401k Daytrading For Dummies!

The corner of the twitosphere I follow had some fun yesterday with this article from the LA Times about people who day, or otherwise actively, trade their 401k accounts in order to "catch up." The entire article is worth reading but there were two things in particular that stood out to me.

First was a grim statistic that noted "the average 60-year-old has only $114,500 in his or her 401(k), and half have less than $37,300, according to Aon Hewitt." The specifics of these stats always differ but the message is almost always the same as people are generally woefully under prepared for retirement in terms of being ready now if they are of age or being where they should by age 40 or 50 or wherever they are at the moment.

It is too simple to blame it all on just a "rigged game" or just politics or just financial literacy issue or no fault of their own stuff it is a combination of all of these and more and each person has their own combination of reasons (I would include living beyond your means as part of literacy). It is never too late to improve things but it can be too late to have the "ideal" retirement--ideal is of course different for everyone.

This part of the discussion reminds of Nassim Taleb's comment that really we learned everything we need to know about finance from our grandmothers which is save a lot, don't borrow money and don't lend money (paraphrasing). It is a little more complicated than that but that is a good starting point.

People have their own set of deficits in their financial lives and they can be at least partially mitigated with changes in behavior. I don't minimize the difficulty here but as I've said before, something has to give. A person may now have a lot of consumer debt to service, they own those consequences, but they can also change their consumption habits going forward. 

The other point from the article that stuck out was a remarkably hubristic if not all too familiar comment; "that's what people usually say about day trading (about the risks) — but I don't see how it can be dangerous,"

Aside from the idea of actually actively trading a 401k and the books being sold that "teach" people how to do it stock market history is littered with people who misunderstood the risks they were taking on multiple levels. Behaviors like the one exhibited in the quote will always exist.

Things are still on schedule for RRGR. We submitted the portfolio last night, it should be actually implemented later today and then ready to trade on Wednesday per the original schedule.