Newsletter: Do You Have What it Takes to be a Market Speculator?

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Welcome to the FI Mastery Journey, a weekly newsletter where you receive actionable ideas from me to help tame financial chaos, get your financial house in order and live your legacy.

Here’s how it works: each week, you’ll receive one article written by me. You’ll also get three simple questions that go along with the week’s article to help jog your mind and inspire you to take small, bite-sized financial wellness actions.

And, you’ll also get an inside look at the research I’m reading.

Follow along for one year and you will have completed all the work necessary to keep your financial house in order.

My goal in all of this work?

To provide you with the tools, resources, and insights to help you take one step closer to becoming the master of your own financial independence journey.

This Week at a Glance

  • Check out this week’s topic on how to be a prudent market speculator. You know, if you’re going to take big market bets outside of your tradition investment strategy, at the very least check out some prudent steps to take beforehand.
  • Rising bond yields: The yield on 10-year US Treasuries is rising to its highest level since before the global financial crisis. This matters because borrowing costs, like mortgages, are tied to this rate. Higher interest rates likely will make it harder for the US economy to simply hum along in the months ahead.
  • ICYMI – be sure to check out last week’s post on how walking away from a job that’s not a good fit can boost your bottom line. This is worthwhile read because it’s a hot topic that’s come up in many of my conversations this month.

A Playbook for the Prudent Speculator

Being a prudent speculator is like trying to “act natural”, or being “clearly confused”, or listening to the “deafening silence”.

They’re all things that typically don’t go together.

Even so, it is possible to become a prudent speculator if you approach it the right way.

And why would you want to be a speculative investor?

Certainly, don’t we all know that disciplined investing is the surefire way to achieving and maintaining financial independence?

Well, let’s face it: For many of you out there, taking big bets is what’s allowed you to achieve the level of success in your career or business that you’re living today.

Indeed, you know all too well what it feels like to go all-in on yourself, and to see those efforts rewa\rded in many multiples of your initial time and financial outlay.

Now, while it’s true that you’ve likely experienced some big professional wins in the past, a common mistake that many high achievers make is to extrapolate expertise in one domain by trying their hand at trying to beat the markets.

And you know, all too often, this move rarely works.

That’s because, all it takes is one wrong move in the markets, and you could see your years of hard work wiped out in short order, which is why a disciplined investment strategy works for the long-term.

Even so, if you’re going to try your hand at speculative investing, there is a way to have your cake and eat it too, so long as you approach this act from a place of self-knowledge, order, and prudence.

How to Be a Prudent Speculator

So then, here are some steps to take to ensure that you’re ready for speculating with your savings:

Step #1: Evaluate Whether You Have What it Takes to be a Speculator

To engage in what can be a highly volatile financial endeavor, you’ll likely need to prepare emotionally for the highs and lows of speculative investing by examining past reactions to high-risk scenarios.

Ask yourself: Are I equipped mentally to handle sudden market downturns and significant investment losses, especially when operating outside of my long-term disciplined investment strategy?

By understanding your emotional responses to high-risk situations and familiarizing yourself with past speculative failures, you can approach speculative investing with a more informed, level-headed mindset, potentially preventing hasty decisions driven by panic or greed.

Step #2: Prioritize Financial Foundations Before Getting in too Deep

Here you’ll want to ensure that you have a strong financial safety net before venturing into the turbulent waters of speculative investing.

Ask yourself: Do I have a solid cash management process that covers my emergency savings, debt service, and continued retirement savings, to sustain me when capital is locked up?

By prioritizing a secure financial foundation and strategically using cash windfalls, you mitigate risks and reduce the impact of potential drawdowns/lockups, allowing you to approach speculative investing with a safety buffer and long-term perspective in mind.

Step #3: Adopt a Gambler’s Mindset and Become a Risk Manager

To do this, you’ll need to recognize the inherent uncertainties of speculative investments and use tools and strategies to manage those risks effectively.

Ask yourself: Do I have a clear strategy for my speculative venture, from position sizing to exit plans, and am I equipped with the right tools and resources to navigate the volatile world of speculative investing?

By incorporating robust risk management practices, understanding the importance of position sizing, defining exit strategies, and adopting a gambler’s risk-assessment mindset, you can participate in speculative investing with a higher degree of safety, discipline, and potential success.

What I’m Reading

We’re all busy in the daily rush of things. That’s why I’m sharing a list of articles that I’ve read this week to help me stay on top of my own financial independence journey.

You can find links to these articles in the daily feed at app.fimastery.com

  • US Yield Curve Disinverts as Markets Reprice Bond Risks
  • Your Memory is Lying to You
  • Lessons from History from Three Generations of Currency Crises
  • How Awe Can Change our Lives for the Better
  • 90/90 Minimalism Rule

Thanks for taking a look,

Peter Donisanu