Lost 90% of clients money

[KateMoloney]

My accountant of 8 years, who used to be a great accountant, decided to start up a trading fund for clients in 2020 with a so called “trading expert”.

Its been interesting watching his journey.

The fund started off discretionary using options (ASX market). In March 2020 their broker Comsec margin called them and they were forced to close positions.
The fund was down 50% by end of March / April 2020.

The accountant stubbornly held onto his view that ASX shares were over priced and held shorts (mainly on CBA). You wouldn’t need to be a genius to figure out how he performed mid 2020 – late 2021. Yet, he kept stubbornly holding onto these short positions and held the view that CBA was over priced.

Funnily enough, the accountant recommended that I look into Nicks work, yet didn’t apply the principles himself. I suggested he have a consult with Nick, which he hasn’t done.
He said he had 42 pages of positions (I am not sure how many positions that is … but its a lot). Instead of liquidating the fund at a 50% loss, he kept trading and now the loss is at 90%+. He has a lot of guilt losing 90% of his family & friends money. His Mum, for example, invested her retirement savings with him.

Emotionally, its taken a toll. He second mortgaged his property to put more money into the fund to try and recoup clients money. He now has a drinking problem and another child on the way (unplanned). He is not on the ball with his accounting business and clients (like us) are leaving. 

He said he found a strategy that was making money this year, when I asked him what his rate of return was this year, he had no idea.

There are many, many lessons in this story.

Here are my take aways ………

1) Don’t be stubborn. Be willing to admit you are wrong and sell a losing position(s). 

2) Have a hard stop on your initial capital. e.g if I lose 30% of my initial capital I will stop trading and do X 

3) Keep trading simple. 42 pages of positions is a lot. The trading systems Nick teaches us about might hold 5, 10, 20 or 40 positions. There are systems and processes in place to manage these systems and all the positions.

4) Know your numbers. Especially when you are losing.

5) Be willing to seek help. My accountant could have stopped trading and consulted with someone like Nick. At a 50% loss it would take a 100% gain to recover. Not easy but with 3-6 years of trading a robust strategy he might have had a chance. With a 90% loss, he is emotionally wrecked and never wants to trade again.
 

[Nick Radge]

Ouch.

Another lesson; stick to what you know. My accountant is a shit investor too. He’s held ZNO.ax since COVID hit. Down -74% just this year alone, and 71% last year

[RobertMontgomery]

The lesson that comes to my mind is avoid “trading experts” without data to support their expertise.

In God we trust and everyone else brings data.

[TimothyStrickland]

Everyone is a guru these days, just look at youtube. Except no one can provide any data or rationale on why they do things.

I have heard similar stories Kate. A friend of mine retired and decided he was going to make it big day trading watching youtube guru’s. Well as it turns out, that was 4 years ago, he lost 700k and is now working again and believes the market is out to get people and is rigged.

Another close friend messaged me last year about day trading and we talked. He was just picking trades on gut feelings. I warned him this is probably not a good idea unless he had tested his strategy etc. He didn’t believe me and thought I was just being a kill joy. He lost his entire retirement savings this year. There are many more I have heard in my years of trading. Everyone wants to make a quick buck but no one wants to put in the work required.

 

[KateMoloney]

Some sad stories there Tim

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