for the fences if you receive a large lump sum. However, if you simply let your cash sit idle in an account earning no interest you’ll be falling behind, thanks to the effects of inflation.
Obviously, if you’re dealing with sums of any magnitude, you’ll want to work with a financial advisor to help you through the process. But even if you’re working with a more manageable sum of money on your own, you can avoid Corcoran’s mistake by always putting your money to work earning some type of return.
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