Tutorial Essay: BSc Banking and International Finance


A Fool and His Money The Odyssey of an average investor


John Rothchild is the money hungry "average investor" who stumbles from stocks to options to bonds and then ends up with this cautionary tale of the stock markets. The twenty-four tips he emphasises within this tale are based on his own experiences during his quest to become rich. The six tips discussed below show some of the different aspects of the stock trading experience.


Useful Tip Number Five is "One man's cash is another man's correction". Rothchild has advised this tip especially as its implication is twofold. Firstly, it suggests that those investors who had the "courage to hold" during this rising market had their stock coming "back Strong" from the low point in 1929 to earn the "cash". Those who weren't patient lost the chance to see their stock rising in value are to learn from this and make a "correction" in the future, hence the name of the chapter "The lessons of history". However, it can also mean that taking risks in such trading have two opposite outcomes and that we need to accept any either. The essence of this advice is to learn from mistakes and to be aware of risks involved.


Barring in mind that a brokers earnings are also based on commission, it is important to remember they would be highly persuasive, hence, Useful Tip Number Eight "The first thing the broker recommends will make him the highest commission" is advised by Rothchild. Their persuasiveness is proven as Rothchild was being cautious in his trading when the broker hinted "about his new red Porsche and his decision to take more chances and live for today". The tip also hints it is important to remain independent in making trading decisions and to...