Investing for Indepedant wealth

So Sorry, I should really work on my sarcasm skills on-line. But to the point…
It doesn’t matter a hill of beans what is made in one month if that can’t be repeated. Why, because you don’t know the results ahead of time. Unless you have inside knowledge, which makes it illegal to trade, then no one can reliably predict the up/down movements of stocks over the short term. Tell me what your average return after expenses and taxes are over 5,10,15 years. IMHO that’s what matters. But hey, the belief that short-term changes can be reliably predicted keeps billions of dollars flowing so brokers can get rich.

[TaoJones]

Originally Posted by Jones5962

. . . It doesn’t matter a hill of beans what is made in one month if that can’t be repeated. Why, because you don’t know the results ahead of time. Unless you have inside knowledge, which makes it illegal to trade, then no one can reliably predict the up/down movements of stocks over the short term. . .

While my use of the word "conservative" as applied to the covered call trading strategy is true, it is only true in a relative sense. There are a multitude of Options Trading strategies, and, among these, writing covered calls lies at the tamer end of the spectrum.

Should everyone with an interest in trading pursue it? Certainly not!

And, as in all speculative pursuits, one never knows ". . . the results ahead of time." One can, however, uncover situations where the odds of success are considerably improved, and with the various trading software available today, finding these situations is much less difficult. If/when a person finds a range-bound equity, covered call writing can be a way to generate consistent premium (income). Is success guaranteed? No, of course not.

Every human pursuit, in seems to me, is the result of contemplation of the risk:reward ratio. Where to go to college, who to marry, whether to have children, where to live, what career to pursue, whether to buy a boat, a car, a house, a . . . well, you get the idea. The calculation occurs even if a person is unaware of it, and it is triggered by the survival instinct.

It definitely occurs in trading. A trader is constantly weighing perceived risk against potential reward. If you want certainty, buy government bonds. There, the return on your capital investment is guaranteed, and you have very little reason to doubt the return of your capital.

What does the removal of risk get you? Pathetic capital gains that are less than the real rate of inflation, and a tax obligation to boot!

Eventual death is the only guarantee I'm aware of. The only other one that comes close is that fiat paper money - legal tender for legal liabilities by government edict - will ultimately return to its intrinsic value, which is zero!

In the entire history of our planet, the number of fiat currencies that avoided this fate, so far, is also zero. As Winston Churchill put it, "All previous attempts to base money on intangibles such as credit or government edict or fiat have ended in inflationary panic or disaster."

TaoJones

[Islandmike]

TaoJones,

Very well said...and so very true.