Once you cross that hurdle of becoming a consistently profitable trader, it can be alluring to let your trading account keep growing.
But, most trading strategies are cyclical, meaning there will be some sustained drawdown periods. In order to weather these inevitable storms, it’s a good idea to use some of the proceeds of your trading to produce other income streams.
Whether that’s real estate, dividend stocks, or even a small business, establishing a security blanket around your life that doesn’t revolve trading can actually make you a better trader.
Trading with the mindset of “I need to make money today to pay for my son’s hockey league,” is suboptimal at best and catastrophic at worst.
A trader who has an interesting approach to diversifying his wealth is Phil, also known as @OzarkTrades on Twitter. As Aaron from Chat With Traders put it, he is “short hype stocks, long farmland.”
Phil described in his interview with Aaron that his farmland tenants are stable unlike those of multi-family buildings, and farmland has historically appreciated at around 5% annually.