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Friday, November 2, 2007

Get rich overnight? I don't think so . . . but what about slowly?

I had the brother-in-law over the other night for dinner. And what I call that conversation arose. We started off talking about Railroad Tycoon (the video game). The "stocks" that you can play with in that game led to a discussion about infomercials and get rich quick schemes. Which of course led to what I do for a living. What is that conversation? Discussing what we all see promised on various infomercials.

The promise of making a million dollars from investing and trading within a matter of weeks. Because it's all so easy.

Which . . . of course, is a crock. This is what I do for a living, and I'm telling you . . . it's a crock. To make those sort of returns in that length of time, you're not investing. You're not trading. You're gambling. I get tons of that crap in the mail everyday (start investing for your living, and your junk mail increases almost exponentially). Those claims are so easy to pick apart, it's almost stupid. And trading for a living isn't easy. It's work. Hard work that requires a ton of emotional discipline. Research these days is infinitely easier than it used to be (I used to chart by hand), but it's still a lot of work.

However, the more forums I travel to, the more I find people who want to learn about the markets. They have a keen desire to learn. They understand that it will be work, but they have no idea where to begin. They understand that most of what you see isn't worth hot air it's comprised of. They want to better their lives, but quite frankly, they are in a position where they don't have a lot of money to start out. I see more and more posts of "I only have $800.00, how do I get started?" My god, the Zecco forums were replete with those sort of posts.

So, the question came up. Can it be done? Can you take $500 to a million dollars like you see in those infomercials? What's the real deal? Realistically, throwing all that hype garbage out the window? Can it be done? I always respond the same way.

Absolutely. But there is a catch. The catch?

How soon you want it? Time. I mean, lets face it, any dummy could do it, if given 80 years. Stick it in the highest yielding interest account and forget about it. Right?

But can it be done? Realistically? I finally said yes, but it would have to follow a very strict plan. Because if anyone knows anything about my trading and investing? It's that I rail on and on and on about money management. And part of money management? Is being adequately funded. For a stock trader, you need at least $30,000.00 to start off nicely. You have to have room to maneuver in this business. And with only $500.00 – you don’t have a lot of wiggle room. But then again, not to blow my own horn? But I have a great deal of knowledge when it comes to investing. I manage risk very well. And to be frank, I know what I'm doing. So I was thinking about it. And thinking about it. And I finally thought? Why not find out?

So I decided, I'm going to run a real experiment. Take $500.00 of my real money, and trade it in separate, but very real accounts, with real trades and investments to see if it can be done, and see how quickly it can be done. And I'm going to do it publicly. I am going to open up sub-accounts, and trade $500.00. I'm a stock investor and trader, as well as someone who trades Futures Options, so that's the route I'll be going.

I've already opened the sub-accounts necessary at Sharebuilder and at Xpresstrade, and they are in the process of being funded. The Xpresstrade account is just a regular sub-account, and the Sharebuilder account is a regular "Individual Account" Once that is done here in the next week, I'll post screenshots of the sub-accounts. These are the rules that I'm going to abide by:

1) The initial investment is $500.00, to be split amongst the accounts.

2) Every month, I can contribute $100.00, that can be split amongst the accounts however I choose. In other words, I can send $30.00 to Sharebuilder, $70.00 to Xpresstrade; or $100.00 to Xpresstrade, and nothing to Sharebuilder, etc.

3) I'll be using regular investment and trade vehicles. Bonds. Stocks. ETF's. Futures Options.

* * *

This is not a recommendation of how to spend $500.00. The losses in trading can be very real, and depending on the investment vehicle, can exceed your initial investment. I am not a licensed trading advisor, or financial planner. But I do have 12 years of experience in trading and investing in these markets. The above experiment will be run for my own education, and education of other traders.

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