Investment Advice

Lesson and Observations. A Portfolio Cafe member’s perspective.

December 11, 2016

perspectiveFor those who don’t know me, I’ve been invited by Tim Fortier to write some post for his website. As a huge fan and active user of Portfolio Cafe’s “Ultimate Package,” I gladly agreed to contribute. My goal in these missives it to keep it short and to the point.

Back in the early nineties, I founded and was the CEO of Lombard Institutional Brokerage, the first internet-based online trading firm. Lombard grew by leaps and bounds and sold to Morgan Stanley in late 1997. I too was one of the founding investors in Knight Trading as well.

During my time at Lombard, I saw tens of thousands of individuals and institutions trade their accounts. It was like standing 10,000 feet above the most diverse, active and volatile trading universe one could imagine. By looking down through that fishbowl, I came away with a few hard and fast tenants I have used throughout my investing life. Today I’d like to speak about one in particular – Options.

In short, I watched a cycle repeat itself many times over. Win a little, win a little — Lose it all. Now I’m not speaking of covered call writing, but the more aggressive option plays one could easily characterize as “gambling.” Moral of the story here: If you want to get, retain and grow your wealth – Stay Away. I am not naïve, or inexperienced in their use, as an options principal at the firm, I not only saw these outcomes but often had to clean them up.

Next, I’m going to speak about another observation that is a little grayer – Diversification.

V Eric Roach


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