It always amazes me how many stock market investors seem racetrack bettors . Some are very conservative, willing to trade low returns for relative safety . Others put up with both hands , looking for the big score . In this article I want to introduce you to a few characters that I have met . At racetracks Then we'll see what they can learn about investing us.
CONSENSUS CONNIE - Connie is easily recognizable . She is the lady with the table buried in paper. Connie thinks picking horses is too complicated for her to learn all the songs and the like. So she relies on the experts - all of them . Before she sits down , Connie buys all tout sheets . She adds them to the predictions of the newspaper , the handicapper on the circuit and the Daily Racing Form . If they all agree on a horse , Connie head for the windows.
As you would expect , Connie win more than they lose . Too bad the horses she wins with performing the shortest odds (smallest payout ) at the track . It takes Connie to make her occasional losers . Many winners
Connie has to invest the same approach. Before buying or selling something , it controls the money shows on cable TV , as many financial newspapers , newsletters and magazines as she can get her hands on , and then asks her broker. By the time Connie is ready to make a move, they work on old news . They can pick good stocks , but she's so late she misses most of the profits and takes up most of the losses .
ARTIE ACTION - For Artie , who in the game is more important than winning or losing . Artie just has to bet each race. Ask him how he did, and he will recite his list of winners for you . Many days , Artie will tell you that he won $ 200 . Count the cards on his table and you may find it cost him $ 350 to do it . Artie did not care that he lost $ 150 , as long as he has new winners to talk about .
Artie plays the market in the same way . It is in and out, up and down. He will win some and lose others . Talk to him and you think he's a genius . Ask him about losers and that he can not remember any. In fact, Artie thinks he is so good , he thinks to be a day trader . It generates many short-term capital gains and losses , he has a love / hate relationship with his accountant .
EXOTIC Ed - Ed loves the exotic bets . Daily Double, Exactas , trifectas , Pick 6 get all his blood moving.They all promise huge payouts for small stakes. Ed is not stupid , he knows that the odds of winning each bet are pretty slim. He makes up for it by betting many combinations . You can choose Ed from the crowd after each race . He is one busy shuffling through a deck of betting tickets to see if he won .
When Ed decides to invest , he takes the same approach . He buys a bunch of penny stocks , some junk bonds , maybe even take a flyer on an IPO or two . He has a stack of buying and selling fasteners on his desk . The Ed takes an hour to one simple question to answer - " How are you, Ed ?" .
" CYA " CHARLIE - Charlie never lose - a lot. And when he does , it bothers him dead . You see, Charlie is much more interested in _not losing_ than he is to win . In a two- horse race , Charlie will bet on both horses . Win and Place .
When it comes to investing , Charlie is a real belt - and - suspenders kind of guy . FDIC - insured savings account ? Yes , even if only pay 2 % . U.S. Savings Bonds ? Charlie also . Bought them for a walk on the wild side . What Charlie has not yet realized that , in his quest for absolute safety , he takes a big risk of being left behind .
Now that you have met our cast of characters , you see yourself in one or more of them ?
Are you like Connie , who likes the idea of winning, but does not trust himself to take its own decisions Your job is to learn enough to choose an advisor you can trust at least. Load index fund - even that. , Go out and buy a good no missing That way you can use the collective knowledge of the entire market .
Are you like Artie , who likes being able to talk about his latest "hot deal" more than making maoney on " boring" investments? Your job is to make the most of your money in vehicles that earn the returns you need in relative safety . Go ahead , take 10 % , and go have fun .
Are you like Ed , who has so many irons in the fire that he did not know whether he or behind ? Your job is to simplify , to focus on the ones you really understand and have confidence in your investments
Are you like Charlie , so afraid of losing money you lose on a higher return ? Your job is to understand that your trading capital risk ( risk of losing money) for the inflation risk ( risk of loss of purchasing power ) . Find a mix of investments that will generate a higher return and still let you sleep at night .
Whether you choose to take these tasks is entirely up to you . You are responsible for your financial life . Ask yourself a question , and act accordingly.
Want to earn money or would you rather fool around ?
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