"The Wolf of Wall Street" was a love letter to greed and excess. It also glorified criminal behavior, and it shoved the notion that the only way to get ahead in this world was to step over anyone in your way -- and, not to mention, was incredibly entertaining.
But, come on, there has to be some moral silver lining... right?
Well, perhaps we can view The Wolf of Wall Street as a warning. There are people who will attempt to take advantage of us, and it up to us to protect ourselves and our finances.
So, the next time you get a call from an overzealous broker, I've got seven ways to muzzle the Wolves of Wall Street and begin on your path to accumulating true wealth.
1. The market isn't a get-rich-quick scheme
It's fair to watch the Wolf of Wall Street and believe that Leonardo DiCaprio's character, Jordan Belfort, is just a villain conning people out of their money -- because in a lot of ways that's true.
The movie, however, focuses exclusively on the broker's end of the phone, but there's someone on the other side, someone -- whether through desperation or greed -- who buys into what Belfort is selling. Which is that the market can make you quick money.
Let go of that notion -- if you haven't already -- and buy into the idea that investing is a process of accumulating wealth over time, and you'll be one step closer to never getting taken by a sleazy broker.
2. Handle your own investing
There isn't a whole lot we can do to stop the wicked few from cheating the market, but if you don't want to get manipulated by a broker, then don't have one!
3. Cut down on trades
There's this great scene in the beginning of the movie with DiCaprio and McConaughey, where McConaughey explains that the key to this business is moving your client's money into your pocket. That scene, looking back now, really becomes the catalyst for the entire movie.
Commissions are the fees brokers collect for executing your trades. The more trades you make, the more commission they collect and, in turn, the less you make on your investments.
The best way to avoid commissions killing your earnings is to first keep commissions to about 1% of your purchases, and second, think of your investments in years instead of weeks or, even worse, days.
4. No one can predict the market
Every salesmen in the movie sold with a sense of urgency by playing on the client's fear of missing out on a fantastic opportunity, and sometimes there really are fantastic opportunities.
Fantastic opportunities to make money, however, will often share a lot of the same characteristics with great opportunities to lose money.
Don't be fooled; no one, not even Warren Buffett, knows what the market is going to do in a given year, and that's why avoiding risk is, and should always be, priority No.1.
5. Know what you're buying
The strategy behind the business that DiCaprio's character creates, while despicable, is ingenious. I don't want to give away too much for those who haven't seen the movie yet, but the strategy was to earn the client's trust so they could sell clients the stocks they wanted them to buy.
The fact is, brokers push stocks all the time. Maybe because their boss said so, or they did some research and see a honest opportunity. Either way, buying into companies you don't understand -- even when someone else is directly handling your finances -- is just bad business, because imagine if your advisor quits, and now you're stuck with a portfolio full of stocks you don't understand. Ouch.
6. Avoid IPOs
As the movie, and Jordan Belfort's business, progresses, Belfort starts getting into IPOs. And why not? Initial public offerings are extremely volatile and one of the fastest ways to make large chunks of money -- which is especially true if you're manipulating the market.
For the rest of us, though, it's best to leave IPOs for Wall Streeters. Give the company some time to get its feet wet, then take a step back and see if the business looks sustainable.
7. Literally never buy penny stocks
The movie takes off once Belfort starts working as a broker selling penny stocks. He has little to no information to work off of, which can make pitching stocks difficult -- that is, unless you don't mind coloring outside the lines.
As I said earlier, never buy a company you've never heard of, or you one don't understand, and this goes double for penny stocks.
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