Stock trading for a living

[carodoo]

Is anyone doing full-time stock trading as an occupation? I'm interested in doing this but need some guidance on how to set up the business and begin with wisdom. I'm in the process of reading "The Faith-Based Millionaire" by Jay Peroni. I also took some stock trading classes from the Wealth Intelligence Academy affiliated with Rich Dad. I spent way too much money on those classes and haven't applied what I learned. But, now I am trying to re-focus and get started. I would like to one day quit my current full-time job and support myself on investment income. Any advice?

[bob]

carodoo,
I used to have the same aspiration - I was reading a lot of stock investing books about 6-7 years ago and my basic plan was that I figured out how much I needed to acquire to live off the interest. For example, if I wanted a $50K/year income, I would work to get $500K in investments and then (hopefully) make 10% off of them and live off of that each year.

My goals and plans have changed a bit, but in a roundabout way, I still have similar goals. The two main factors are saving and growing income to build up that nest egg that will provide the income and minimizing debts and expenses so that the nest egg doesn't have to be as large. I figure if I have no mortgage debt or any other debt, it really won't require much income to survive.

[pochax]

carodoo,

please think carefully about how to go about this. i actually have yet to meet someone who has been a successful stockpicker over a long-period of time (whereas i have met MANY intelligent people who have lost money trying do to this). i'm sure you can make some money doing this when times are good (in fact, everyone is probably doing well during those times), but how will you manage when times are bad (as evidenced by what just happened?). i'm not saying it can't be done, but by virtue of the fact that so few can do it successfully tells you it cannot be learned easily or it's based on luck. i would not want to bank my future on either of those situations. you are essentially working off the principle of "market timing" when you day-trading. however, if you are not day-trading and planning to buy stocks of well-research companies with good balance sheets and great business plans, you are essentially doing what an active fund manager does. so why not just invest in an active mutual fund? it will be a lot less effort on your part and you can invest your time/skills in other potential money-making opportunities. i'm not trying to tell you not to do this, but please think carefully before you put a lot of hard-earned money on the line.

[pochax]

came across this blog that happened to talk about stock-picking and thought it was appropriate for this thread:
http://www.obliviousinvestor.com/200...e-and-so-am-i/

[bob]

Pochax,
I should say that I agree with you - if it is to be a pursuit, it should be a long-term one - similar to what I mentioned where you could survive off earnings of 6-10% and honestly even doing that would require quite a bit of skill as the last couple years have taught us. But that is much preferred over someone needing to make a 50% return each year in order to buy groceries - that just isn't a good idea...

[stock-trading]

i tihnk in this period you cant trade in stock for a living but you should trade as side business as you might get lucky a few times, but your constant loses can wipe you out sooner or later.

[pochax]

..... you might get lucky a few times, but your constant loses can wipe you out sooner or later.

agree with this part of the statement - which is why stock trading ("day-trading") is tantamount to gambling, IMO.

[KrozFan]

..... you might get lucky a few times, but your constant loses can wipe you out sooner or later.

agree with this part of the statement - which is why stock trading ("day-trading") is tantamount to gambling, IMO.

Good stock trading takes way more work than people think and that's the reason it's so dangerous. People will take only a few minutes to think "Apple is a good company I'll buy some stock" and they hope it goes up. I've heard an hour of research per stock every week. That's no small amount of time. If it's a hobby that you enjoy and only invest in a few companies and don't expect to get rich on it I think stock trading isn't so bad if you invest the right amount of time in research.

[pochax]

Good stock trading takes way more work than people think and that's the reason it's so dangerous. People will take only a few minutes to think "Apple is a good company I'll buy some stock" and they hope it goes up. I've heard an hour of research per stock every week. That's no small amount of time. If it's a hobby that you enjoy and only invest in a few companies and don't expect to get rich on it I think stock trading isn't so bad if you invest the right amount of time in research.

If you don't expect to get rich off of it, then why take the risk? this is why it is tantamount to gambling/playing the lottery. why not diversify your risk in good mutual funds or even index funds? is Apple a good company? guess what - it's in the S&P500 already and you'll be invested in it by being in an index fund. could it go bankrupt in a few years? unlikely, but possible. why put any eggs in that basket? it's not like any of the research you can get on these companies is some sort of special information that everyone else doesn't know already and therefore has already been priced into the market. sure, take <10% of your portfolio and play with stocks if you must get your stock-picking fix/hobby in, but there is a reason why <20-30% of actively managed mutual funds (run by people who research stocks for a living!) can beat their associated index. we can't all be Warren Buffett (who incidentally also got crushed during this recession).

[garyatk]

Yeah! What he said!!!! There is a difference between being an INVESTOR and a GAMBLER. Diversification is the key, and no I'm not suggesting you buy Lotto tickets from many different states either.

Personally, I don't see how a person could work, raise a family, live a life that honors God, and at the same time do all the research that is required to trade individual stocks as an investment, not a gamble.

I believe the only Biblical way to invest is to take small amounts of money, for a long period of time, and invest in a conservative mix of stocks and bonds. Mutual funds are a great way to do just that. Index funds are what I use, and I use the Target Retirement funds from Vanguard. This allows me to structure the investment part of my Christ centered finacial plan in a way that allows me to live my life on auto pilot.

Sure, there will always be bumps in the road, but time should smooth them out. Contentment will help too.

[guy@howto]

Wow.

It's amazing how many views there are regarding investments. I would recommend reading Robert Kyiosaki's book Cashflow. There is a section that he talks about the different levels of investors. The beginner needs a hand holder and may still invest only in CD's or savings acounts. levels progress to mutual funds, etrade and other self directed investing, stocks and bonds, and finally to the type of person who can finds and creates investment opportunities themselves.

Awareness of which level you are at is very important before you begin investing. Learn to increase your financial and investing literacy over time, little by little. Time and energy are absolutely required to reach higher levels of investing without being a gambler, so I see where Gary is coming from. Make sure your investing is prioritized after God, then family. After this, if you have time, energy and can muster up the know-how, becoming wealthy, and potentially making others wealthy with well researched investments, than God Bless.

Blessings,

Guy

[pochax]

Wow.

It's amazing how many views there are regarding investments. I would recommend reading Robert Kyiosaki's book Cashflow. There is a section that he talks about the different levels of investors. The beginner needs a hand holder and may still invest only in CD's or savings acounts. levels progress to mutual funds, etrade and other self directed investing, stocks and bonds, and finally to the type of person who can finds and creates investment opportunities themselves.

Awareness of which level you are at is very important before you begin investing. Learn to increase your financial and investing literacy over time, little by little. Time and energy are absolutely required to reach higher levels of investing without being a gambler, so I see where Gary is coming from. Make sure your investing is prioritized after God, then family. After this, if you have time, energy and can muster up the know-how, becoming wealthy, and potentially making others wealthy with well researched investments, than God Bless.

Blessings,

Guy

Good input Guy...i think it needs to be pointed out that it's not merely just improved financial literacy that gets one ready to "graduate" from fund investing to stocks/bonds (yes, it is necessary but not sufficient). In order to have diversification you actually need to have enough starting capital to work with. high-net-worth individuals may be able to do this: diversify in enough non-correlating individual assets to minimize risk and volatility while still ensuring enough risk allotment to obtain significant gains. However, most individuals do not have this capability/capital. Is 10 stocks enough to be diversified? I doubt it. That is where active/passive mutual fund investing comes into play for the "average joes" like ourselves who are not Donald Trump-rich. we pay a small fee (expense ratios) to obtain the diversification necessary for long-term growth. We are pooling our "pennies" together to create a virtual high-net-worth "investor" to minimize (not negate) the risk of losing it all.

There are those of us who read enough books, watch enough CNBC or Fox Business News, and investor newsletters that we think we have enough "insider" knowledge to pick the stocks we think will do well. All we have done is immersed ourselves in a culture that makes money off of our trades. they could care less what we actually buy and whether we make money in the end. We need to get ourselves out of that sphere of influence and admit we don't have a crystal ball. To use a casino analogy, why bet on one number when we can bet on all of them? if you had enough money at the Roulette table, you could do this. But most of us don't have enough money to do that. thus we think "all info out there says black-6 will be the next roll of the ball on the roulette....i am all-in on black-6". (replace black-6 with any stock du jour). next thing you know, we've lost it all. even if you get lucky once or twice, you are bound to flop. Don't buy into that thinking....it's almost never a good approach. Cheers

[Clarinda Della]

That depends on the trading range of the stock, the funds you have available, the return you require to meet your needs and sustain your trading position, and the quality of your trades, among other things.