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If you trade the forex markets regularly, chances are that a lot of your trading is of the short-term variety; i. From my experience, there is one major flaw with this type of trading: h igh-speed computers and algorithms will spot these patterns faster than you ever will. When I initially started trading, my strategy was similar to that of many short-term traders. That is, analyze the technicals to decide on a long or short position or even no position in the absence of a clear trendand then wait for the all-important breakout, i. I can't tell you how many times I would open a position after a breakout, only for the price to move back in the opposite direction - with my stop loss closing me out of the trade. More often than not, the traders who make the money are those who are adept at anticipating such a breakout before it happens.

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Antifragile investing in penny

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This is something I learned from one of my favorite investors of all time, a guy named Tom Engle, who's been living off his portfolio for more than 40 years now. So, the style that I go today is, if I find a new company that I'm interested investing in, and it has really high potential, I take a position in that company immediately, but a small one.

So, I'm going to jot down a couple of simple valuation metrics. Then, I'm going to follow the company, and if the company continues to execute against its plan over time, I'm going to look to add to that company at a better valuation than I bought the first time. So, if I first paid 20 times sales for a company, with my next purchase I'm going to try and pay 18 times sales or 16 times sales, or less.

So, with each future purchase, I'm trying to buy at a better and better valuation, as I build my position. Now, that's not always possible to do. In that case, I stop buying. But broadly speaking, that's like the best-case scenario for me. I find a business, I want to own it for five, 10, 15 years, and I buy that same business again, and again, and again on the way up or on the way down, always trying to pay a lower valuation than my previous purchase.

Benz: So, you've been emphasizing the importance of understanding the businesses that you're invested in. During the pandemic, it seemed like many of the new investors in the market appeared to be using some version of the greater fool theory to help guide their investments. They're basically speculating.

What were you thinking as you watched the GameStop phenomenon unfold in the summer of ? Feroldi: It was crazy to watch. And you can learn so much about investor psychology by studying what's happened with GameStop and AMC. To your point, those businesses that became a meme stock, by and large, are companies that I am just not interested in as an investor. They are on the declining phase of their growth style. I don't think their businesses offer very good long-term potential, or at least they didn't before they went through that craze.

That doesn't mean that their stocks can't go up. And we saw those companies absolutely skyrocket as Reddit got behind them, and they were being pumped like crazy on social media. So, I just thought that what was happening with those stocks was just fascinating to watch.

But I in no way as an investor wanted to participate in it. Ptak: It's hard not to think of the elimination of trading costs as a positive. But do you think the removal of frictions like commissions has contributed in a way to the fast-trading mindset that you were just describing?

And ultimately, that isn't going to be good for investors? Feroldi: I will tell you, I'm very much of two mindsets around that. On the one hand, I absolutely love what Robinhood has done for investors by bringing down commission costs to zero, to making it very easy to get started investing, to offering things like fractional shares. And I think by making it so easy and so convenient to buy and trade by doing it on your phone, you are doing investors some disservice because it makes it so easy to sell if something's down or buy if you see something going up.

So, generally, I am a huge fan of the fact that trading costs and commissions have been ground down to zero, but it would be foolish to think that there weren't some potential negatives to that happening. Benz: We want to talk a little bit about teaching young people about money and about life. You have a post on your blog contrasting what you're teaching your own children about success with the things that you were taught as you were growing up. Can you talk about some of the key differences there?

Feroldi: I was taught the standard American playbook of success growing up. What are you supposed to do? You're supposed to get good grades in school; you're supposed to go to a safe and prestigious university; you're supposed to use that to get a safe, secure job; you're going to earn a good salary and your job is to climb the corporate ladder. That was the standard playbook for decades in this country. I've since learned that the way that people actually become successful, especially today, is to think about money differently.

And the way that I'm teaching my own kids how to think about money is I'm going to instill in them the idea of always being an investor, so I'm going to teach them like crazy as best I can, about what investing is, how to invest successfully, how to think for the long term. Another thing I'm going to try and teach them is how to network with other successful people. This is something that I am naturally pretty bad at but is one of the wonderful reasons to be on social media platforms, especially like Twitter.

If you share your thoughts openly, honestly, and connect with people, I think people in general are very willing to connect with you and to get to know you. And by networking with other people, it just opens up a tremendous amount of opportunities down the road. And the final thing I want them to learn is how to think like an entrepreneur. I'm going to really encourage them to start their own business, especially when they're young and can fail on it.

But even if they don't want to become entrepreneurs down the road, I still think it's very important for them to think like an entrepreneur. I might be giving up salary in the beginning to do so. But I might be getting options or stock in that company and what could the long-term ramifications of that be? If you're a hustler, and you can go out and learn a skill, it's never been easier than it is today to find ways to generate income for yourself and work for yourself.

So, broadly speaking, what I'm trying to teach to do is how to invest, how to network, and how to think like an entrepreneur. I think that will set them up for long-term success. Benz: Do you think some people, though, just aren't cut out to be entrepreneurs--not even literally, but also just do not have that mindset, it's not in their personality type?

Feroldi: Oh, yeah, I think most people shouldn't be entrepreneurs. There's a lot that goes into it. And you have to have a mindset, you have to certainly have appetite for risk-taking. Still, even if your plan is to just be a worker, be and work for companies your entire life, I still think there's a lot of value you can get by studying entrepreneurs and business executives of the past just learning how they think.

Even if you never act on that, I still think there's lots of value that you can bring to your employer by thinking like an entrepreneur. Ptak: Some schools use stock market games to teach young people about investing and to ignite their interest. Do you think that's a good idea? Or do you think that's ill advised? Feroldi: This is something that I'm very much of two minds about. But I can tell you that this is something that I've started with my own kids in their elementary school, partly because I want to teach them how to do it.

So, my twist on this was I visited my kids' elementary school at the start of the year, I taught them a little bit about investing, what a stock is, what a company behind the stock is, and so on. And I gave them stocks to pick. So, they all picked five stocks from a list of 25 companies that I thought that they would be interested in.

Then, I go in at the end of the year--I give it almost a full year--and I show them the results. But the important thing for me is that I've repeated this process now every year for multiple years. And when I'm going in and reviewing with them how they have done, I'm also referring to the stock-picks that they made one year ago, two years ago, three years ago, and more.

It's truly my hope to continue this with my kids' classes, all the way through seniors and high school, and at the time they graduate, I can say, well, let's see how we've done with investing from when you were in 10th grade, eighth grade, fifth grade, third grade, all the way back to second grade. So, I'm trying to make it a good process by making it a multiyear period.

But even still, if you just do a simple stock market game, and it teaches them about what a stock is, and why stocks squiggle around, and it's over a short period of time, I still think there's value in that, just not as much value as there would be if you did it over a multiyear period. Benz: Speaking about lessons, broader lessons about money, you've often written that having an adequate savings rate and avoiding debt are the most important contributors to financial success.

You mentioned that throughout your book. So, why are those really mundane things so often overshadowed by investing and maybe even investing in individual stocks? Feroldi: Well, investing and talking about individual stocks is fun.

In reality, my personal belief is that what you do with your personal finances is, in order of magnitude, more important than what you do with your investing finances. And it would be foolish to think that the two things were not linked. My career mission in life is to spread financial wellness. And as a part of that, I really think it's important for most people, to start by focusing on their personal finances.

To me financial wellness means that you have multiple sources of income, that you have a high savings rate, that you eliminate your debt, that you build up a strong emergency fund. Only once you get that stuff done, do I really think you should start to focus on investing and investing in individual stocks. So, it's really important to me that you take care of your personal finances first. I also think that if your personal finances are in a really good place, it makes you a better investor.

If you have no debt, multiple sources of income, and you're not worried about your day-to-day life at all, what your portfolio does on any day, week, month, or year really will have no impact at all on your actual life. It will impact your psychology, but it might not impact your life at all. For that reason, if your personal finances are rock-solid, not only can you invest more in the markets, but when a downturn comes, I think it gives you the mental clarity to be able to take a focus on the long-term and really continually invest even when the markets are heading in the wrong direction.

Ptak: I wanted to shift gears and talk about crypto, which I think you've been a skeptic on in the past. But if I'm not mistaken, maybe you own some crypto now. So, can you describe how your thinking on crypto has evolved? And what were the key things that might have changed your mind along the way?

What are your thoughts on ethereum? So, I have no idea how to value them. And two, they're just like digital gold. So, it's going to be the greater fool theory with selling them to somebody else at a higher price. So, that was the beginning and end of my research on it. I will say that slowly, over time, I've come to understand how crypto works more. So, what is the leading contender to be that thing if you think that thing should exist?

Well, right now, the leading contender is bitcoin. There's no doubt that bitcoin is the top dog and first mover in potentially answering that question. And then, it was just educating myself about the topic with things like the Bankless podcast and having some crypto enthusiasts like Chris Dixon, and Balaji, listening to them on podcasts, such as the Tim Ferriss podcast. So, slowly, over time, I've come to be more accepting of it. You consider yourself a part of that community or group.

Can you talk about what you find so attractive about FIRE? I've always kind of craved independence for myself. I'm the type of person that doesn't like when other people tell me what to do. And if you've worked a job or had a bad boss or anything like that, I'm sure you can relate to that. How do you save up enough money so that you never have to "work" again? And how could you possibly do that in a lifetime? But once you start studying people in the FIRE movement, you see not only is it doable in a lifetime, I personally know people that have retired from their jobs, "retired" in their 50s, in their 40s, in their 30s, even in their late 20s.

And by doing so, by lowering their costs so low, they afforded themselves the luxury of buying back their future time. I love studying people that are in the FIRE movement, because those are people that are interested in money, they're interested in investing, they're interested in optimizing their life. And those are topics that just immensely appeal to me.

Ptak: I wanted to shift gears and talk about avoiding big mistakes. You have a section in the book on avoiding mistakes. One mistake is gravitating to stocks with the highest dividend yields, which is something that retired investors often do.

Why is that not such a great idea, in your opinion? Feroldi: I learned this lesson the hard way. So, let me just say, when I first started investing, I had no idea what I was doing. I couldn't tell you how to find a balance sheet, how to find an income statement, who was running the companies that I was investing, what their competitive advantage is, nothing.

I did literally no research at the start. And after dabbling with penny stocks, which went as well as everyone else that I've heard of investing in penny stocks, mainly I lost money by trying to trade penny stocks. I said, OK these penny stock things, they're not working out. Well, it turns out that that investing style has a whole another set of risks.

And really, you have to understand as an investor, well, what is a dividend? A dividend is when a company takes a portion of its profits, and it gives them back to its investor base. Well, that's typically the market's way of telling you that the dividend is not sustainable, and that the business that's backing, that's paying for that dividend, is in trouble. So, I can tell you that when I first started investing in very high-dividend-yielding stocks, I again was doing very little research, was just focused on the yield.

It turned out that the businesses behind those companies were crumbling. And when your business is crumbling and your profits are declining, you can't afford to pay your dividend for so long. So, eventually, some of those companies slashed their dividend, which caused their stock price to fall. So, broadly speaking, dividend stocks are very attractive, and there are some high-yielding companies out there that can afford to continuously pay them. But more often than not, if you see a dividend yield that's more than 2 times the market, your first thought should be warning sign, not opportunity.

Benz: So, you referenced, Brian, the mistake of gravitating to penny stocks. Can you expand on that? Why are they not a great idea, even though you can assemble a basket of a lot of stocks with very little money to start? Feroldi: Again, when I first started investing, I had no idea what I was doing.

That's a natural thing for new investors to think to themselves because in every other area of our life price tells you something about what you're paying for. However, that's not how investing works. The price of one share of stock is a meaningless figure and really tells you nothing about the underlying quality of the business.

If their stock is there, the odds are good is that it deserves to be there because the underlying business backing that company is not good, and that won't be a good investment. So, that is again something I had to learn the hard way. Penny stocks are priced that way for a reason. But again, that's a counterintuitive lesson that I kind of had to learn the hard way. Ptak: What are some of your go-to blogs and podcasts each week? What's in your rotation? Feroldi: I'm a money and investing nerd, and I probably have a rotation of 20 or 30 podcasts that I go to.

I really like ChooseFI , that's about financial independence. I like Afford Anything , another podcast about money and financial independence. I mean, truly, we are blessed today with so many high-quality podcasts out there. It's never been easier for investors to get great information about investing. Benz: I wanted to close by asking you about how you stay engaged. You have a well-articulated investment philosophy and you focused on the technology and biotech areas for a while now.

So, how do you avoid complacency in your work and stay energized? Feroldi: That's a really fantastic question. For whatever reason, I was just born to be interested in money and finance and investing. And I think investing is like the ultimate strategy game.

There's always new companies coming public, the business news cycle is always changing. There's always companies that are on the rise. There's always companies that are on the fall. And I just think that it's tremendous fun to sift through all that noise and look for companies that are good investments.

Because if I do that well, then I can actually dramatically grow my wealth over time. So, I just so enjoy everything about stocks and investing. And so far, I haven't become complacent in that. But I think that's one of the positive about investing. There's always new companies coming public. There's always emerging technologies to learn about. So, I just find everything about researching them tremendous fun. Benz: Well, Brian, this has been a really fun conversation.

We really appreciate you taking time out of your schedule to be with us today. Feroldi: Jeff and Christine, thank you so much for having me on. This is tremendous fun for me, too. Ptak: Thanks again. Benz: Thank you for joining us on The Long View. If you could, please take a moment to subscribe to and rate the podcast on Apple, Spotify, or wherever you get your podcasts.

Benz: George Castady is our engineer for the podcast and Kari Greczek produces the show notes each week. Finally, we'd love to get your feedback. If you have a comment or a guest idea, please email us at TheLongView Morningstar. Until next time, thanks for joining us. Disclaimer: This recording is for informational purposes only and should not be considered investment advice. Opinions expressed are as of the date of recording.

Such opinions are subject to change. The views and opinions of guests on this program are not necessarily those of Morningstar, Inc. Morningstar and its affiliates are not affiliated with this guest or his or her business affiliates unless otherwise stated. Morningstar does not guarantee the accuracy, or the completeness of the data presented herein.

Morningstar Research Services is a subsidiary of Morningstar, Inc. Securities and Exchange Commission. Morningstar Research Services shall not be responsible for any trading decisions, damages or other losses resulting from or related to the information, data analysis, or opinions, or their use.

Past performance is not a guarantee of future results. All investments are subject to investment risk, including possible loss of principal. Is there an antifragile investing strategy that you and I can use? Of course there is, and it's something that smart mutual fund investors are already practicing. SIP is based on the idea of averaging your investment cost over time and it's the simplest and yet most effective technique of benefitting from volatility. You invest a constant amount every month and keep doing it for a long time.

When the markets drop, stock prices are low and so are the NAVs of equity mutual funds. Therefore, the sum you invest gets you more units of the fund. Eventually, when you redeem your money, all units fetch you an equal amount. However, your gains are higher because of the volatile periods, when you were able to invest at a low price.

That's antifragile--actual benefit from volatility. SIP gains depend on the long-term, gradual rise in equity prices, punctuated by periods when the markets are volatile or it drops. It's a supremely antifragile investing strategy. You make more money precisely because markets are volatile.

If, hypothetically it never actually happens , the equity markets rose by a constant amount every day, then there would be no advantage in SIP investing. SIPs are essentially a psychological trick to keep investing regularly, regardless of whether the markets are up or down.

It's the routine that locks investors into an inertia which turns out to be of benefit to them. The antifragile nature is a hidden advantage that proves beneficial over time. When one looks at investing with this fragile-antifragile mind frame, it is immediately obvious that short-term trading of equities or derivatives is the ultimate in fragility and long-term SIPs is the ultimate in antifragility. Mkt Commentary Jun, Mindshare Jun, Volatility is a friend, not foe!

Rate this article: 5. Leave a comment Name: Please enter a name. Email: Please enter an email address. Please enter a valid email address. Preview latest issues. Mkt Commentary Jun, Nifty closes above 15,; all sectors end in green!

Nifty closes above 15,; all sectors end in green! It was a broad-based rally on Tuesday as all the indices closed in green. Nifty

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Antifragile Exits 2. Antifragile Investments by Industry, Year, and Region. Investments by Industry. Investments by Year. Investments by Region. Request a free trial. Antifragile Team 1. Antifragile Co-Investors 3. Contact Us info pitchbook. Terms of Use Privacy Policy. Early Stage VC. Social Content. Generating Revenue. Media and Information Services B2B.

Multimedia and Design Software. Financial Software. Seed Round. Produzioni dal Basso. Secondary Transaction - Private. Giuseppe Mayer. Insure Life Insurance. Health Insurance. Motor Insurance. Other Risk Covers. Personal Finance News. Rate Story. Font Size Abc Small. Abc Medium. Abc Large. By Dhirendra Kumar What is the opposite of fragile? If the opposite of fragile is robust, then the opposite of positive should be zero. If fragile things are considered to be those that are harmed by shock or adversity, then the opposite of fragile should be the things that benefit from shock or adversity.

Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www. Read the now! Indulge in digital reading experience of ET newspaper exactly as it is. Read Now. Recent hit Taken for a ride: how Ola, Uber promised the moon to drivers and failed to deliver. Subscribe to ETPrime. Find this comment offensive?

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Investing in Antifragile Funds. Similar to a put-selling strategy that collects a penny every day and occasionally suffers dollar-. Before you invest in penny stock trading, do some soul-searching, be honest and find out whether this is the best thing for you. There is no shame in admitting. Governments “did not want to spend pennies in January; But Taleb, extrapolating from trading risks, believed that “managing without.