Recently I have heard someone say to me “I hope you are doing well in the market because I am’. I did not respond to his proclamation nor will I in the future. This self-proclaimed trader obviously has made some good buys and sells.
He does realize that he is gambling and speculating with his money. He can justify each trade with some signal or trend change or some other indicator.
Unfortunately for this trader his short term success will be met with long term failure. Successful investing is NOT gambling and speculating. Successful investing involves following a prudent process and remaining disciplined to that process.
OK I am going to say this with the risk of repeating myself. There are three simple rules to successful investing:
- Own equities and fixed income.
- Globally diversify.
- Rebalance.
Each of these rules sound very simple and should be very easy to follow. Until one of your friends or someone you know tells you something that scares into panicking and selling. Or even convinces you that the next hot stock or asset class will make you rich.
Successful investing is just that investing which means long term. One of the reasons the equity markets provide an excellent return long term is the volatility both up and down. We need to live with the downturns in order to experience the upturns.
Stock picking and market timing may be more fun to talk about because it is exciting, especially when you win. But like a gambler market timers and stock pickers get a high off their trading.
It’s ok to gamble and speculate with fun money but not money designated for a long term goal, like retirement. If you really want to gamble and speculate go to Las Vegas, at least you will have more fun when you lose.
To successfully investor you need to fire your broker/agent and hire an investor coach/fiduciary adviser.
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