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Lost Money Spread Betting?

Spread betting is very addictive and hard to find that adrenaline burst anywhere else but we need to resist the urge until the markets settle a bit.

I just got news one of my trading friends (he has no name here) has crashed and burned. He appears to have lost the lot. I knew something was wrong but didn’t suspect that. He’s someone I like enormously but from whom I have never taken any ideas because I could never quite work out what it was he did. He also seemed to be making too much money. I don’t know what happened but I suspect he just got it wrong too many times…let’s face it, good money management will keep you in the game for longer but it can’t keep you in the game forever. I also suspect he didn’t have the flexibility to adapt to the change in the market. He started at a time the market was falling….and then found it difficult to make money when the market turned for the better. Anyway, a sad day.


85% losers keeps cropping up. Day traders, Investors, Fund Managers, Spreadbetters, all statistics show that around 85% lose. O’Shaughnessy showed the same results as Comley but quite a few years earlier. Many academic studies have shown the same results.

A truly appalling statistic from Comley’s book is that between 1998 and 2010, while investors made a total of $9 billion out of listed hedge funds, the fund managers themselves pocketed a massive $440 billion – comprising 98% of all the profits made. It’s this culture of corporate looting in banking, stockbroking and pretty much everything that’s made it so hard for us small investors…

The vast number of retail investors who were hammered in the dot-com bubble, when just about everyone wanted to take part in stock ownership, then went on to miss out at the best time to be buying stocks (2002/2003), by which time they’d had their fingers burned and instead pulled money out.

Similar with buyers of real estate or shares again in 2007 – the party was over by the time the average retail investor wanted a piece of the action, and in 2009? You couldn’t give the same companies away, regardless of fundamentals, and yet the burned private investors were mostly pulling their money away.

The pattern goes back for about a hundred years. Each time you can be sure that the S&P will lose about half of its value, a lot of people will pack in investing for good, and a whole lot more will come back a few years later. It rarely ever happens in the same way, the patterns for predicting it are rarely the same. All we can do is keep this in our minds, try and manage our risk, and expect our favourite companies to be on a “bargain sale” once or twice a decade. I wouldn’t be too fearful of the 85% rule so long as you get why that figure is so high – most people want to buy at the worst time and then sell at the worst time!

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