By now, those plugged into the investment world have seen "the video" by James Cordier, the options trader who saw his clients portfolio wiped out in the blink of an eye in the recent downturn. That's right, I said wiped out. In fact, the damage was so bad that his clients actually owe money to INTL FCstone Inc, the brokerage that cleared the firm's trades.

 

What is the lesson here?

 

Downturns, be they corrections, bears, or outright crashes, do occur. While I was not in the industry for '87, I was for the tech wreck, 2008 Financial Crisis, and the oil crash from peaks of $150/bbl.  Investing is not a friendly business, and things that are too good to be true, usually are. What is not too good to be true is portfolio balancing, rebalancing, and understanding your tolerance for risk. Knowing where you are in your life and financial cycle, and adjusting to your realities will yield consistent and reliable results over time.

 

My father would quote me a line from Clint Eastwood " A man has to know his limitations". The same goes for investors of any type. If you want excitement and the prospect of massive and immediate returns, I would recommend that you go to the casino. I struggle to see the difference between that and what Mr. Cordier was trying to accomplish (although he may vehemently disagree with me)