Charles Kirk of The Kirk Report was recently interviewed by Your Trading Edge magazine. It's recommended reading, even if you're not a trader.
The most interesting question, for me, was how to meet the challenges of a lack of regular income when trading full time. Kirk lists four factors:
- Having absolutely no debt
- Living well below your means
- Having alternate means of income
- Having a large savings fund -- not attached to the market -- that covers at least one year of living expenses
My take? These are ALL good ideas for ANY type of investor -- traders or long-term buy-and-hold types or anywhere in between. In fact, they're excellent advice for practically everyone.
Getting specific, on having no debt, I don't know if that includes a home mortgage, but I'm certain Kirk means no credit card bills and likely no car payments.
Living below a person's means is something I bet is catching on big-time these days.
On alternate income, Kirk is married and his wife is a college professor. And he also charges a membership fee for his blog. I don't know if he considers both of those as his alternate income, but it undeniably makes it easier to trade or invest or do anything under the "self-employed" umbrella with a working spouse.
Finally, I've posted before on the advantages of having an emergency fund. The benefits are much more than simply financial. Kirk says a year, and I'm not going to argue with him. I've said in the past six months' worth of expenses is fine. Some financial planner types have said three months. I'd be very leery of relying on 90 days' worth of expenses for any unplanned rainy days.
great advice all around from both of you. I think the consumer balance sheet has been under such siege after the crisis that it highlights the reasons for the savings rate to rise and establish emergency funds.
Also wanted to toss out a comparison to poker where you have to manage your bankroll. Professional poker players and traders are very similar in this regard in that they can only risk x% of capital on any given day/trade/table. I've found the similarities to be fascinating and just wanted to toss out that similarity.
Keep up the great stuff!
Jay
http://www.marketfolly.com
Posted by: Jay (market folly) | August 28, 2009 at 11:59 AM
@Jay: Your point about professional poker players seems spot on. I've never thought about it, because I'm not a poker player. But you make a great comparison.
Posted by: John | August 28, 2009 at 08:20 PM