3 Things 2-15
02/15/2021
Although MAS is a financial services company, not everything published herein will be about numbers or investing. But no matter the topic, we hope for three things: 1) That you find the time you spend engaged worthwhile. 2) That you’ll reach out to us for help in any of our areas of expertise if something we discuss creates an urging in you to do so. 3) That you’ll share this with somebody new each time you read it.
Thing One
What Would You Do?
Here are a couple of hypothetical questions for you:
If you were a 20-year-old college student and you opened your Robinhood app and saw a screen like the one at the top of this newsletter that said shows an account that is over $700,000 in the hole, what would you do?
If you were that same 20-year-old college student and you subsequently got a message from Robinhood requesting that you send an “immediate” payment of $170,000, what would you do?
Sadly, the situation above is not hypothetical and the young man’s tragic answer to the questions above was to commit suicide. Here is part of his suicide note:
"How was a 20-year-old with no income able to get assigned almost $1 million worth of leverage? The puts I bought/sold should have cancelled (sic) out, too, but I also have no clue what I was doing now in hindsight. There was no intention to be assigned this much and take this much risk, and I only thought that I was risking the money that I actually owned. If you check the app, the margin investing option isn't even 'turned on' for me. A painful lesson. F*** Robinhood."
His question, which was related to his options trading activity on the app, was a good one, and, as it turns out he wasn’t 700 grand in the hole. Unfortunately, the message from Robinhood to him clarifying that very significant fact came a day after he took his life.
So, here’s one more question:
If your friend told you he was making lots of easy money trading options, what would you do?
The answer is, you should do what you want. But, if you do decide to start trading options, you should get some understanding of what that really means. And, hopefully, as a part of gaining that understanding, you’d come to the same conclusion that many people, including the ones at clarkfinancial.com, have:
“The number one reason why most options traders fail is they rely solely on market timing for success. If you’re using options simply as a leveraging tool to make more money on the predicted movement in a stock or index, you’ll have many trades go in your favor, and from time to time you’ll experience fantastic gains. However, if you’re simply buying calls or puts based on what you expect the underlying stock to do, your odds of long term success as an options trader are very limited.”
If you still want in knowing that, go ahead. But know there are other “options”.
Thing Two
A Quick Take On Social Security And Retirement Planning
Alicia Munnell, a frequent Marketwatch contributor and the director of Boston College’s Retirement Research Institute, recently said:
“If you delay taking Social Security from age 62 to age 70, your eventual monthly checks will be 76% bigger.”
That’s because of the compounding effect. For every year you hold off collecting your monthly benefits between 62 and 70, you get an 8% raise. So, for example, if you were due to collect $1450 per month at age 62 and you could wait until age 70 to start collecting a monthly check, you would receive $2560 per month instead - for the rest of your life, with cost of living increases for inflation. Collecting $1110 more per month is a great deal if you can hold off taking the benefit for that long. The problem for many of us is we can’t hold off because we need the income.
Don’t wait until retirement is around the corner to start figuring out that’s a problem for you. Start working on it now. And encourage younger people you know (yes, even people in their twenties, in fact, especially them) to start now too.
Thing Three
Just A Thought
"If I had to do it all over again, I would do it all over again." - Yogi Berra