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November 11, 2010

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Pretty much any business that doesn't involve a corner shop and making sandwiches.

Did you notice the common factor in your list? Almost all of them (except the foreclosure one) involve betting against the 'other guy' on the other side of the transaction: you can bet HE'S a professional and you're not. So why are you buying what he's selling?!

My favorite that is not on the list but is buying high and selling low. Take Ford stock at $16 a share 4 years ago then two years ago sell it for $2.50 a share in a panic crash and then watch it come back to $16 a share.

The guy is still moaning at work.

You an add gambling to the list, although daytrading pretty much falls into that category.

I used to be bolder and invest in individual stocks. Then a company I really believed in and had good numbers tanked, and I realized that even companies that seem to be doing everything right can go down precipitously too. I pretty much stick to index funds now.

Robbing a bank? Dealing drugs? Start a pimping business?

Starting your own business.

Micro Cap investing/ Venture Capital.

Commodities trading.

Anything involving leverage.

Well I have #1 and #5 covered ... I wouldn't say I get rich doing it but I make a good living.

AJC has a good point: to make money when trading you have to be not just good, but better than almost everyone else. Yet everyone seems to think it should be easy.

As this good paper shows, most day-traders lose money. My bet is only 5% who try it make a significant amount and under 1% can make a lot of money. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=529063

As a "Get rich slowly" believer I have never tried #1 thru #4 but I have tried #5 but never made any money with it. My first experience with selling short happened a few decades ago. My broker called me up at work and told me that US Steel was going to have a really bad earnings report and convinced me to sell it short. I did. About a week later the earnings were announced and they were indeed very bad but the stock went up that day. His story then was that so many people knew the bad earnings were coming and that it had already been factored into the stock price and now that all of the bad news was already out it was natural that the buyers would come, which they did.

Another technique that I tried a few times but it never worked for me was "Buying on Margin".

What has worked for me is not being greedy, getting rich slowly, and using diversified mutual funds.

Every time I've tried any of the strategies in the above post I've lost money.

Only savings works to generate wealth.

I don't have the midas touch.

-Mike

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