In the Martin Scorsese film, The Wolf of Wall Street, the senior broker at L.F. Rothschild, Mark Hanna, delivers broker training to Jordan Belfort over a cocaine and martini lunch. "The name of the game is to move the money from your client's pocket into your pocket. Number one rule of Wall Street: I don't care if you're Warren Buffett or if you're Jimmy Buffett, nobody knows if a stock is gonna go up, down, sideways or in [expletive deleted] circles, least of all stockbrokers. It's all a fugayzi… It's a fake." Hanna goes on to highlight the lack of fiduciary duty to clients when he explains how clients keep trading with the broker because the clients are addicted to the process of trading. Hanna further explains that a broker needs to keep coming up with "brilliant ideas" to keep clients' money at the firm and that clients will keep trading "again, again and again" because they are addicted. Meanwhile, the client thinks he is getting rich, but that is only on paper, while the broker takes home "cold hard cash" via commissions. "That's incredible sir", exclaims Belfort, "I can't tell you how excited I am." Hanna: "You should be."
Of course, the excitement of the broker equates to the despair of the client. My purpose in writing this book is to show you how to avoid becoming a victim to either an unscrupulous broker or to your own self-destructive behavioral tendencies that draw you into speculating, more generally known as active investing. This better way to invest is simply passive investing with index funds.
This 12-Step Recovery Program for Active Investors will walk you through the land mines and pitfalls of active investing and show you a better way to invest. When you complete this 12-Step Program, you will understand the differences between speculating versus investing, and become aware of the emotional triggers that impact short-term decisions. You will also obtain an enlightening education on science-based and rules-based investing that may forever change the way you perceive how the stock market works. You will learn the hazards of speculation and the rewards of a disciplined investment strategy. The best part is that you can change your own investment behavior, which can lead to a more profitable and enjoyable life.
Emotions often override reason when it comes to investment decisions, leading to irrational and destructive behavior. The financial news media and Wall Street feed the fear, anxiety and other stressful emotions experienced by investors, resulting in less than favorable investment outcomes. This book will teach you how to hang on in the midst of market turmoil so you can earn the long-term returns of capitalism.
As you climb the 12 Steps illustrated in the following painting, you will abandon the gambling behaviors of the active investors located in the bottom right corner, ascend the stairs to claim your risk-appropriate portfolio (symbolized by the woman handing out colorful balls), and continue up to the balcony where individuals who have successfully completed their 12-Step Journey enjoy the tranquility of an "investing heaven."
Stairway to Investing Heaven