A Millennial investor avoids 401(k)s, keeps his money in trading accounts – USA TODAY

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Market traders like James Pollard don’t always play by the traditional rules of investing.

For instance, Pollard, 24, a marketing consultant and owner of TheAdvisorCoach.com, which helps financial advisers attract new clients, prefers easy access to his hard-earned cash. 

“I’d rather have access to my money using stock trading accounts like Robinhood instead of tying it up in a 401(k) or IRA.”

While he takes a lot of heat for such comments, he’s not your typical brash, fast-talking trader.

“I’ve been trading since 2011, after reading several books on the subject,” says Pollard, a University of Delaware alum. His favorites include Secrets for Profiting in Bull and Bear Markets by Stan Weinstein and Technical Analysis of the Financial Markets by John J. Murphy.

Before making any significant trades, he stockpiled his cash. That strategy, combined with running a company that is on track to earn six figures by year’s end, helped him shore up his funds. 

“I actually save 60%-70% of my income per month into various dividend stocks,” says Pollard. “Whenever a dividend poses a good deal, I buy.”

More: Millennials: Here’s how to save and invest when you’re just getting by

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In addition, as the owner of his Newark, De.-based advisery firm, he has more than two years of emergency expenses set aside. “Knowing that I have a good amount saved up helps me to manage the ‘what ifs’,” he says.

What’s more, he is not trading incessantly throughout the day, but does pull the trigger at least twice weekly. His investments fluctuate, although he keeps a steady mix of blue chips — high-quality businesses that have steady profits and reliable dividends — such as Exxon, GE and AT&T. 

“When I make an investment, I don’t go in with a naked trade, I’m prepared to hold,” says Pollard. “Mentally, I have a stop loss, but I don’t want to risk having a bad investment so I will ride the market out.”

He also dabbles in more speculative activity, investing in products like Bitcoin and Ethereum. The price of both digital currencies has soared since last year. Bitcoin prices increased to almost $5,000 in mid-October from $635 a year ago, according to CoinDesk Inc., a news and information firm that tracks the currencies.

To date, Pollard states that he has lost and won thousands in a single day. To fund his trading activities, he keeps at least $25,000 in liquid assets in a brokerage platform with money earmarked for trading. “I only trade with 5% of my trading capital at any given time,” he says. “It isn’t income or pay, it’s 5% of the money I set aside to use for trading.” 

He never worries about “going all in” because as he points out: “I’m extremely disciplined that way, and I’ve seen too many people lose a lot of money deviating from their own rules.”

Despite his pension for market trading, Pollard offers this advice to other Millennials: “It definitely shouldn’t be considered your entire retirement strategy,” he says. “If you learn what you have to do, then wait for the opportunity, you can make it work.”

Carlos Dias Jr., a wealth manager and financial adviser at MVP Wealth Management Group and Excel Tax & Wealth Group in Orlando, Fla., says as a passive investor, James is buying and holding the right companies such as AT&T and Walmart. However, as a day trader, price fluctuations and transaction fees can be problematic. 

“You can make some real money trading, but you really have to know what you are doing,” says Dias, who has previously purchased penny stocks. “James sounds like he is more of a buy-and-hold investor focusing on large companies that provide stability, through dividends, but he has to think about how to save some money for the future.” 

For investors considering market trading, Dias has this advice:

Set up a 401(k). As an entrepreneur, James can set up his own retirement plan such as a Simple 401(k) or Simple IRA. Dias explains: “These plans are good for employers who have less than 100 employees and received at least $5,000 in compensation for the previous year.” When you have the money to set aside, it’s important to save for the future, he says.

Beware of keeping too much cash. If Pollard were ever sued, a litigant could come after his cash accounts. “James’ biggest liability is keeping his money in non-qualified accounts, meaning non-retirement accounts, and that leaves that money available to collection,” Dias says. 

Protect your portfolio. James reserves 5% of his trading portfolio for investments, which is good, but Dias advises new traders to beware of going overboard. “Don’t just look at the profits you can make, look at how much you can lose on one transaction or multiple transactions,” he says. Instead of chasing returns, set aside a small amount of money to invest.

 

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