Being a good investor is not easy. It’s incredibly hard work, and it takes a gigantic toll on a person emotionally. Whenever you hear a story about someone making a lot of money in the market, don’t suspend your disbelief. Most of the time, the story is too good to be true.
Back when I was on the floor, we all heard about a guy in one pit that was a miraculously incredible trader. Turns out he had a buzzer in his pocket. One of the largest order fillers in the pit would buzz him when he was buying. I have heard other stories about people making a lot of money, but usually there is a catch. They had a line on some inside information no one else knew about. Or, they controlled the order flow, and thus were able to take cues from it. Or, they had a back room deal with someone somewhere.
There are true stories where people undertook a lot of risk and did make a lot of money. I know more than a handful of people that did it. But, most people that invest for a living don’t make it all at once. They make it over years and years. They don’t have huge winning years, and they don’t have huge losing years. Warren Buffett’s return over time is massive. But, pick any one year out of the bunch and it’s not that much different than the others. It’s the cumulative effect and compounding effect of doing well each year. As an investors business matures, they can take bigger shots-only because they can withstand the downside if it all goes to hell.-wrote Jeff Carter