This month: Marcus Padley

Education seminars for investors are a minefield, so look carefully before forking out thousands of dollars

Iasked my colleagues a question this week. “How do you lose $10,000 in the stockmarket?” The more sensible replies included:

• Try to make $5000.

• Trade forex from the comfort of your own kitchen.

• Trade CFDs without understanding leverage.

• Trade a lot.

• Trade with confidence.

• Trade intraday.

• Trade on “inside information”.

• Buy stocks that fall.

• Back your brother-in-law’s tip. • Set and forget (emphasis on forget).

• Buy a stock that is up 20% on the day.

• Buy a stock that is down 20% on the day.

• Don’t take any losses.

• Don’t take any profits.

• Buy GameStop. And finally, this old chestnut: go on a course called “Learn how to trade and make money like a pro!” An instant way to lose a few grand. Let’s focus on that.

There are a lot of ways to receive a share trading education these days, so many places to put in your credit card number and receive instant sharemarket gratification. The bar for successful stockmarket teachers, it seems, is a lot lower than the bar for successful stockmarket traders and for the uninitiated it is a minefield of heroes and charlatans.

So, to guide you on your way I have put together a list of things to consider before forking out for guaranteed trading success:

• Trading success cannot be “delivered”, packaged, achieved with a credit card or achieved in quick time. You may think you are buying a solution, but you are not. You are buying an introduction to a lot of work.

• Without “purpose” you will not last as a trader. It is like joining a gym. You’ll likely try it for a month and stop. Enter the trading marathon without enthusiasm, interest, passion and a purpose, and you will join the many ranks of people who have wasted their money and time. You need purpose and that means having a very specific goal to inspire you. Without that can you seriously make trading a part of your life?

• You need risk capital. To make that clear, you need capital you can risk. Come to the trading game out of financial necessity, with capital you can’t afford to risk, and your “loss aversion” will doom you to failure.

• Most people come into trading with a get-rich-quick expectation. It’s a guaranteed way to get poor quick. Trading is often about exploiting a small, small edge over a long, long period. That takes maturity, discipline, method and patience. Do you have that?

• Some courses have a hidden agenda. Selling you a software package, selling you a data feed, upselling you to another product, snagging you as a customer of their trading platform (CFD providers, guilty). This alternative purpose is why there are so many “free” seminars. They’re a forum for hot leads and that’s how they see you.

• The more you pay does not mean the more you get. There is no standard pricing. Some prices reflect the strength of the sales pitch, not the quality of the product. Check what you get.

• The more people you put in a room, the longer it takes. Many courses take an extraordinarily long time to cover basic principles that could be read in a book in half the time.

• There is a huge difference between “learning to trade” and “technical analysis”. Many courses sell technical analysis, which is not necessarily what you need as an introduction. You need to learn to trade. It’s very different.

Finally, here are a few simple questions to ask yourself before you sign up for anything:

• What am I buying? Is it mentoring with a human or am I just buying 20 PDFs in the form of a book dressed up as a course?

• Can I find the “cancel your subscription” button. Some very well-known educators don’t have one. Check first. They say you can cancel, but can you?

• What will I get? Anything physical, anything valuable, anything personal, anything more than words?

• What is their motive? To get me trading, to get me as a subscriber to get money, or to actually educate me?

• Who are the people behind it? I need names and faces and addresses in Australia. Not an unlicensed, faceless entity with an address in New York.

• Could I read it in a book? If so, read the book. You don’t have to pay to have someone read the book for you.

• Am I really interested? Do I really have the time? Do I have any passion? Or am I just trying to solve my financial ambitions by spending money on my credit card?

• Do I really want to be a trader all day, every day? Because if you want to succeed at it, that’s what it will take.

Marcus Padley is the author of the daily stockmarket newsletter Marcus Today. For a free trial of the Marcus Today newsletter, go to marcustoday.com.au