We have written previously about how to make money in a falling market. It takes special talent, and yes, we have done it. It is possible.
Losing money in a rising market also takes special talent; it is almost impossible. I recently did it nevertheless, but I am in good company. Billionaire Eric Sprott, for example.
The upside of my losses is that I incurred them in my “fun” portfolio. Right now, it is not much fun, but the pain is bearable since it is a small percentage of my overall investments. No one needs a “fun” portfolio. If you have one, make sure that it is small relative to your core portfolio.
The upside for Sprott’s losses, from his perspective, is that he incurred them for other people (while personally becoming a billionaire thanks to the size of his assets under management).
For details about Sprott’s clients’ losses, go here.
For details about my losses, well, here we are. I ignored habit number three. Namely, instead of buying a US market index exchange-traded fund, I bought a single stock – Novavax (NVAX) in order to sell covered calls on it. The premiums were exciting! (Don’t pick stocks is good advice.) The risk of writing (selling) covered calls comes from the underlying security entirely. NVAX tanked to a much greater extent than the premium income that I got from writing covered calls on it.
You too can lose money in a rising market if you do what I sometimes do. Just make sure that it is not in your core portfolio or, if you manage money for others (as some of our members do) make sure that others incur the losses. You’re not in a popularity contest.
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