Apprenticed Investor: Nothing Doing
The latest "Apprenticed Investor" column is up, and its titled (apropos of nothing in particular) Nothing Doing.
In it, we look at the problem of overtrading, and why many traders cannot simply do nothing. Its especially true for those thrill jockeys who trade less for investing and more for the buzz.
The accompanying podcast is here:
Here's an excerpt:
"Let's be blunt: There is something exhilarating, even thrilling, about trading. The adventure of putting a position on, the buzz of watching it rally -- it can be such a delight that it almost feels illicit.
Clearly there is a rush to trading, especially when the market is really hot. But if you are getting that excited by trading, then the odds are you have become far too emotionally involved in the trade.
This is a huge mistake.
Investing is serious business, with real dollars at stake. There are far cheaper, less dangerous ways to buy a thrill -- snorting cocaine or hang gliding comes to mind -- than trading and investing."
There's nothing wrong with having, say, 5% of your portfolio in a "mad money" account for more speculative trades or just to have "some skin in the game." But if you are trading to get your jollies, then you are not spending your money well.
So today, I'd like to talk about nothing; specifically, about doing nothing."
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Sometimes, it pays to turn the old cliche on its head: Don't just do something, sit there!
Prior Apprenticed Investor columns can be found here.
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Podcast:
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Download:
Nothing doing.mp3
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Source:
Apprenticed Investor: Nothing Doing
Real Money, 7/14/2005 10:22 AM EDT
http://www.thestreet.com/_rms/comment/barryritholtz/10232263.html
Thursday, July 14, 2005 | 04:15 PM | Permalink
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» Saving Money by Doing Nothing from Online Trading
Some weeks ago I published a post about overtrading (taken from Ivestor's Business Daily) as a common mistake made by a lot of traders and investors. There is another good article about this topic in TheStreet.com column by Barry Ritholtz. [Read More]
Tracked on Jul 15, 2005 2:03:41 AM
Comments
most want action
BAD
not many people can sit and wait
then act on a plan
then stick with the plan
shortorlong dot com
understanding markets
one must have a plan with fixed rules
& patience, & DISCIPLINE, to be able to implement ones plan
Posted by: duncan robertson | Jul 14, 2005 7:36:02 PM
Apparently "doing nothing" is just what Barry's been doing lately.
Right now it looks like he was on the right track when he first advised to "increase exposure to equities as the market moved towards DOW 10,400 NAS 2000 and S&P 1181" -- but they never all "confirmed" at the same time and he never quite got to buy -- "no new positions have been initiated."
I guess he was stuck in neutral waiting for that "oil bear trap" to materialize? Maybe he still is?
On the other hand I wonder if he bought the "breakout" today at DOW above 10,610 closing?
Naw ...........I doubt it ..... he's probably still fretting over that last Baltic Freight Index reading!!!!!!!!!
Posted by: edje | Jul 15, 2005 2:07:45 AM
The Apprenticed Investor Series is not addressing current market conditions -- many of these columns were written way in advance of their publication date.
But that said, you must learn to distinguish between short term trading comments and longer term investing perspectives; Its a function context.
Recall I flipped Bullish when lines were crossed in May: I wrote about this on Real Money -- If you do not have a RM sub, you can see these: http://bigpicture.typepad.com/comments/2005/05/_line_is_the_sa.html http://bigpicture.typepad.com/comments/2005/05/dont_fight_the_.html http://bigpicture.typepad.com/comments/2005/05/tape_vs_growth.html
My second half of the year expectations were published in June: http://www.smartmoney.com/theproshop/index.cfm?story=20050602
Any single comment can be pulled out of context and have its meaning distorted.
Posted by: Barry Ritholtz | Jul 15, 2005 6:46:45 AM
Frequent trading isn't just a problem for thrill-seekers. High turnover raises transaction costs, including taxation of gains at the higher short-term rate. And there's no guarantee that what you sell as a dog today doesn't start booming upwards 6 months or a year down the road.
Posted by: royce | Jul 15, 2005 10:35:00 AM
