Ask Colin

I have left it very late to try to accumulate enough money for my retirement. Is share trading a way to make up for lost time?

I often find myself fielding this question. It worries me that the reason you might want to trade is to "catch up" for lost time. This is one of the worst reasons of all, because it can easily lead into what we can "over trading" or taking large risks to try to get extaordinary returns. This can easily take you past the optimal trade size and into the area where your risk of ruin is almost a certainty. Gamblers do this in casinos all the time and mostly lose everything. There is agood discussion of these ideas in Robert Rotella's book The Elements of Successful Trading.

From all my reading and experience, I do not believe there is any short-cut to riches from trading. We cannot go back and change the life decisions we have already made. We should all have started saving and investing when we first left school. If we did not, then that is tough. We chose not to, whether we realised the implications of that decision or not, and we have to live with it. All we can influence is what we do from this moment onward.

The real secret in investing is to be consistent. You find an approach that works and stick with it. John Train says that even a mediocre approach applied consistently will beat someone who chops and changes all the time. This is also my experience. Whether the approach you choose is trading-based or more passive, it will take you years to learn. You need to like the work or you will not have the motivation.

If you have not saved and invested enough to date, you need to start. Then you can work out a plan of how much you can realistically have to live on at any future time. If this is not enough you have to earn and save more or earn or save longer. This last one is not out of the question - Rupert Murdoch is still working at 70 and many others keep working even longer. Rupert may not need to work at 70, but others do because they did not or were not able to save and invest earlier in life. As Malcolm Fraser reminded us "Life was not meant to be easy", or as someone else said, "there are no free lunches" in life.

If the reality is that you need to earn more to save and invest enough to retire on, then ignoring this reality and chasing the impossible, will only make it worse. Accepting reality and making the tough choices is the only way.