. I was so mad at how badly I was doing at the beginning of my investing career. I realized that the worst long-term investor could lose almost everything. The worst investor in my opinion was me. I took about 30 million short positions over the same period. When those positions closed, they were worthless, having failed in their purpose.
I learned something else, but it was the opposite of the advice that Warren Buffett gave to “the best investors” in the Harvard Business Review in 2005buy the big winners instead of the winners. What I got from all my bearish trading would be the opposite of this: You can never be an absolute loser in a stock market. But at the same time, you should never put money down on a good winner, knowing that he’ll get crushed by the market. For all your efforts on “buying stock” at the wrong price, you should think twice every time you buy a stock that pays a higher price later.
When markets closed, I thought my bearish trading had been for naught (it wasn’t). The SPDR S&P 500 (NYSE: SPY) closed 6.42% higher on the closing bell. At a later point, I realized that it had all worked out perfectly and that I didn’t get anything out of my bearish stock strategies. At the time, I didn’t appreciate that I had missed out on a chance to take the profits of my money. That’s called a lottery ticket. To this day, I’ve never owned any of the losers in the S&P 500. The most I’ve ever spent on a stock trading position was around $75K. Since I started to work on my strategy, my losses, which totaled $20,000, never come close to $50K in the three years that I’ve had a trading account. Why? Because most of the losers I’ve traded on have in fact had incredible stocks to trade into and have gotten richer because of it.
The market has a way of turning around your trading mistakes quickly. And it turns around people’s stocks, too. The S&P 500 started off as a bearish investment back in the early 1980s. As the 1990s took hold, the market rallied as it had by the early 2000s. It turned upside-down at the end of 2008, but the market did make a comeback last October by turning around the entire Dow industrials. With every new market rally, people buy up their own stocks. I recently took my first short position of $3,000. During my bull run, I was up around 10%. Today I’m down 2% because of my poor “buy and hold” investing habits. The lesson from my experience is this: If your life revolves around stocks, be sure to get into them! And if you are a trader, don’t be afraid to stop short. All it takes is one small mistake to ruin your whole future trading career. It’s okay if your returns are bad, but stop short at the worst. What do you think? What’s the worst stock to invest in?