Question About "Average Joe" Risk Tolerance ...

Haven't you heard the mantra? "you can never go wrong owning real estate"

"average joe" believes you can't lose in real estate, you just have to hold on long enough. Try that in futures and they liquidate positions for you.

I think some people are now learning through speculative real estate what a margin call on a 100:1 leveraged position is like.
 
Quote from stock_trad3r:

Everyone knows futures are much more risky than real estate due to leverage and volatility. Massive fortunes have been lost on futures.
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You really show your ignorance (again) by making that statement.

There is significant leverage inherent in futures. You can avoid that leverage by trading a smaller position than you can afford at maximum leverage. Less gains possible - less losses too. I believe Mario Gabelli did that for years & was chided mercilessly for it, but most of us would give our left nut to be him.

But, everyone always thinks about leverage as something that HAS to be maximized. And then when they blow out with a margin call, wonder why.

Future limits can also be scary. See above.

U get an ignore now since your knowledge base is insufficient to add to the general conversation except as a negative indicator.
 
Quote from stock_trad3r:

Because contracts expire worthless. When was the last time a house expired worthess?
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When your ass is on the street, cause you failed to meet the margin calls and the bank forecloses on your ass leaving you on the street losing your 50K down-payment and in the hole when the bank had to sell for less than what you paid for.
 
Quote from Sunshine4ever:

My question is: why "Average Joe" believes that "John" has a riskier way of making money than "Bill"? :confused: :D
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By your answers it is obvious that you know this is not true. So therefore, you can't possbily be an "average joe", now can you?

The answer to the question, as someone else has already stated, is that futures are conceptual, and real estate is tangible. We both the know the two different vehicles can make or break you when it comes to creating wealth.

The successful futures trader defiitely has the edge though, do to extraordinary liquidity and the absolutely amazing things you can do with leverage and compounding, all he/she has to do is find a trend and trade it.

The real estate tycoon, on the other hand, generally has to be a bit more of a wheeler and dealer to make it in his business.

Good trading,

JJ
 
As a former "average joe", now slightly more sophisticated through the school of hard knocks, I can tell you the average joe doesn't understand risk, period. Any kind of risk! He/she doesn't even understand how much risk they take with their nice, safe, time clock punching job. But they're getting schooled by the day with home values plummeting and pink slips in hand they'll know better next time. Education, it is expensive.
 
Quote from CaptainObvious:

As a former "average joe", now slightly more sophisticated through the school of hard knocks, I can tell you the average joe doesn't understand risk, period. Any kind of risk! He/she doesn't even understand how much risk they take with their nice, safe, time clock punching job. But they're getting schooled by the day with home values plummeting and pink slips in hand they'll know better next time. Education, it is expensive.
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Amen brother, my units jobs are being shipped off to India, where they pay them 7%-8% of our salaries for the same service (except the guys in India probably have more formal education). Now the human resources there are getting a pretty good understanding of "risk"! :eek:

Who would've thought my futures trading would've turned out to be the far less riskier task of the two ...

Good trading,

JJ
 
It seems to me that trading and real estate have their own kinds of risk. You can make/loose a lot more money a lot faster trading than you can flipping real estate. In real estate though you have things like carrying costs and much lower liquidity. If you have a futures position you don't' like you can flatten it right now. If you have a real estate position you don't like there's no guarantee that you can sell it quickly, even at a much reduced price.

If you're trading it's easy to put in things like stops to control your risk, in real estate it isn't so simple because liquidity is uncertain. Also, if you're taking out a loan to buy real estate you're basically working on margin anyway.

Personally I think most house flippers are crazy. The risk of ruin is too high.
 
To summarize the average joe is somebody who:

1. doesn't properly understand how futures markets work

2. has no idea what risk means, and how much risk they take on a daily basis for that matter (see the pink slip reply)

3. has a firm belief that one "can't go wrong with real estate" since you can see and feel the asset.

IMHO "average joe" should stay away from both markets! People should be required to take a risk knowledge exam before purchasing a home :D
 
I think that people often fear that which they do not understand, as well as fear showing that they do not understand something, and that they manifest that in a number of ways.

My medium term goal is to trade full-time in the future. I am a very analytical person, so I devote quite a bit of time to questions like: how much risk capital would I need, how much safety capital would I need (to feel comfortable), what would I trade, when, how, etc. I also devote a fair bit of time to reading/absorbing as much as I can about the markets.

The above said, I cannot imagine that I could actually talk to many people about becoming a full-time trader, yet I would likely be able to converse at length with many "average" people about, say, wanting to pursue a career flipping houses, investing in real estate, etc.
 
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