Dumb money can be generally described as individual investors who tend to make emotional, unrational decisions about investing their money. Dumb money can be responsible for buying stocks without conducting proper due diligence, holding on to a loosing investment and wishing it would rebound and make a profit, and just plain don’t know what to do with their money, but jump in because they think they know.
I was raised with the notion that in order for you to make it in life, you have to work hard, save money, and hold on to investments until you retire. Needless to say, I just found out that this is not the way to make it in life. I’ll go ahead and discuss how I came to this new found thought…
After coming into a substantial lump sum of money through my occupation, I decided to get on the right track of being financially stable. I paid off my debt, fixed my credit, and bought rental property. Next on my list was to start my retirement savings. I had big plans of maxing out a Roth IRA, obtaining CDs, and purchasing mutual funds and stocks for the long haul.
From December of ‘07 to August of ‘08 a measly $4500 of long term investments showed a quick loss of close to $1000. Around this time, with the housing and credit crisis, a friend of mine introduced me to the idea of day trading and how long term investments weren’t meant for me.
After reading a few books and watching a lot of youtube videos of day traders, I decided to take a plunge into day/swing trading. Between Oct. 24-29, I accumulated close to 7000 shares of Fannie Mae (FNM) on the thought that I would make money. And I did, selling 6000 and making close to $1000, not bad for my first trade (money wise, not trading wise).
Thinking I knew what I was doing, I decided to register for an account on Coverstor.com to show people how I traded. It’s a portfolio tracking website that compares you to the market and other investors showing all of your trades and P&Ls. Since my inception on Nov. 1, I am showing a performance of -33%.
Now that brings me to this blog. In books and blogs alike, not many day traders harp on the losses. Well, I made this site so that you can come here and see how an aspiring day trader will loose.
But the question is, will I be able to step over to a successful career as a private day trader with all the dreams of wealth by my side, or will I just give all of my savings away, along with all of the other dumb money out there?
