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Here are my final thoughts on this topic. I try to make this post applicable to most people but minimise the specific concerns peculiar to me. Enough of your time is spent replying about it. I hope this post on the topic "full-time investor" does justice to the folks here who have given their time to reply.
While this post talks about the psychological aspects of being a full-time investor, the most important aspects are still the financial. I believe before one embarks on this risky journey, he must have enough financial resources on hand to make sure his family finances are protected should he fail to do perform for at least the duration of a bear market(~3 years). I use this duration as a proxy for Mr Market to recognize the value of his stock picks. Because much of investment success is dependent on having the right psychology, this financial buffer also acts as a psychological buffer. The speculator who speculates with scared money operates at a severe disadvantage over his competitors who operates objectively.
The financial buffer should consist of a mixture of cash, fixed income and dividends. If you are a full-time speculator, I would recommend that the weightage of cash and fixed income to be higher than dividends to protect your psychology during a financial crisis. During a financial crisis, equities can drop >40%. When that happens, relying too much on dividends from equities will damage your psychology. In the Singapore context, because of the poor access to fixed income for retail investors, several investors have replaced fixed income with REITs. Be careful. REITs behave more like equities than fixed income during a financial crisis. REITs can also drop >40% in a financial crisis. Check out what happened during 2008.
I do not agree with Big Toe about going in 100% with no "what ifs". There shoul be a back-up plan if the main plan fails. And if the back-up plan fails as well, then the estimated damage from the fall-out should be within tolerable limits. I don't believe in burning bridges and going 100% in with no what-ifs. On this note, I think full-time speculators should create an alternative stable income by using their other skills and hobbies. They can become free-lancers or consultants. These are low capital business activities that continue to keep the full-time speculators' other skills intact. I believe the greatest asset is still human capital. The skills in your head that no hostile enemy can take away by force. Don't lose it after becoming a full-time speculator. Some full-time speculators create a side income by teaching people how to speculate. On this, the skepticism expressed on this forum is absolutely healthy. I would personally recommend that retail investors learn from books and free internet resources than attend expensive courses which charges thousands for a few days. It is simply not value for money.
For someone to become a full-time speculator, the most important human capital is his investing skill. This can be assessed objectively assuming he has a track record long enough to cover at least 1 (preferably 2) boom-bust business cycle. During the bust period, how much did he lose compared to the benchmark? This is a measure of his risk management skills which is vital given that the full-time speculator no longer has the stable cashflow of a salary worker. Can his past investment gains cover his past and estimated projected expenses throughout the business cycle with a margin of safety? If not, he had better stay patient and build up his skills and financial buffer before taking the plunge. Does he like the job of a speculator or is he thinking of becoming one because he hates his current job? (Would-be speculators thinking of going full-time had better be honest with themselves on this point). Can he deal with the loneliness? Introverts have an advantage here. Does he possess the intellectual honesty to admit he is wrong, see things objectively as they are and not be clouded by personal biases? A high-IQ person can actually be disadvantaged because it is easy to self-rationalize and come out with good reasons to support his biased position.
Finally, for those who have reservations over how society would view them when they become full-time speculators, it is a personal problem that they have to sort out themselves first. Not resolving it will result in self-sabotage in their journey as full-time speculators even if they meet the above criteria that I mention above.
I would like to end with this final note by a kind soul who wrote this to me;
“It is better to go wrong in freedom,....then to go right in chains”
PS: I apologize to fellow investors if I have given offence with some opinions held in my initial post.
While this post talks about the psychological aspects of being a full-time investor, the most important aspects are still the financial. I believe before one embarks on this risky journey, he must have enough financial resources on hand to make sure his family finances are protected should he fail to do perform for at least the duration of a bear market(~3 years). I use this duration as a proxy for Mr Market to recognize the value of his stock picks. Because much of investment success is dependent on having the right psychology, this financial buffer also acts as a psychological buffer. The speculator who speculates with scared money operates at a severe disadvantage over his competitors who operates objectively.
The financial buffer should consist of a mixture of cash, fixed income and dividends. If you are a full-time speculator, I would recommend that the weightage of cash and fixed income to be higher than dividends to protect your psychology during a financial crisis. During a financial crisis, equities can drop >40%. When that happens, relying too much on dividends from equities will damage your psychology. In the Singapore context, because of the poor access to fixed income for retail investors, several investors have replaced fixed income with REITs. Be careful. REITs behave more like equities than fixed income during a financial crisis. REITs can also drop >40% in a financial crisis. Check out what happened during 2008.
I do not agree with Big Toe about going in 100% with no "what ifs". There shoul be a back-up plan if the main plan fails. And if the back-up plan fails as well, then the estimated damage from the fall-out should be within tolerable limits. I don't believe in burning bridges and going 100% in with no what-ifs. On this note, I think full-time speculators should create an alternative stable income by using their other skills and hobbies. They can become free-lancers or consultants. These are low capital business activities that continue to keep the full-time speculators' other skills intact. I believe the greatest asset is still human capital. The skills in your head that no hostile enemy can take away by force. Don't lose it after becoming a full-time speculator. Some full-time speculators create a side income by teaching people how to speculate. On this, the skepticism expressed on this forum is absolutely healthy. I would personally recommend that retail investors learn from books and free internet resources than attend expensive courses which charges thousands for a few days. It is simply not value for money.
For someone to become a full-time speculator, the most important human capital is his investing skill. This can be assessed objectively assuming he has a track record long enough to cover at least 1 (preferably 2) boom-bust business cycle. During the bust period, how much did he lose compared to the benchmark? This is a measure of his risk management skills which is vital given that the full-time speculator no longer has the stable cashflow of a salary worker. Can his past investment gains cover his past and estimated projected expenses throughout the business cycle with a margin of safety? If not, he had better stay patient and build up his skills and financial buffer before taking the plunge. Does he like the job of a speculator or is he thinking of becoming one because he hates his current job? (Would-be speculators thinking of going full-time had better be honest with themselves on this point). Can he deal with the loneliness? Introverts have an advantage here. Does he possess the intellectual honesty to admit he is wrong, see things objectively as they are and not be clouded by personal biases? A high-IQ person can actually be disadvantaged because it is easy to self-rationalize and come out with good reasons to support his biased position.
Finally, for those who have reservations over how society would view them when they become full-time speculators, it is a personal problem that they have to sort out themselves first. Not resolving it will result in self-sabotage in their journey as full-time speculators even if they meet the above criteria that I mention above.
I would like to end with this final note by a kind soul who wrote this to me;
“It is better to go wrong in freedom,....then to go right in chains”
PS: I apologize to fellow investors if I have given offence with some opinions held in my initial post.