Transcription
You can think you're making all the right moves with your money, but still might not be positioned to achieve maximum profits. I went from being a floor trader to founding two industry-changing fintech companies, making millions of trades along the way, just for myself. And what I learned is that investing profitably isn't about picking winners. It's about consistently following the same rules and same mechanics over time. And in this video, I'm going to share the five rules I learned for how to invest properly and profitably no matter what the market's doing.
Number one, take control. This is probably the most important rule, taking control of your investing. So many people default to portfolio advisors, raas, the musings of gurus. Don't. Not only are you not in control of your money, you're not learning anything. You have no agency in your winners and/or losers. Markets can be totally random. And we have no control as investors. We have no control over any of that kind of stuff. We have no control over outlier events. But what we can control, okay, is the size of our investments, when we make the investments, what strategy we use, and what underlying or what opportunity we're seeking. Most successful investors. They control their opening of their trade and they recognize that's where all the strength is in the decision-making. Taking control of your investments or taking control of your decisions is the most important thing. So whether you're an active trader or a passive investor, take control.
Number two, view your risk in volatility terms. Most people think about risk the wrong way. They look at how much money they have in something and assume that tells them how much risk they're taking. But the real measure of risk is volatility. How much that asset moves up or down. A $10,000 position in a stock that swings 30% a day is far more risky than a $10,000 position in something that's more stable and predictable. Once you start measuring your risk by volatility instead of dollar amounts, you'll start making much smarter decisions about what you own and how much of it you should hold. One of the things about volatility is it should be called an opportunity index, not a fear index. If you want the lowest basis and the most opportunity, you're going to want to take advantage of the highest volatility in different underlyings. It really doesn't matter what it is. So, one of the things that we like to do is we like to assess opportunity in mathematical terms based on volatility. It's something that we've been doing for the last almost 40 years. And I think it's one of the most valuable, it's called indicators in all of investing. It's also a contrarian play because most people look at volatility and they get nervous. Very few people look at volatility and they think of it as opportunity. We want you to understand your investments and your trades and your portfolio in terms of the math around volatility. It's just such a valuable asset.
Number three, improve your basis. Your basis is simply the price you paid for something. The lower your basis, the less risk you're taking and the more potential profit you stand to make. And what it does for you is it improves your probability of success. If you think of any long position, any long underlying, just buying anything, the odds of it being successful or with positive drift are probably 53/47. If you sell something against your long, you're giving up a little bit of upside 'cause you're capping your upside, but you're also improving your probability of profit from 53 to somewhere between 65 and 68%. So, when you think of it in probabilistic terms and you think about it mathematically, most people would rather have a 65 to 68% probability of profit than a 53% probability of profit with unlimited upside. One of the many exciting features that we built into the new Lost Dog software, it optimizes your portfolio. And it optimizes your portfolio by helping you improve your basis. Essentially, it uses Agentic AI to give you suggestions on how to improve your basis by writing calls against a long position.
Number four, remove less liquid stocks. Liquidity simply means how quickly and easily you can sell something. If you own stocks or assets that are hard to sell, you're taking on additional hidden risk that most people never even think about. When markets get rocky and you need to get out fast, illiquid assets can trap you and they can force you to sell at terrible prices. The simple rule I follow is if you can't get out quickly and cleanly, you probably shouldn't be in in the first place. In my world as a trader and as an investor, liquidity is king. And the reason liquidity is king is because I like to be strategic around what I invest in, especially in liquid products. And the problem with liquid products is if the underlying is not liquid or listed products, if the underlying is not liquid, the derivatives can't be liquid. So if you trade underlyings that aren't liquid, A, you could be trapped in that underlying with no way out. Even more important for me is that you are limited in your ability to add any kind of strategy, which includes hedging, which includes um reducing or improving basis, which includes adding some fund strategies to take advantage of high volatility and everything else around that specific underlying. Why limit yourself?
Number five, own a few high-risk non-correlated assets. Now that you understand the basics and most of your capital is deployed in liquid assets, you can do what every wealthy investor does. Set yourself up for some asymmetric upside. These are positions that may have higher risk, but they also have the potential to completely change your financial profile. These are assets like crypto, pre-IPO companies, futures, or maybe even starting a side business. We're talking about the kind of assets that can go up three, five, or 10 times what your index fund can do. The key word here is small. You're not betting the house. You're giving yourself exposure to the upside that traditional investing will never give you. Think of it as your portfolio's alpha engine. Everything else is the foundation. But this is where the real acceleration happens. It adds a level of opportunity that wealthy investors and successful investors use as a strategy all the time. Nobody wants a portfolio of utility stocks. Nobody wants a portfolio of risk-free investments. I mean, if you want that, then you're not going to outperform risk-free rates. But if you want an outlier return, you've got to take some outlier risk. So, those are the five essential rules to fixing your portfolio. If you like this video, watch my video on how to be insanely well educated right here.