Apprenticed Investor: Nothing Doing

Tscm_1The 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

So today, I’d like to talk about nothing; specifically, about doing

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.





Nothing doing.mp3


Apprenticed Investor: Nothing Doing 
Real Money, 7/14/2005 10:22 AM EDT

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What's been said:

Discussions found on the web:
  1. duncan robertson commented on Jul 14

    most want action


    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

  2. Online Trading commented on Jul 15

    Saving Money by Doing Nothing

    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 column by Barry Ritholtz.

  3. edje commented on Jul 15

    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!!!!!!!!!

  4. Barry Ritholtz commented on Jul 15

    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:

    My second half of the year expectations were published in June:

    Any single comment can be pulled out of context and have its meaning distorted.

  5. royce commented on Jul 15

    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.

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