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I’ve been running around for over a decade with a degree in Finance – so long that it is almost paid for - but I never really thought that was enough to dispense advice to anyone other than my kids or an occasional “man on the street.” (Such as – “get a job”) But, I have become wise, or matured, or whatever it is you call it when you lose money in the stock market.

This is an exciting time because I have lived through one of those “life lesson” kind of deals. I can honestly say the experience was educational and now I feel qualified to start giving financial advice.* The following is an excerpt from my forth-coming book - “Getting the Most Out of Government Sponsored Retirement.”

How to Lose Money in the Stock Market

As the old adage goes, you have to have money to lose money. To simply say “I want to lose money in the stock market” is not enough, no matter how badly you want it. It would be fantastic if we were all so wealthy that we could just throw money into whatever investment came along, but this is just not possible. So, most of us need to save a little bit every month, and put it in a 401(k).

Don’t worry if the name sounds confusing – it is. In layman’s terms, a 401(k) (named after the man that invented it – George Kenunky, on his 401^st try) is a savings plan where your employer takes some of your pre-tax pay and puts it in a retirement account for you. Often your employer will “match” your contribution on a percentage basis. (This is known as “free money.”) The money will be put in every month, giving you ample opportunity to buy stocks or mutual funds at the wrong time. Then, if you live to see retirement age, you will get back anything that is left in your account, less taxes.

Under this plan, it is assumed that you will be in a lower tax bracket after you retire. Also, it is assumed that tax rates will not go up substantially. If either assumption is wrong, then you will pay more taxes on your earnings tomorrow than you would today, so the whole 401(k) thing – apart from the “free money” from your employer – is a perfect way to lose money without even trying. If you want to ensure that you are in a lower tax bracket in 20 or 30 years, I recommend working just hard enough to not get fired and saving as little as you can. To ensure that tax rates do not go above 50%, I recommend not voting for Hillary.

The 401(k) is how most people save for retirement, which is why I think most of you will easily be able to lose as much money as you want. But, if you are currently, or are planning on making gobs of money, then you will want a secondary approach. To you I recommend hiring a broker. Brokers are skilled artisans at losing your money whilst lining their pockets. The way they accomplish this is affectionately known as “churning.” I’ll offer an example.

If you bought one mutual fund today and stayed in that fund for the rest of your life, you would reap the benefits the growth and income experienced in that fund. (More on how to avoid these “good” investments later.) But, your broker would only make money on your first buy, and then they would just sit there, playing online Poker and not really thinking about you. So, to avoid this, brokers like for you to sell these types of “good” investments occasionally and buy other “good” investments. (Sometimes called “better” investments.) If they can get you out of one thing and into another several times a year, then they make more money. You might make more money, but you also have potential to lose money. Plus, you are paying commissions every time you buy and sell, so this is a really good way to see your nest egg shrivel like a shrinky-dink.

To combat the feeling that investors were getting burned, many companies started offering low-cost trades without brokers. If you think you are ready for this route, I commend you – you are on your way to losing tons of money. Commonly the “good” investor will select a mutual fund that is tied to an index or that is specifically designed to meet their needs of growth or income. These are the good investments that I mentioned earlier, and you should avoid them like the plague. You might lose a little here and there, but over the course of 20 years you will end up making money with these, so I recommend against them.

It is far better to select individual stocks – preferably ones that people send you information about in your email. These stocks can cost as little as $1.00 a share. The emails will tell you that they have the “potential” to go to $10.00 a share or more, but that is really a lie. These stocks will inevitably tank, possibly imploding into non-existence. These are the ones to which you want to hitch your sail. Imagine sinking $5,000 or even $10,000 into one of these beauties on a Tuesday and then finding out Friday morning that the company has folded, or left the country. That is where the real players lose their money.

I hope I have offered some real-world guidance on how to lose money in the stock market. It takes some guavas, but if you follow my instruction, you should be as mature and worldly as I am in no time.

*Jay Groce is not a licensed anything. Taking his advice is inadvisable and will certainly lead to death or financial ruin, or both.

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