Editor’s Note: I’ve always admired Karim Rahemtulla’s grounded, no-nonsense approach to investing. It’s refreshing in this day and age.
Below, he shares some helpful advice for anyone who’s looking to become a better investor.
Karim and the rest of the team at Monument Traders Alliance do a fantastic job delivering on their mission to “restore the lost art of smart speculation.”
To learn more about their latest research and all the products and services they offer, visit their website here.
– James Ogletree, Senior Managing Editor
You’ve got to be able to tell yourself the truth.
Stop making the trade that isn’t yours to make.
That’s the lesson I’ll be giving you today.
Over 30 years ago, I hit a 6x winner on IBM options. The president of Ceres (now part of TD Ameritrade/Schwab) called me personally to congratulate me. I was over the moon. A wunderkind, perhaps, as I had never bought short-term options before.
So I spent the next decade trying to recreate that win. It never happened again.
There are kinds of trading you are naturally good at… and kinds you are not. Pretending otherwise is what bleeds the account.
That’s why I co-founded Monument Traders Alliance with Bryan Bottarelli.
He runs the short-term options side.
The long-term wealth-building work is mine.
Each of us refuses to do what the other is better at.
The Numbers Nobody on TV Wants to Hand You
Most people never get to that moment. They keep trading because they think they are the exception.
They are not. Here’s what the research says.
PiP World ran the largest longitudinal study of retail trading in history: 8 million traders, 295 million trades, 27 years of data. Between 74% and 89% of retail traders lost money over that stretch. The failure rate has not moved since 1998.
A Brazilian study found a 97% loss rate among traders who stuck with day trading for 300 days or more. And most active retail traders underperform the S&P by 6.5 percentage points per year.
Compound that over 20 years, and the gap is the difference between retiring and not retiring.
Most retail accounts end up here.
Why You Hear a Different Story
The people who lost money do not post about it on Twitter. Nobody on CNBC tells you they blew up.
The brother-in-law at the barbecue who turned $5,000 into $50,000 on Nvidia calls is real. So is the brother-in-law who turned $50,000 into $5,000 on the next trade. You just don’t hear from the loser.
Fox Business isn’t going to book the guy who tells you the market is about to crash. They book the AI optimist instead. That sells ads. Doom does not.
So, at no fault of your own, you only ever hear the wins… Then you decide you can do this too.
The G in G.R.I.T. Starts Here
The first letter of my G.R.I.T. wealth-building system stands for Guard Your Wealth.
Most people read that and think hedging, position sizing, dry powder, LEAPS instead of stock. All of that matters.
But the deepest version of Guard Your Wealth is the one nobody wants to talk about.
It’s being honest about the trades that are not in your lane and having the discipline not to make them.
The Test
Pull up your last three years of trades. Compare them to the S&P over the same period.
If you’re not ahead after fees and taxes, you have your answer. You are not the exception. You are the example.
Now the question is what to do about it.
What to Do With the Answer
What I’m asking you to do is simple… but it takes an honest look in the mirror.
Go through your trading account and identify where your biggest wins and losses came from.
Double down on your strengths, and eliminate what’s not working.