What would you tell your 18 year old self about trading/investments?
- Thread starter Mpas
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Robert Morse
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Yes. I supported myself and my family for 25 years while trading fulltime as an Option MM. Before that I made money in college doing a little trading and that all led me to the sell-side. No regrets. I might tell my 18-year-old self to play bigger from 1998 to 2001-my best years.
If I had perfect hindsight:
1) Warn myself ahead of time about 2007-2008
2) My earliest exposure to finance/investing was Graham's "Intelligent Investor" and Warren Buffett's letters to shareholders and books about him. Everything written in those materials made a lot of sense to me intuitively and I thought would be a good roadmap for making investing and trading decisions. It shaped my decision process for years afterwards.
Well I wish I would have warned my younger self against that type of thinking, because this bull market (09-19) has made people like me look like absolute fools and cost me money. I should have been pouring money into the most glamour of the glamour stocks and ignore the graham and dodd stocks. Should have just thrown out classical valuation altogether. I don't know if it is because of Fed easy money policies, or the fact that we are in a perpetual bull market, but it doesn't matter - the fact remains I was wrong and I wish I knew better. But truthfully, when QE started, I honestly thought the Fed would stop much sooner and we would return to normalized interest rates (4-5%) by 2012, so I was clearly wrong about that as well, which I think ties into why value investing has been so terrible vs glamour.
1) Warn myself ahead of time about 2007-2008
2) My earliest exposure to finance/investing was Graham's "Intelligent Investor" and Warren Buffett's letters to shareholders and books about him. Everything written in those materials made a lot of sense to me intuitively and I thought would be a good roadmap for making investing and trading decisions. It shaped my decision process for years afterwards.
Well I wish I would have warned my younger self against that type of thinking, because this bull market (09-19) has made people like me look like absolute fools and cost me money. I should have been pouring money into the most glamour of the glamour stocks and ignore the graham and dodd stocks. Should have just thrown out classical valuation altogether. I don't know if it is because of Fed easy money policies, or the fact that we are in a perpetual bull market, but it doesn't matter - the fact remains I was wrong and I wish I knew better. But truthfully, when QE started, I honestly thought the Fed would stop much sooner and we would return to normalized interest rates (4-5%) by 2012, so I was clearly wrong about that as well, which I think ties into why value investing has been so terrible vs glamour.
1) Rule of 72
1a) Life is Exponential, not Linear. (Just that sometimes the exponent *might* be 1.0)
2) Trade expectancy.
3) Price Theory: Capital migration: The Invisible Hand moves capital to it's next best expected use, each day, each moment: stay in tune.
4) Warren & Charlie: So right! Learn what an economic moat is, and respect it.
{added} ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
5) "GET IN THERE KID!" (Thanks, jonahern)
6) "T/A works, until it doesn't." (As a Chicago School economist, I ignored/pooh-poohed T/A until I actually started trading. Now, it fuels Nobel Prizes and RPA/ML/AI hedges.
)
1a) Life is Exponential, not Linear. (Just that sometimes the exponent *might* be 1.0)
2) Trade expectancy.
3) Price Theory: Capital migration: The Invisible Hand moves capital to it's next best expected use, each day, each moment: stay in tune.
4) Warren & Charlie: So right! Learn what an economic moat is, and respect it.
{added} ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
5) "GET IN THERE KID!" (Thanks, jonahern)
6) "T/A works, until it doesn't." (As a Chicago School economist, I ignored/pooh-poohed T/A until I actually started trading. Now, it fuels Nobel Prizes and RPA/ML/AI hedges.
)
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Argh! Fundamentals can lead you to avoid the Dot.Com bubble -- but also to avoid FAANG stocks, too. It's not a crime to be on the wrong side of a coin flip, FWIW. "Finding a moat" can itself be tricky -- as the most common way is post hoc.
Career
I would have told my younger self that finance is a viable career path. My family always told me it was a disgusting career but I have been drawn to it since I was a teenager. With the modicum of accidental success I had in the confluence of software and finance, I feel like I missed out on an enjoyable career. Don't listen to your family, who probably are like crabs in a bucket anyway, follow your own path.
Investing
I would also tell my younger self that being young is NOT the time to be reckless with investment. Compounding is hardest early on, so I would actually put 80% of savings into things that compound at 6-7% (say SPY or REIT-like things).
The difference compounding $25K at 6% for 40 years vs $50K over 20 years is a cool 2 million dollars. And if you can't save $25K a year as an educated person, then you might as well go on welfare.
The rest, I'd send over to my friend Asadullah in securities...
Side hustle
Get a side hustle, no matter what. This helps you do two things: 1) release the energy you are unable to release at work, 2) a secondary possible income stream
Career + Investing + Side hustle
The bottom line is this: get a high paying career, save as much as possible early on and invest conservatively when you're young. An optional side hustle can accelerate your financial independence.
You may also want to plan/expect to be fired at 40 years old if you have a normal job. That's what I tell my kids. Then not being fired or "made redundant" is a bonus.
Edit: More notes
Financial freedom is an amazing feeling. By following a path to financial freedom, you give yourself the opportunity to become REALLY rich.
Say you start saving $25K/year from the time you're 20 and you get "fired" at 40. You now have no residual income but a nest egg of about $1 million. With compounding at 6%, let's say you start drawing down $25K. That changes your return to about 4%. That still continues to compound.
The point is that it isn't about getting rich but about ensuring that in the event that you get fucked, you can live with dignity.
The best part is if you don't get fucked, the above strategy also makes you rich.
I followed this, purely out of a survival instinct, not due to any specific education or help otherwise, and was able to put aside enough from 20-30 resulting in a nest egg of about $450K at the time I first got onto this website. Continuing that, and protecting it from divorce lawyers (please don't ask me to write a book), has resulted in a nest egg of much bigger than that. Now I am in a position where I can say fuck corporate life.
Without a divorce, and had I followed my desired career path, I can conservatively say I'd have 2-4x what I have now but honestly, I'm still pretty happy with where I am.
I would have told my younger self that finance is a viable career path. My family always told me it was a disgusting career but I have been drawn to it since I was a teenager. With the modicum of accidental success I had in the confluence of software and finance, I feel like I missed out on an enjoyable career. Don't listen to your family, who probably are like crabs in a bucket anyway, follow your own path.
Investing
I would also tell my younger self that being young is NOT the time to be reckless with investment. Compounding is hardest early on, so I would actually put 80% of savings into things that compound at 6-7% (say SPY or REIT-like things).
The difference compounding $25K at 6% for 40 years vs $50K over 20 years is a cool 2 million dollars. And if you can't save $25K a year as an educated person, then you might as well go on welfare.
The rest, I'd send over to my friend Asadullah in securities...
Side hustle
Get a side hustle, no matter what. This helps you do two things: 1) release the energy you are unable to release at work, 2) a secondary possible income stream
Career + Investing + Side hustle
The bottom line is this: get a high paying career, save as much as possible early on and invest conservatively when you're young. An optional side hustle can accelerate your financial independence.
You may also want to plan/expect to be fired at 40 years old if you have a normal job. That's what I tell my kids. Then not being fired or "made redundant" is a bonus.
Edit: More notes
Financial freedom is an amazing feeling. By following a path to financial freedom, you give yourself the opportunity to become REALLY rich.
Say you start saving $25K/year from the time you're 20 and you get "fired" at 40. You now have no residual income but a nest egg of about $1 million. With compounding at 6%, let's say you start drawing down $25K. That changes your return to about 4%. That still continues to compound.
The point is that it isn't about getting rich but about ensuring that in the event that you get fucked, you can live with dignity.
The best part is if you don't get fucked, the above strategy also makes you rich.
I followed this, purely out of a survival instinct, not due to any specific education or help otherwise, and was able to put aside enough from 20-30 resulting in a nest egg of about $450K at the time I first got onto this website. Continuing that, and protecting it from divorce lawyers (please don't ask me to write a book), has resulted in a nest egg of much bigger than that. Now I am in a position where I can say fuck corporate life.
Without a divorce, and had I followed my desired career path, I can conservatively say I'd have 2-4x what I have now but honestly, I'm still pretty happy with where I am.
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Yep, I'd definitely put some money on the long shots as well.
