What's with financial markets?

“We are throwing more and more of our resources, including the cream of our youth, into financial activities remote from the production of goods and services, into activities that generate high private rewards disproportionate to their social productivity. I suspect that the immense power of the computer is being harnessed to this ‘paper economy’, not to do the same transactions more economically but to balloon the quantity and variety of financial exchanges.”
— James Tobin (1984), Nobel Prize winner in Economics

This month marks two years of my active involvement in the stock market. And I am done.

In the last month, I had little happening at work which left me with a considerable amount of time that I spent almost exclusively trading options and consuming content related to the market. I find it disgusting in retrospect.

I realise that the combination of free time and disposable income is a scary prospect. “ਵਿਹਲਾ ਮਨ ਸ਼ੈਤਾਨ ਦਾ ਘਰ”¹ and all that.

“Infinite upside with limited downside” sounds jolly only when you are in the green. I can’t deal with the highs and lows that market fluctuation causes in my mood. Last month, I was doing pretty well as you could probably tell from my last newsletter. This month hasn’t been as kind and the profits have been wiped out. As tiny as they were (barely a few thousand rupees),² it does not feel good to lose both the game and the bet.

That’s what options trading is – you are both a player in the game and the bettor. When you win, you win big. When you lose, you lose twice.

I am done gambling. I am going back to passive investing via ETFs and Mutual Funds. “Going back” is not exactly true because I never stopped investing in ETFs/MFs – in fact, I invested a lot more in them than I did in options. But you get the idea.

Thanks to entropy, I came across this tweet today –

I started investing into the market in 1994 at age 23….every month….autopilot….never stopped…..never sold. Result? Multimillionaire. It’s not sexy. It’s not clickbait. It just works over the long run.

— Millionaire Financial Coach (@MillionaireDoor) June 11, 2022

Further reinforcing the idea that I need to stay away from adrenaline and greed.

I decided earlier last week that I was going to spend my time working on side projects instead. Which is something that I really enjoy doing. Some of them are paid side gigs, while others are just pure nerdy fun.

The joy I derive from these little projects is vastly superior to anything I have felt through successes in the stock market. And the impact is longer lasting too. I create a tangible output through each of these projects. I get to repurpose my work in future projects. I expand my own knowledge and understanding. I contribute to the world’s knowledge (by tweeting, writing, and sharing code on GitHub). I gain new followers on Twitter, my network grows, and that brings in new work and it’s great. It’s what I want.

So I have created a new page on my website for this. Hit me up if you need some research support. Or point someone else my way.

I have been away for a whole month from this newsletter. The reasons were –

1. Low motivation. I had ideas but not the will to write them.
2. Work. The first three weeks, I didn’t have much to do so I’d just waste my time browsing Twitter and waste my money trading options. Then the last week I was incredibly busy.
3. Side projects. Whatever little time I had on the weekends, I spent working on a cool little project where I am scraping data from some government websites.

The month off wasn’t a waste though because I feel I got a lot more ideas than I did otherwise. Perhaps having idle hands isn’t all that bad after all? Something something in praise of idleness.

But now that my schedule is cleared up and the motivation is back, there will be a lot more newsletters this month. I hope. Work is unpredictable and motivation is fickle.

Send me your thoughts. Email / text as always.