≈ Vitamins & Aspirins ≈
“George Soros has a philosophy that I have also adopted: The way to build long-term returns is through preservation of capital and home runs. You can be far more aggressive when you’re making good profits. Many managers, once they’re up 30 or 40 percent, will book their year [i.e., trade very cautiously for the remainder of the year so as not to jeopardize the very good return that has already been realized].”
Stanley Druckenmiller to Jack D. Schwager in “The New Market Wizards: Conversations with America’s Top Traders”. —
Long Word, short Excel. By reading books like Schwager’s and getting to know what’s inside the head of the greatest traders and investors of all time, you can improve your wealth-building process waaaay more than you suppose. Knowledge is exponential and its thorough application can turn things that once were linear into exponential as well.
The problem with most inexperienced traders is that they take Druckenmiller’s approach and turn it upside down: home runs first and then preservation of capital. If they’re working with a POP that is somehow near 50%, and they do not position size it appropriately, they won’t have any capital to preserve.
Wealth-building can be UNcomplicated with the usage of three boxes:
Box 1: Safety net: This is your safeguard against a possible hardship. If you can keep here at least 6 months’ worth of bills, congratulations.
Box 2: Retirement: Here’s where you marry profitability with safety for consistent long-term wealth creation.
Box 3: Capital Growth/Home runs: Here you go for the jugular prioritizing profitability and liquidity over safety taking risks with method and diversification.
This is how you take care of your financial future: As long as there is bamboo, there will be arrows.
Remember, first vitamins, then aspirins.
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Trading Justice Interviews: Jack Schwager – The New Market Wizards
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