https://www.linkedin.com/in/jdstein/ (David Stein) helps individuals to become more confident investors via audio, video, and books. For the past five years, he has hosted the weekly personal finance podcast, Money For the Rest of Us. The show has more than 250 episodes and more than 10 million downloads. David’s upcoming book, Money For the Rest of Us: 10 Questions to Master Successful Investing, will be published by McGraw-Hill in October 2019.
Previously, David was chief investment strategist and chief portfolio strategist at https://www.feg.com/ (Fund Evaluation Group) a US$70 billion institutional investment advisory firm, where he co-headed the 21-person research group. David’s former institutional clients include https://www.tamus.edu/ (The Texas A&M University System), the https://www.pugetsound.edu/ (University of Puget Sound), and the https://www.sierraclubfoundation.org/ (Sierra Club Foundation). He lives in Phoenix and Idaho.
“And so I started trading and quickly found that it’s not that easy.”
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Worst investment ever David’s worst investment occurred during the transition period after he had quit the investment business and was trying to decide what he wanted to do in “retirement”. He had set up then shut down a few websites and had reached the point where he thought that even though he had retired, he could be a trader. He was experienced. At his prior firm, he was joint chief of investment researchers and money managers and trading was just part of what he and his team did, which included hedge funds and private equity. As his group’s head strategist, he would go to New York once a year and meet hedge fund managers, because he liked to see what they were thinking, to learn from their successes and mistakes and to see their take on the world.
Visit to hedge fund piques interest in trading About a year or before he retired, he went to a commodities trading hedge housed in a Connecticut mansion. He met the founder and went to the trading floor. It grabbed his attention immediately. The floor was separated, with quantitative traders on one side and discretionary traders on the other. He said you could tell where the quants sat and where the discretionary traders say because the latter were messier and their desks less organized, but it looked like a fun and cool place to work. Then once he saw them at their desks trading, David got the idea that trading wasn’t that hard as he had had 15 years of investment experience.
Trading turns out to be a lot harder than he had thought So a year after he quit his job, he decided to be a trader in commodity futures, currencies, options just to see how it would go. He knew enough to know that he would not be risking all his money into it, because he had known many people who had suffered huge losses in trading commodities. But he thought with his experience that he knew enough. He had economic models to use, and other investing tools, so he started trading and quite quickly found that it was not nearly as easy as he had suspected it would be. Some of the trades went well, and some didn’t. The problem he found mainly with commodities and foreign exchange (Forex), gold, silver, and other precious metals was the volatility. They trade almost 24 hours a day but it is extremely volatile, and there is no rhyme nor reason for that the volatility.
Decides to stop trading but forgets to close one trade So he realized that there were things happening that were not at all like the investing he was used to. He had done fine, if fine is losing a little bit of money, but nevertheless he decided t