Thursday, May 21, 2015

Make your mistakes when you're young - Jim Rogers advice

I, like many people, didn't know much when I was young. I thought I knew everything. At one point, I decided the market was going to collapse. I went and put all my money, which wasn't much, into puts. And lo and behold, the market collapsed, the worst drop since 1938. I tripled my money when everybody else was going broke. And I thought, 'Boy am I smart.' I sold my puts the day the market hit bottom, waited for the market to rally. This time I sold short, didn't want to pay the premium, and two months later, I was wiped out completely. I didn't have anything left. I couldn't meet the margin call. One thing you better learn is about the margin clerk. He doesn't care. He's going to give you a margin call. The six stocks I shorted eventually went bankrupt in the next two to three years. But in the meantime, they had gigantic rallies. It never occurred to me that a company on the way to bankruptcy could go up, could double.

I learned a lot about myself. I learned about margin. I learned that markets do really strange things. I assumed that everybody knew what I knew. I now know they don't but that I have to wait. My timing is useless and hopeless. I now realize if I want to do something, I usually wait a year or two, and even then I am wrong in my timing. 

When I speak at schools and universities, I explain to them that there's nothing wrong with failing, nothing wrong with losing everything, but please do it when you're young, when you don't have that much money. Learn your lessons that way rather than when you're 50 and it could be $50 or $100 million dollars. That was a great experience.

Jim Rogers is a smart investor who co-founded the Quantum Fund with George Soros in 1973. By 1983 the fund gained more than 4000 percent.