Michael Marcus is an American commodities trader who, between the early 1970s and late 1990s, turned his initial $30,000 stake into $80 million. His is a classic rags-to-riches story.
Profiled in the investment classic Market Wizards by Jack Schwager, Marcus is still trading almost 50 years later. His investment approach will even help you gain a greater return from your business or career.
Begin With A Personal Stake
After graduating from college in 1969, Marcus invested his life savings of $1000 in trading soybeans, wheat and other commodities. Marcus continued trading (partly funded by a loan from a family member) after taking a job as a research analyst at a brokerage.
Marcus said about his early days, “…trading was a release and hobby for me. It replaced a lot of other things in my life.”
Although he lost his initial stake, Marcus gained a basic education about commodities trading, and he was able to gather more capital together and learn through taking action on his ideas.
If you’re setting up a side business, your personal stake is the money you invested launching a website or the time spent each night developing your product after work.
For example, a self-published author, might have to invest some of their money to create and sell their first professional book and launch their author website.
Whatever your business, investing a personal stake like Marcus did will help you acquire skills faster than simply taking a course or reading a book about an area that interests you.
Weigh Opportunity Costs
In the early 1970s, Marcus began taking his burgeoning hobby more seriously. He invested $30,000 of his savings and an additional $20,000 borrowed from his mother.
Marcus learned about managing his risk and avoiding betting everything on a single investment.
“Always bet less than 5 percent of your money on any one idea. That way you can be wrong more than twenty times; it will take you a long time to lose your money.”
He also discovered successful commodities traders weigh opportunity costs. Deploying their capital into one trade means they’ve less for the next one. And there’s always another one.
If you decide to start a business, your opportunity costs might be your favorite hobby that you now have little time for. Or if you spend several years working for one company, the opportunity costs might be an alternative career in a different industry.
It’s up to you to decide if these costs are worthwhile and determine what’s important to you. Reflecting on a career during which he’s lost and earned millions, Marcus said:
“I have learned not to be as attached to material things. I accepted it as a life lesson. I learned I don’t have to own a house in every beautiful place in the world; I can stay at a hotel and walk on the beach or climb a trail there. Or, if I really feel like spoiling myself, I can charter a plane; I don’t have to own one.”
Cut Your Losers
Marcus’s most important takeaway for aspiring traders and readers is to hold onto winners and cut losers.
“If you don’t stay with your winners, you are not going to be able to pay for the losers,” he said.
I took from this insight one important life lesson: look at what’s adding value to your life or your business before deciding what to do more or less of.
A business coach, for example, might earn a significant income from their practice that enables them to work fewer hours.
However, this coach might also work with a difficult and mentally draining client. If so, the coach might want to let this client go at the end of their contract, even if it means a short-term dip in revenue.
Bold decisions about investing or your business require courage. Marcus said.
“Being a successful trader also takes courage: the courage to try, the courage to fail, the courage to succeed, and the courage to keep on going when the going gets tough,”
His insight is useful what you aspire to achieve.
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