Gamblers
Folks are worried about stock trading. Specifically, too much of it.
A nebulous adage cautions against "too much of a good thing." But I'm not sure that old saw is applicable here.
Depending on your circumstances, trading might not be a "good" thing in the first place. I'd argue that most investors would be (far) better off minimizing their trading. Indeed, there's a very real sense in which you can't be an "investor" and a "trader" at the same time. Those are two distinct types of market part
WTF is A+B+C volume?
There are three “tapes” that together comprise the full volume of the market: https://markets.cboe.com/us/equities/market_statistics/historical_market_volume/
I am somewhat guilty as charged….BUT (of coarse a big but) I am full aware of it. Before reading this I completed selling a fair amount of what I call my trading stocks. The market is now “Too rich for my blood”
I would rather be on a beach in the Caribbean with internet I dare not trust to finances. Set it and forget back home.
I actually like catching falling knives. 3rd time at this rodeo.
“This is the end result of all the bright lights and the comp trips, of all the champagne and free hotel suites and all the broads and all the booze. It’s all been arranged just for us to get your money.”
-Ace Rothstein
And it’s funny, because whether it’s markets or other types of gambling, the people who should know that the most, invariably know it the least. The more experience you have, the less aware you become. Or, maybe it’s more apt to say that as familiarity grows, so too does a kind of reality denial coupled with false confidence. “I know what I’m doing, and I know the bookie, so it’s fine.” And it is fine. As long as you keep perspective. And that Casino quote is the perspective.
I don’t think of myself as a trader so i went onto Fidelity and checked my trades, I make 1 to 2 trades a day on average. So i guess i am guilty too. The next question is “am i addicted”. I have never thought about it but is a real possibility.
Yup, also guilty as charged. And also stupid enough to think that I can beat the markets over the long run.
All that aside, what if the trading gives you pleasure, keeps you reading, keeps you learning… surely there are worse hobbies, or for that matter addictions, to have?
I fondly remember a trader on our FX desk in HK back in the 80s. Every Friday once he passed his orders to London, he’d dash (literally) out and grab a hydrofoil over to Macau and spend the whole weekend gambling. Now that’s dedication to an addiction!
Personally I was trading house money 24/6 so could never waste my few hours of freedom gambling. It all takes so much mental focus to do right.
I really appreciate this type of article from you. When I first started with my own account in 2013 (I was 52 when I started investing), I would find one stock after researching extensively and put 100% of my funds into that one stock and I did quite well with this approach (stocks such as Aapl, Avgo and Ui (formerly Ubnt)).
Then, “people” told me I was crazy, which I initially resisted – but my account went from insignificant to significant and I realized I could really “screw myself” if I had a sizable loss.
For what it is worth, I still WANT to invest that way, but I do not. I also, pretty much always WANT a second glass of wine, but I do not do that, either.
With the extra time that I have because my time is no longer allocated to extensive research (I once drove 500 miles to watch what was going on at a warehouse) or dealing with the associated stress from investing in 1 stock, I have rekindled my love of reading, cooking and athletics. I can actually sleep for 6 hours straight. “People” tell me they like me more now- since I am less stressed out- and I attribute this to being in SPY (haha).
This begs the question of what the line is between an investor and trader. I scalp cryptocurrencies, but I also have several traditional stock/bond portfolios that I rebalance only once a quarter, and some business that I’m invested in that will take years to return any profit. Am I an investor or a trader? I would argue that I am certainly both, bringing different perspectives to different markets as appropriate.
Also, this reminds me of the old adage that a trader becomes an investor when they hold on to losing trades.
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Lucky you to get all those free lessons from your friend’s “bookie” dad. I made a couple of free trades on my own once. Lost on all of them, even with good research. I can’t gamble either. I know how many hours it took me to get what I’ve got and I just can’t bring myself to be careless with even a little of it. I’ll never spend it all, can’t do that either, but I genetically barred from throwing anything saved away.