I need to preface the next few remarks by saying that I really do
like kids. What I have noticed, however, is that in recent years there
seems to be a movement to defer to the judgment of children. This fall,
for example, there is going to be a reality TV series where a bunch of
kids set up their own society with no adult influence. I bet that first
appendectomy will be something to behold. TV ads show kids lecturing to
their parents about investment concerns. In some quarters discipline is
abandoned and scores are not kept in athletic contests because it may
harm a kid's self-esteem. It's only my personal opinion, but I think
this approach is absolute unadulterated nonsense. The question becomes
who is running the show? The kids or the adults? Personally I vote for
the ones with the most life experience, education, and knowledge.
Rarely is that the kid.
The foregoing little tirade was designed to lead into the question
of who is running the show in your own trading? I adhere to the
principle that no one cares as much about my money as I do. No one.
Since that is the case, I also believe that I should run the show in my
own trading. In order to run his own show successfully, a trader must
first educate himself to gain the necessary knowledge and then practice
that knowledge by paper trading. When both the knowledge and skill are
in place, then, I believe, the trader should be in charge of his own trades.
What is a new trader to do while gaining the knowledge and
experience? Though it is more expensive than using an internet broker,
I suggest finding a good broker who is (1) knowledgeable and (2) willing
to work with you. Finding that person may not be too easy. Interview
several and find out who knows and actually trades the strategy or
strategies that interest you. If you just want to first buy and later
sell stock, find out what specific exit strategy the broker advocates.
If you ask the question about exit strategy and the answer is buy and
hold, ask how that worked out buying QQQQ at the top in 2000 (you still
wouldn't be back to even) or if they had any clients in Enron. Once you
establish that the prospective broker is, indeed, knowledgeable, find
out if they will be available throughout the trading day and, if not,
who covers for them. Finally, make sure it is someone with whom you
feel comfortable and with whom you are at ease communicating.
Only when you have become competent on your own should you open an
internet discount brokerage account. When you open that account, you
will pay lower commissions, but you will be on your own in the decision
making department. While that can be a good thing, it is important that
your decisions have a foundation in knowledge and experience.
I believe it is better to avoid complete reliance on any single
broker, financial planner, adviser, or whoever. As I mentioned at the
beginning, no one cares as much about your money as you do. It is
important to you and since your money can make money for you, it seems
like trading or investing is something that is worth the effort. While
professional advice can be extremely valuable, it is you who should make
the final decision. In order to make the final decisions effectively, I
urge you to take the time and make the effort to educate yourself about
trading. Read trading books, attend seminars, avail yourself of
education your brokerage firm offers. On the other hand, you could turn
to your kids or grandkids for trading guidance.
Good Trading!
Bill Kraft
Mr. Kraft's past articles are posted on our website for your review.
