After the article last weekend, a subscriber wrote a thoughtful comment essentially asking whether anyone but a professional could make money in the markets and whether it didn't just make sense to have a professional manage his (or as I interpret it) any amateur's money in the market. These are important issues that are definitely worthy of discussion in my view.
First, let me say that one need not be a professional trader to succeed; only a knowledgeable, disciplined trader. I consider myself to be living proof of that proposition. I started trading after reading a book that captured my interest. I studied, worked, practiced, attended seminars, and watched DVDs to achieve a level of success in trading with which I am very happy. However, there is no question that successful trading does take hard work and diligent study, yet one need not be a professional.
I regularly work with individuals who come for coaching and who have full time jobs yet have wound up trading successfully. I have written a whole book, "Smart Investors Money Machine," that is designed to show amateurs and those with jobs, families, and time limitations ways in which they can add streams of income to their lives. Some of the strategies included in "Smart Investors Money Machine" take little time while others take more, but none require the person be a professional to utilize them provided he is willing to make the necessary effort.
This free newsletter that you are now reading is definitely not directed to full time professional trading and traders. It is instead designed to help educate the retail trader by offering principles and illustrating pitfalls in an effort to help readers improve their own trading knowledge. Trading is not something that is likely to be successful without effort. It is a business and like any business, whether full time or part time, it does require education, training, knowledge, and practice, but it can definitely be done successfully other than professionally.
Why not just use a professional money manager? The first answer is that no one cares about your money as much as you do. If you accept that premise then you may ask yourself why you want someone who doesn't care about your money as much as you do to manage it. Of course, there are a variety of reasons why someone may make that choice. However, as the subscriber noted on the blog, many professional money managers don't even do as well as the S&P although they garner a hefty fee for their services. Check out the performance of the common open end mutual funds that frequently incorporate hefty management fees and administrative fees and see how well the fund must do for you to just break even. "Smart Investors Money Machine" includes a discussion of these fees and costs that may be worth a look.
On the other hand there are vehicles available through which one can approximate the returns of the SP-500, the Dow, or the Nasdaq 100 if that is what an investor is seeking. ETFs like SPY which approximates the movement of the S&P 500, DIA for the Dow, and QQQQ for the Nasdaq 100 are designed to approximate those returns and at relatively modest fees.
As is so often true in life, much depends on what we are willing to do. Can a retail trader who is unwilling to spend time educating himself about trading and who is unwilling to practice be successful? Maybe, but my guess is probably not over the long haul. Naturally there are reasons why someone may be unable to undergo the education and practice. Jobs, families, other interests, other time constraints may make it difficult, but for many who seriously want to make trading and investing work for them, time can be set aside and strategies chosen that fit their station in life. After all, it is the choices we make that determine who and where we are.
by Bill Kraft, Editor
Copyright 2010, Makin' Hay, Inc.
All Rights Reserved
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