Mac Murray

The #1 Sign You Are Likely to Blow Up Your Trading Account

In MYTHS & Markets on December 2, 2009 at 12:47 PM

“What’s the hot stock?”

“Have you heard any rumors?”

“What are you buying?”

“What’s your top pick?”Questionable Questions

“Got any tips?”

“What are you looking at?”

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The question comes in different flavors.  But I’ve heard it oh so many times that out of desperation I recently came up with a carefully crafted, now well-rehearsed response:

“I strongly recommend you find an investment professional you can trust and let him or her manage your investments.”

Diplomatic, isn’t it?  Even a bit polished, if you don’t mind my saying.  More so than my knee-jerk response not too long ago when I wasn’t so smooth:

“If that’s your question, you obviously don’t know what you’re doing.”

Ouch.  Yes I know, that’s tough medicine.  Too tough for most folks–particularly friends, family, and colleagues on the trading floor.  Hence my somewhat tamed-down How to Win Friends and Influence People response:

“I strongly recommend you find an investment professional you can trust and let him or her manage your investments.”

Don’t get me wrong.  If you’re inquiring from an investment professional– for instance a capable investment adviser or an astute stock broker–these questions are relatively harmless.

The problem is, they’re almost always asked by ‘Do-It-Yourself Investors’–those insisting on going-it-alone .

Chinese Blue Slice

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The Kamikaze Investment Approach

“Yeah okay, but what’s the hot stock right now?”I HAVE A QUESTION

It pains me to say this, but if you’re attempting to self-manage your investments,  questions of this nature are as good an indication as any of probable financial ruin.

Before we solve the problem, let’s make it worse.

I see little difference in ‘do-it-yourself-ers’ expecting answers to such questions from me or

  • expecting the answer from the news media
  • expecting the answer from a newsletter
  • expecting the answer from an analyst
  • expecting the answer from a broker

I even see little difference in expecting the answer from a black box trading system. (See There’s a Reason “Black Boxes” are Associated with Disaster)

The root problem in all of the above scenarios is one and the same.  It’s the deadly combination of :

  1. Insistence on the ‘go-it-alone’ investment approach, plus
  2. Unwillingness to do the necessary work involved in ‘going-it-alone’, plus
  3. Codependency on crowd affirmation, a perceived authority figure, and/or a plug-n-play computer program, in effect allowing these often dubious sources of authority to direct your investing.

If you have the talent and time to capably manage your own stock portfolio, more power to you.  In a perfect world many of us could and should do just that.  The problems come when the insistence on going solo is combined with the volatile mix of:

a) unwillingness to exert the effort to acquire relevant knowledge and skill,  plus

b) the need to follow self-affirming “gurus”.

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Chinese Blue Marble Half Slice

“The average man doesn’t wish to be told that it is a bull or a bear market.  What he desires is to be told specifically which particular stock to buy or sell.  He wants to get something for nothing. He does not wish to work.  He doesn’t even wish to have to think.”

–Jesse Livermore

Chinese Blue Marble Half Slice

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Alas, it seems many suffer from this affliction.  Is there a remedy?  I suspect you already know the answer,  although the average person consciously or unconsciously chooses to disregard it.

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Chinese Blue Slice

Choose Your Path: Go Solo Properly or Find a Pro

You have 1 of 2 choices. Either:

1. Acquire the knowledge and skill necessary to wisely manage your own stock portfolio while decoupling yourself from reliance on so-called experts (almost none of whom are traders).  This path needs to be approached by soberly confronting the brutal facts:

a) the learning curve will be at least as steep as the professional occupation in which you are currently engaged, and

b) those gifted with the ability to manage money are few.

Or

2. Find an investment professional you can trust and let him or her manage your investments.

Path #1: Go It Alone  Path #2: Find a trustworthy professional

Path #1: Go It Alone Path #2: Find a trustworthy professional

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Tough choice, huh?  Which path should you take?  Your answer to that question will determine the financial future of your family.  By the way, don’t let the holier-than-thous dissuade you from getting your investment act together:

Chinese Blue Marble Half Slice

Go to the ant, O sluggard; consider her ways, and be wise.
Without having any chief, officer, or ruler,
she prepares her bread in summer and gathers her food in harvest.

–Proverbs 6:6-8

Chinese Blue Marble Half Slice

Even the Good Book implies it would be a shame for your ‘investment strategy’ (or lack thereof) to be upstaged by an ant.  Wouldn’t you agree?

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Chinese Blue Marble Half Slice

Finding the best person or the best organization to invest your money is one of the most important financial decisions you’ll ever make.”

–Bill Gross, PIMCO

Chinese Blue Marble Half Slice

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E. M. M.

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For more strong medicine see

When Failure Is Not an Option

Be Careful Who You Listen To

“Your Average Broker Couldn’t Be a Trader in a Million Years”

E. M. Murray.  Personalized Stock Portfolios.  Professional Management.  Fixed Downside Risk.

E. M. Murray. Customized Stock Portfolios. Professional Management. Fixed Downside Risk.

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