Lessons from a veteran SMSF investor


Is anyone else sick to the back teeth of gambling adverts on television? The only good thing about Shaquille O’Neal (7'01") and Mark Wahlberg (5'8") ads is that they take airtime away from the Masked Singer ads. I cannot imagine any program that could be less interesting than the Masked Singer. Finding out that the person who can't sing under the piñata or kebab outfit is someone you’ve never heard of is for another generation.

One of the things that everyone seems to enjoy is gambling. Along with prostitution, it is the most enduring industry in the world. Of course, it doesn’t deliver because luck is doomed as a means of reliable progress, but still, people keep doing it.

When it comes to gambling the inevitable is inevitable and if the government really wanted everyone sucking on the State Pension then they have done the right thing, put large sums of superannuation money in the hands of many unqualified, unsophisticated and impatient individuals (which doesn't include educated Marcus Today Members of course) who live on a diet of adverts that say gambling is smart and clever, that it makes you happy and that the winners are social heroes, all of which is the utter opposite of the truth.

But morals and politics aside, it is far better you open one of those very technologically dazzling online betting accounts and lose $10,000 in a year fulfilling your gambling urge in the open, enjoy it and be honest about it, than you take the same approach to the money that has been painfully collected over decades to buy your groceries and pay your electricity bill when you are a retiree. Because your superannuation money is real cash. It will be paying the bills. You will be withdrawing it from an ATM. Money is time in the end. Making it is buying time and losing it is giving away years. Follow Shaq and Mark and you are simply prolonging your working life.

There is a base level of knowledge you can acquire and should acquire before you go trading and investing, but it does take time to acquire and many people don’t have the time and interest and are impatient to set up their trading account and start hitting the buttons.

One of my tennis colleagues who trades full time and retired at 50 to trade and has been doing it for 20 years successfully (modestly not glamorously), has written a draft of a "book" (not published) about his experiences and the lessons learned as a long time SMSF manager. He says it is about learning a process and you need to start with a clean sheet. How do you do that? Here’s an outline for beginners with thanks to my tennis colleague who has nailed most of this from experience.

  • Buy yourself a comfortable chair, and make sure it’s comfortable, you might be here a while.
  • Do not trust yourself. You do not know what you are doing, don’t pretend you do. You are not a hero you are a risk to your own retirement.
  • Understand that it is not a matter of intelligence it is a matter of learning and your brain needs practice. Give it the time to learn. Travel at your own pace. It’s not a competition.
  • Treat it as a business. Set a target like “I will finish the first year with the same amount of money I started with”.
  • Include all costs in your results. Subscriptions, brokerage, memberships, fees. Minimise costs.
  • If you can, find a mentor like Marcus to tell you what you don’t want to hear. Pay for training if you can find it. And by the way a free seminar from a platform provider is not education, it’s a client acquisition strategy.
  • Interaction is essential to being objective and hearing ideas. Interact with other investors. You can do that online but doing it in person is a good game. You might find some like-minded traders and investors in the AIA and ASA and ATAA.
  • On the way to success expect to fail, fail, fail. Expect failure. Failure is good. Every failure is progress. Whilst you’re starting/failing, do it on paper. When you start succeeding start with $10,000, but only when you think you have a process. Then prove the process a few times before trading with more.
  • Write down your process (I always hate it when someone says that - it's in every trading plan) the steps you will take from the beginning to end of every individual trade. It can be simple to start with. You will add to it every trade.
  • Analyse your result, make corrections to the process that would have improved the result. Learn. Adapt. Develop the process.
  • Be brave enough to do unconventional things. Everyone tells you how it is done but it’s not working for most people, and just maybe the Lord has been waiting for centuries for someone as dumb as you to come along and prove something else was possible and works.
  • Eradicate emotion. You cannot operate the process when you are upset, annoyed, desperate. Be the robot.
  • You do not end up as a good investor, you end up as an effective risk manager. Decades of experience will tell you that its all about risk, identifying risk and understanding the level of risk you are taking. Managing your investments is more important than picking them.
  • You are not alone. Everyone else goes through what you will go through. Everyone else has failed to take an early loss, everyone else sells only to see the price rise immediately, everyone else has sat like a stunned mullet when they are losing money. But you will learn and you get better. Expect those mistakes. Allow yourself to learn.

Nothing comes easy. Expect it to be hard, but if you have an interest, investment and trading can become a fantastic, absorbing and stimulating intellectual pursuit.

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