From a woman of good spirits and not inconsiderable means: “I wrote to you in April ’96 asking what I should do as I had an $11,000 gain on a $22,000 investment. You said sell, but I decided to be the pig and held on … all the way back to break-even. That’s one for the DUM, DA, DUMB, DUM file. But this year I’m going to try again. I subscribed to Investor’s Business Daily, read his book, listened to his tape and am still looking for the cup and handle on stock charts. He must have better eyes than I do. So, I have decided to begin with $20,000, which of course I fully intend to turn into $40,000 by year’s end. Just as an experiment. No more getting caught up in the Iomega crazes, etc., etc. So, wish me luck. I’ll let you know if it works.”

What’s your guess? Is she likely to turn $20,000 into $40,000 this year? Even with the benefit of William O’Neil’s book and tape?

The two things she has going for her — possibly three — that she wouldn’t have had 20 years ago:

Low Commissions. It used to be, brokers nicked you for 1% or 2%, coming and going, when you went to do a trade. In a world where stocks might be expected to average 9% a year in dividends and growth, going in and out a couple of times ate up your entire expected return. Today, you can trade for practically nothing. But note that the taxes involved in trading in and out are still there, as are “spreads” between bid and asked prices that are the less obvious transaction costs you have to pay to play.

A Bull Market. When the trend is up, everyone’s a genius. Twenty years ago, the market had been largely lousy for nearly ten years and would get lousier still before bottoming out five years later. That’s a long, long time for a lousy market. When the next bear market arrives, it will be quite a shock — of the long, drawn out, demoralizing kind — for a lot of people. When it will come no one knows. But the more years the market rises at way beyond a sustainable rate (like its recent annual 20% or 30% gains), the closer and deeper the bear market is likely to be.

Better Information. From your laptop, you can get S.E.C. filings and other such info all but instantly, just like the pros. But so can your competition. So unless you are the kind of investor who really does her homework, crunches the numbers, talks to the customers, and so forth, you are competing against an ever better informed investor. If you take the easy way, doing “research” by tapping into two-sentence tips from fellow speculators on any number of investment forums, you’ll have more fun but are just playing the horses. Or musical chairs.



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