Investments you should not know

Some forms of trading out there may drive you mad, and your portfolio either sky high or to zero.

Short selling means you will buy a stock and “lend” it to some other fellow. You are sure the stock is overvalued and will drop soon, so you lend that stock to somebody else and wait to buy the stock back at a lower price.

Options are a gamble on whether a stock price will go up or down in a given time. They have names like “190621C00195000-AAPL-CALL”, which means you buy the right (call) to buy a share of apple (aapl) for $195.00 ($195.00 strike price) which will be available until Jun 21 2019. That has a “bid” and “ask” price on the purchase, as well has high fees.

It is more expensive than just buying the stock,  you won’t get dividends, and the option is worthless if the price doesn’t go up.

There are other tricks you can pull: buying companies out of bankruptcy, flash trading, cryptocurrency speculation, and leveraged trading. Those may be covered later.

Investing in the stock market itself is a positive sum game, so long as companies are returning profits. Investing in government bonds are positive sum as well, as long as the government is making tax revenues and the bonds are put into some project good to increase those revenues.

Short selling, options, and other tricks are negative sum games. You are guaranteed to lose money on average, because you have to pay fees and then hope somebody wants to buy the option or short sale.

In order to make money considering the fees, you’d have to have a huge amount of money and risk it all, at least $100,000. That’s most people’s entire retirement, or a good chunk of it.

Worst of all, it is gambling, that money is not helping a company grow or a community prosper. A stock or a bond… gives money to a company that requested it to grow with. A trade like this, just puts money into a betting pool until it is over. That’s why it is a negative sum game. Please consider this when investing.

My purpose in investing is to make you money. The best way to do so in the long run, in a repeatable and tested way, is to do so by also helping others.

Want a scientifically proven algorithm that finds the best investments?

Leave a Reply