The Few, The Proud, The Stupid.

We have opined consistently on this blog that almost no one reading it should be buying, trading, or being involved in any way in individual stocks or bonds.  We rarely pass a day where someone does not ask for a stock pick that will make them quick money. There are no real quick ways to make money or find financial freedom via getting lucky by picking the right stock or bond.  Like playing the tables in Vegas almost no one gets lucky and wins big.  So smart people become long term investors by following a simple path.  One, max out your 401-k plan at work which is $18000 for most people. Two, max out your Roth IRA which is $5500 for most people.  All your money in 401k plans and Roth IRA's should be in stocks 100% and we suggest the Vanguard 500 fund which is investor owned, cheap fees, and safe for long term investing. Three, max out your HSA if you have one which is $3250 for most people and put in a good saving account.   Four, reduce all consumer debt in your household to zero excluding your home mortgage.   Lastly if you have done that for all eligible members in your family then if you can accumulate $100k in a low cost brokerage account consider it play money.  We fully expect almost anyone reading this blog will not make it to the last part. 

So that means only a FEW can reach the last part of accumulating enough money past what is needed to invest in retirement and deferred tax options.  Those few of us tend to be retired or investors who are making significant money at their vocations. Those that do reach that point tend to be like us PROUD traders who watch the markets, do hours of research and try to make some bucks by taking risks beyond normal.  Trading stocks, bonds and options like we do is not a place to find yourself.  There is a reason there is a church on one side of Wall Street and a cemetary on the other side.  The trading profession is populated with some of the most obsessive practitioners around.  They tend to be highly educated and posess brain power way beynond most people.  Traders can only prosper by finding a process and working harder, researching longer than anyone else is willing to do.   If you are not willing to get up at no later than 5 AM to begin your day, keep your emotions out of your trades, and discipline yourself to know when to take a loss you will not succeed.  We suggest writing a blog since it will allow you to go back and consider your mistakes and avoiding mistakes are how traders prosper.  Risk happens fast and managing risk as opposed to maxing out batting average is how one makes money trading.  Remember you are taking trading positions against the very best in the business and they are ruthless in pursuit of winning trades and profits and taking your money. 

The STUPID comes in when those of us who trade make a series of winning trades and get cocky.  Yeah you think you are good enough to avoid that cockiness, you are wrong.  All traders get stupid and think they have become bullet proof.  Over the past four years we have rung up a series of winning trades and earlier this year took some positions that have of late being shown to have been stupid.  Stupid, not ignorant, as we knew when we took the positions they were risky, but overlooked it due to thinking we had gotten smarter than most.  Sure enough we sit here in October with some pending trading losses and a wipe out of over half years trading profits.  That will trust us concentrate the mind.  So at the end of this week we will take those losses and proceed forward to right the trading ship by getting back to managing our risk profile. 

The lesson here is be wise and follow our ideas in the first paragraph by being The Few, The Proud, and Financially Free.  Be an investor first and a trader last.