From The Reformed Broker:
Could you walk into Caesar's Palace, belly up to the first open blackjack table, hit on 19, and win the hand? Yes, of course you could. But would you? On a regular basis? No, you would not. You'd either go broke very quickly or your fellow players would kick the leg out from under your stool.
I've witnessed every single mistake an investor could make since I came into this game and I've made most of them myself. The mistakes where it's very obvious that the odds are against you before you even begin are called the Money-Losers.
I'm going to over-generalize here in an effort to help MOST investors (not the elite) and you're either going to nod your head in knowing agreement or you're going to be an industry participant and yell at me. It doesn't matter, I know I'm right, and if you had no bias or "dog in this fight," then you would have to admit that I'm right also.
I've made a list of the money-losers below, if I've missed any feel free to tell me in the comments section....
1. Buying out-of-the-money naked options: Have fun, play the game, be merry, but just know that what you are doing is gambling, not investing. And unlike with a losing equity position (during which your holding period can be unlimited), with naked options the clock is working against you. Ninety percent of the time you will lose whatever principle you put into the premiums, most of these expire worthless.
Naked options - that's a money-loser!
2. Confusing your politics with your investing...
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