Sometimes investing is just a game for rich people

Who does not want the life of waking up twice at night to see how your trades are doing? Or appearing in the news for acquiring a large stake in a company? Or going on a campaign to drop the share price of a company you have just shorted?

For many finance enthusiasts the fast-paced, win/lose big, rock star life of an activist fund manager is a dream. People like Buffet, Carl Icahn, Bill Ackman, John Paulson, Ray Dalio, George Soros and so on are adored by the finance faithful.

However, the successes of these people probably cannot be replicated on the scale of the small investor. As Barry Ritholtz noted here, wealthy people have goals that are different from that of the average person. They make huge bets for non-financial reasons such as hurting a rival, increasing respect in the industry, cementing their legacy and so on. They are not thinking about acquiring a home, saving for their education or their children’s education or any of the other financial goals that I and most of my readers are thinking about.

While we can learn a lot from these famous fund managers, it’s always important to be mindful of context. They can afford to lose more money on a trade than the average person will make in a lifetime. So even as we dream of the rock star life we should not get pulled into investing like that with money we cannot afford to lose.

Avoiding unnecessary expenditure, investing in your earnings capacity, sticking to a savings schedule, investing in things you understand and having enough of your portfolio in low risk assets could do you more good than following a trade which your favourite activist investor swears by.

If you cannot live the life you dream at least ensure that you can dream about it with a roof over your head.

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Jerome Kuseh

Accountant | Economist-in-Training | Private Investor
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