Trading Wins/Losses. Learn! Increase wins! Anyone trading will experience both wins AND losses, ANYONE! That is true of the most experienced professional as well as the greenest novice on the globe. Even the snake oil vendors who promise trading success “worth $150,000 with a 30 minute effort one night a week,” admit something less than 100% success from their system. We will have losses, I will have losses, you will have losses! Additionally, we never know where or when they will show up. That, dear friends, is the reality of trading wins/losses in the market place. Let’s use, to our advantage, tools available to win more than we lose.
A great majority of investors find comfort with their money stashed away in the market. Why has the market been so popular for so long? It has returned an average of about 10% each year for over 80 years. What a great place to just put your money and forget about it. The market has been, through the years, the default repository for billions of dollars in mutual, retirement, insurance fund monies, etc., etc. But what about the losses? The operative word in the 10% reference above is “average.”
Because of the upward growth of the U.S. economy over these years, the average of the trading and investment wins and losses returned the +10% figure. In the mutual fund arena, each fund invests in dozens, even hundreds of different companies, providing diversification. Sure, there have been losses, but always more wins than losses! This is how the investor can sleep at night, leaving the managers of their fund to shift dollars around to maintain the positive averages.
Now, let’s do a little exercise. Suppose as a young high school graduate we started our first job and stashed $20 away every week. Let’s see, after one year (50 weeks, for the sake of argument) we would have $1,000. If we did that for 40 years, the amount would increase to $40,000. But that would be the result if we put the money in a sock. What would happen if we put that money to work those years, drawing interest? Figure 1 shows the result, for different return rates. Not a bad retirement plan!