Editor's note: You might think successful investing means scrounging for the perfect value...
But when it comes to stocks, your mentality is also pivotal to your success.
That's why Retirement Millionaire editor Dr. David "Doc" Eifrig stresses you must keep an open mind when it comes to finding ways to navigate the markets. You see, Doc uses a completely different approach from traditional investors in his Retirement Trader newsletter.
In today's Masters Series, adapted from the October 10 and November 12 issues of the free Health & Wealth Bulletin daily e-letter, he talks about a powerful, often-misunderstood way to earn massive, safe returns...
Ignorance Is More Expensive Than You Think
By Dr. David Eifrig, editor, Retirement Millionaire
When people think of Wall Street, they often picture a flurry of floor traders in color-coded vests barking bids at one another. Or they think of riding a hot tip they got from a guy who "knows something" and then seeing an immediate windfall.
That's not how it works. Or rather, that's not how it should work.
We don't want speculative excitement in our investment accounts. We don't want risk, drama, or to be spending all of our time sitting in front of a computer watching our brokerage account.
We want to put our money to work for us.
After all, we've got enough to worry about in times of crisis... And we want our wealth to be a buffer against that, not another thing to worry about. We want to invest so we're free to enjoy our lives.
There are two things you need to do to make that happen...
First, you need to plan ahead and manage your risk.
We've talked about ways to do that before... Buy the stocks of high-quality businesses... Diversify with low-cost funds... Allocate to stocks, bonds, and other real assets... And limit your speculations to sizes you can handle.
These ideas aren't original to us. They can be dull, and they can get repetitive...
But every panicked investor today wishes they did those things three months ago. The simple work of building a sturdy portfolio pays off in a crisis... even if it doesn't excite in a boom.
The second thing you need to do to invest involves your mentality.
You need to accept that stocks are volatile. Stocks build wealth over time... But they don't do it in a straight line. If you want the money, you've got to be willing to walk the uncertain path.
That means you must embrace new strategies designed to help you trade what has become an increasingly chaotic market environment. It's tough to break old habits – and humans tend to avoid the unknown. But in investing, that mindset might keep you from better ways to make money.
When it comes to options trading, ignorance is especially expensive...
Between November 2019 and June 2021, retail investors lost more than $1 billion with bad trades.
That number is staggering considering that the broader market was up 40% over that time frame. However, it's not surprising... at least to me.
Options get a bad reputation for a good reason. If you don't know what you're doing when you trade them, you can lose money fast.
And clearly, many of those who traded during the pandemic had no idea what they were doing. They were bored at home and got into options trading overnight with little to no research done beforehand. They wanted to gamble, and they wanted fast gains... Options provided that.
The inexperienced crowd bet on everything from meme stocks to bankruptcies to COVID-19 reopening plays. And they bet in droves, breaking records on trading volume...
As a 2022 Bloomberg article explained...
Spurred by Reddit posts and urged on by Twitter and TikTok influencers, daily volume in bullish contracts set record after record as stuck-at-home tinkerers flocked to the contracts in an effort to juice up returns.
Losing more than $1 billion didn't deter folks, either. Ever since those massive losses, options trading has become even more popular with the retail crowd...
Last year, there were more than 12.2 billion options contracts executed, according to the Options Clearing Corporation. That's a record-smashing figure and up nearly 24% from 2021 levels.
And in 2025, options contracts surpassed last year's record-breaking number, with 12.6 billion executed as of the end of October.
Thanks to commission-free trading, social media, and an increased risk appetite, it's clear many investors have been trying their hand in the options market.
But again, most first-time options traders will lose money. A big reason for this is that newbies usually get too aggressive when buying options.
We saw this back in 2021. Here's more from that Bloomberg article...
The derring-do of newcomers was frequently called out by Wall Street. One tactic in particular – buying out-of-the-money calls days or hours before they were likely to expire – was pilloried as a newbie gambler's mistake. In one celebrated instance, more than 50,000 contracts effectively betting that GameStop would surge sevenfold changed hands on Feb. 25, 2021. The option expired the next day.
Think about that for a second... Retail traders were betting real money that GameStop (GME) would move up many hundreds of percent in just one day.
That's absolutely absurd.
As I've said many times before, options are only dangerous if you want them to be. You can, in fact, trade in a safe way and still make good money.
Here's to our health, wealth, and a great retirement,
Dr. David Eifrig
Editor's note: Doc just spotted a market shift quietly taking place that could result in huge potential gains next year... It's a proven market anomaly that has appeared before many of history's biggest stock winners.
With earnings season around the corner, Doc says we have a narrow window of opportunity to capitalize on this setup. So he just went on camera to reveal how to prepare before the next phase of the market unfolds. Learn more here...
