Below are eight questions. If you answer “yes” to a question, you can proceed to the next. If you answer “no,” you should consider the answer (a.) for each.
1. Are you prepared to have a medium term or greater outlook (1 year++)?
a. High yield savings
2. Can you sleep at night with any risk?
a. Bonds, high yield savings, CD's.
3. Do you have the discipline to stick to an investment mix between high and low risk investments?
a. VTI or other Index Funds.
4. Are you able to manage your emotions?
a. VTI or other Index Funds
5. Are you well informed on various definitions, ratios, and strategies? Do you understand Market Cap, dilution, buybacks, dividends, etc?
a. VTI or other Index Funds
6. Are you able to decipher between constant news to discern correctly the direction a stock will go in relation to news? Are you able to understand which news is irrelevant?
a. VTI or other Index Funds
7. Are you able to predict the direction of a stock and the broader market generally?
a. VTI or other Index Funds with individual stocks up to your individual risk appetite. Most likely under 20% in individual stocks.
8. Are you able to predict with high accuracy when a stock will move, how fast it will move, and whether the premium is priced in?
a. You may consider buying options, but most likely still not a good idea.
Only one out of 10,000 or more retail traders should even consider options as part of their strategy. This is an attempt to articulate how rarely someone is truly able to use options effectively. Most who use options would have better odds of profit at a roulette table.
