Monday, 2 July 2018
What ANIMAL are you in the stock market
What ANIMAL are you in the stock market
Below is an excerpt from the book The Turtle Always Wins. Its a tiny book by Bo Sanchez relating a story about four animals pointing to four types of participants you see in the stock market. Its also his second book tackling the specific subject of investing in stock market, the first being the My Maid Invests in the Stock Market... and Why You Should Too!
Find out what animal best fits you.
***
The Four Animals in the Stock Market
Let me introduce you to the four competitors in the race.
1. Squirrel, the Typical Trader
2. Rabbit, the Trained Trader
3. Sloth, The Typical Investor
4. Turtle, The Trained Investor.
Lets start with Mr. Squirrel.
Squirrel, the Typical Trader
Squirrel represents the newbie who gets into the stock market without understanding what hes getting into.
Squirrel also represents the old-timer in the stock market like the uncle of Julius. Hes never learned his lesson. He earns some and loses some. Its true that this uncle of Julius is a wealthy man. But Julius never asked this important question: Where did his wealth come from? He presumed it came from the stock market.
But that wasnt true. His uncle was a businessman. He earned his money running a big hardware store for the past 25 years. Heres the truth: if he wasnt trading foolishly, he would have been richer.
Squirrel represents the 85 percent of people who get into the stock market - and lose their money.
On Hot Tips and Penny Stocks
Squirrels want excitement.
They look at their stock portfolio every day. Usually, many times a day. Theyre ecstatic when they see their money go up. And theyre depressed when they see their money go down.
Like the squirrel in my story, they have so much energy, these typical traders buy now and sell few days later. Sometimes, they buy and sell within a day.
And like the squirrel that doesnt follow the road, typical traders dont follow the rules. Because trading for them isnt a science but an art. Its all about gut and feeling.
At the end of the day, most traders are really gamblers. Sadly, theyre using the stock market as their online casino.
As I mentioned above, 85 percent of people lose money in the stock market. (And thats a fact.) Because most people who get into the stock market are squirrels.
Squirrels also try to take a lot of shortcuts. They want to make a quick buck.
They hear a hot tip from an uncle or an officemate or a friend and buy the stock.
Sometimes, they earn a lot. When that happens, it feels like theyre winners in the race.
But thats not really true.
Because growing your money isnt a sprint but a marathon.
At the end of the day, all that they earned in the past, they lose in a couple of bad trades.
Nothing is left.
Some Traders Are Devious
Thats not all the bad news.
A few of these traders, like the squirrel in the story, are devious. They fool other traders. He told the rabbit to sleep and he pretended to sleep, too - only to escape and run.
Some bad traders tell their friends to buy a certain hot stock, just so that the price will go up. Once its up, theyll sell, leaving the others to hold an empty bag.
Yes devious squirrels may become rich.
But what kind of wealth is that? In the end they lose all their friends. That doesnt sound very wealthy to me.
Heres the truth.
In the story, the squirrel got lost in the forest and was killed by a bear. Typical traders also get lost in their trading and get killed by a bear market (thats what you call a market that is going down).
And then there is Rabbit...
Rabbit, the Trained Trader
Rabbits are also traders.
But theyre trained traders.
Most of them do nothing else but trade. Trading is their full-time job. For them, trading isnt an art but a science. They follow very strict rules.
Like what rules?
Trained traders dont touch penny stocks with a 10-foot pole. They only buy the stocks of giant companies.
Trained traders dont touch penny stocks with a 10-foot pole. They only buy the stocks of giant companies.
Another rule? Trained traders dont put more than five percent of their money in a specific stock. So if it sinks, at least its only five percent of their money.
Another rule? They never end a trading day with more than 30 percent of their money in the market. They dont like to be surprised. Trained traders are very conservative.
These very strict rules prevent two things: big losses and big gains. Buts thats fine with them.
That doesnt mean rabbits dont do foolish things. Even if theyre trained traders, once in a while, some of them break thr rules. After all, theyre still human beings. The temptation to gamble is still there - and with all the tools at their fingertips - they occasionally break the rules to earn the fast buck.
Are There Really Trained Traders Out There?
Is it possible to become a very good trader? Like the rabbit who actually finishes second in the race?
Yes. Sightings of these very rare creatures have been reported on planet Earth.
I know of a few of them myself.
For example, my stock market mentor has trained 40 plus highly skilled traders. He cherry-picked them from the best schools. He made them go through rigorous training.
My mentor gave his team of traders a modest goal: To earn 5% a month or 60% a year.
Why such a "small" goal? I mean, if these are great traders, shouldnt they be earning more - like 200 percent a year?
Because theyre Rabbits. Not Squirrels. They follow rules - rules that prevent big losses and big gains.
Im sure you know by now that I discourage anyone to become a trader, especially a Squirrel Trader.
But if some of you really want to enjoy the excitement of trading - to be able to brag about your stock market exploits to your friends - then be sure to be a Rabbit Trader.
Some of my friends have what they call "play money." Its 20 percent of their total money in the stock market. Thats what they use to trade. But the 80 percent is what they use for long-term investments, using the Turtle Strategy.
So theyre a crossbreed. Theyre 20 percent Rabbit and 80 percent Turtle.
If you want to do that, go ahead. But I urge you to study about trading seriously. Your play money is still money.
***
In market times like this, many are tempted to be trading.
Just like whats mentioned above, make sure you have the skills and knowledge that will make it work for you.
Have fun investing (or trading with strict rules).
Just like whats mentioned above, make sure you have the skills and knowledge that will make it work for you.
Have fun investing (or trading with strict rules).
Omeng
PS: January 9 is the deadline of super early bird discount to our Practical Money Management + How to Win in Philippine Stock Market Seminar! seminar. Learn
- How You can PROTECT your capital in these times
- When You should take PROFITS
- When You should cut your losses
- How to Hunt BARGAIN stocks
- Know the STOCK PICKS for the year
- and a whole lot more!
PS2: Well have our free newsletter coming. Hang around for future announcements. :)
PS3: For beginners, start reading this book Bo Sanchez My Maid Invests in the Stock Market... and Why you should, too!
