Implications of “No Fear Investing”

Inspired by this, the current post completes a draft I started to write on July 6, 2014.

In the linked post, I asked the question: how can I possibly manage other people’s money during crazy market environments when I am so fear-stricken and on-edge for myself?

The difficulty of trading without fear is probably why so few succeed as full-time retail traders.

Only a couple ways exist to for me to live without fear and have skin in the game.

First, I have a full-time J-O-B that enables me to be adequately position-sized. The job prevents me from needing trading profits to pay living expenses every month. My level of fear is therefore decreased because even when the market goes sour, I still have my J-O-B to pay the bills.

Second, my level of wealth may afford me to cover living expenses by putting a “small” fraction at risk in the market. Little at risk means no, or little fear.

Malcolm Gladwell writes about why the first case is hard to navigate. Gladwell writes the key to success in any particular field is a matter of practicing the specific task for 10,000 hours. I would have a hard time getting to 10,000 hours as a part-time investor, which means I may never make a whole lot in the markets because I’ll never be invested large. Thank goodness for the J-O-B. This circular reasoning pretty much eliminates the possibility of full-time trading.

The second case is difficult for two reasons. First, I believe this requires [multi-] millionaire status, which only accounts for a small percentage of the population. Most traders aspire to be millionaires but are not and are therefore unable to get away with risking a little. Second, if I were a millionaire then I would have to be content making only enough to cover living expenses. Many people with lots of money aim to make lots more. A business owner may want to buy/run more businesses or locations, for example. Doing this in the financial markets means putting more wealth at risk, which opens the door to fear when the market environment goes ballistic (e.g. March 2020).