🚀 TradingRooms Newsletter Issue #2 (by RAIN Platforms)
​The world of active trading and investing in 5 minutes
​​When do statistics meaningfully support an argument?
​The answer: it depends on the argument.
​In sports, statistics are a useful gauge to determine a league's Most Valuable Player. Michael Jordan won 5 MVP's during his stint with the Bulls, and the statistics supported those decisions (he had a consistently high Player Efficiency Rating, for example).
​Let's switch gears - what about the correlation between entrepreneurship and "success"? Do statistics support the idea of becoming an entrepreneur?
​Not at all. Data from the US Bureau, Labor and Statistics shows that approximately 20% of new businesses fail during the first two years of being open, 45% during the first five years, and 65% during the first 10 years. Only 25% of new businesses make it to 15 years or more.
​Should budding entrepreneurs be discouraged by these numbers? Of course not, provided they are aware of the data and can accept "failure". If I seek greener pastures, am willing to work hard, and have a good business plan, entrepreneurship can work out well for me.
​Now, replace "entrepreneurship" with "active trader or investor", and you get our gist. Blindly putting everyone into a "one-size-fits-all", "passive investing is KING" category, frankly, doesn't make sense.
​With that out of the way, let's move on to a few articles we loved reading this week.
​​What we loved
​Farewell 2021, Hello 2022: A reflection on portfolio performance, mistakes and learnings (Invest Karo India)
​​"Risk adjusted returns is a far superior metric than just returns. Every individual has a different risk taking capacity that is based on a variety of factors like age, number of dependents, income levels and so on. I define risk in my portfolio with a very simple metric that’s also easy to relate to - number of months of salary invested in a position."
​A Story on Kindness (Vishal Khandelwal)
​​"Kindness is not something that demands hard work. It is the easiest thing in the world to execute. With very little time (even just two minutes a day) and very minimal effort we can transform a human being’s day, week, or even life. The return on investment is off the charts! Best, every act of kindness creates a ripple effect that spreads from person to person with no end in sight."
​The Sustainable Active Investing Framework: Simple, But Not Easy (Alpha Architect)
​​" So the next time you hear a market participant suggest that one strategy is better than another strategy, simply ask two basic questions: (1) Why are the securities selected by this process mispriced? and (2) Why aren’t other smart investors already exploiting the mispricing opportunity? Without solid answers to both questions, it is unlikely that the investment process is sustainable."
​​Markets this week (Dec 28, 2021 - Jan 4, 2022)
​​Latest episodes of the Investment Blueprint podcast
​​E23: Derrick Oldensmith - Two-Time World Champion Kickboxer and Sr. Trader at T3 Trading (YouTube, Spotify)
​​E22: Rajandran R - Derivatives Trader with One of India's Most Successful Trading Blogs (YouTube, Spotify)
​​Get inspired
​​"[Market] Corrections are good, they keep us humble...The strongest bull markets I've been in are built on walls of worry"- Cathie Wood