Good financial advisers, teachers, and mentors will talk to the young investor about many things over the course of an education, many of which might seem only tangentially related to the topic at hand, namely, earning money. Money management is one of those seemingly boring to the bone topics. Would it still be so boring if we told you it was the key ingredient standing between you and one million dollars?
Now you’re paying attention! At least for a little while. Even if you plan to earn your first million by wining the next edition of Survivor, you’re going to need top notch money management skills to make it last a while because a million bucks ain’t much when you take the long view. Think of it like this. One million dollars divided over the course of a 40 year working career works out to $25,000 a year, an amount that won’t have you eating caviar at the Fontainebleau in Miami Beach.
Knowing how to manage your money for growth is
critical to long term success and the kind of wealth you’ve REALLY been dreaming about. Let’s steer this towards investing and say you have that million dollars in your pocket after outwitting, outplaying, and outlasting 17 other castaways. You take the money from your pocket and open a trading account. You’ve been studying a bit and have a good idea how to make a killing as a Wall Street daytrader.
Here’s something you might have overlooked. No trader is right 100% of the time. Only the market itself is never wrong because it does whatever it darn well likes and no one can do a thing about it. Do you have a clue as to how much of your cool million you should risk on a single trade? How about in total open positions? If you say 50 percent, you might as well turn make a reservation on skid row right now because that’s where you’re headed. Different experts have different ideas but the ballpark you should be thinking is NEVER risk more than 1 percent of your account on a single trade or put more than 5 percent of trading capital at risk at any one time.
That’s what money management is about and that’s what will keep you alive to trade another day.
The Young Wealth Show
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