For some service members, the action they\u2019re seeing isn\u2019t on the battlefield \u2014 it\u2019s in the markets. While some are making big money through high-risk stock trading and other short-term, risky investments, others worry that this approach might not end well.<\/p>\n
A recent Wall Street Journal article reports that military bases and barracks \u201care fertile ground for investing frenzies,\u201d since they\u2019re \u201cfull of young people \u2014 many already natural risk-takers \u2014 with time to kill, disposable income and few taboos\u201d (1).<\/p>\n
Pay levels for U.S. military members are part of the public record, so there\u2019s also a culture of openness about finances in the sector (2). Plus, with high job security and guaranteed pensions, some may feel they can afford to take investment risks.<\/p>\n
Add to that the camaraderie among troops, which is conducive to sharing investment ideas and trading victories, and we\u2019re seeing a new wave of \u201cTop Gun traders\u201d piling into high-risk bets such as tech stocks, cryptocurrency, and meme stocks.<\/p>\n
Take Coast Guard Petty Officer Third Class Bryson Saunders, who was an avid day trader before becoming a finance influencer on top of his military day job. He made money on Tesla stocks \u2014 but also once lost more than $10,000 in a single day trading crypto-related assets, he told the Journal.<\/p>\n
But many young service members have never experienced a prolonged bear market. So, when the inevitable big correction comes, \u201cThey\u2019re in for some hurt,\u201d Brian O\u2019Neill, a financial advisor and Air Force veteran, told the Journal (1).<\/p>\n
And that could sabotage their long-term retirement plans.<\/p>\n
This isn\u2019t the first time we\u2019ve seen \u201cTop Gun\u201d traders. Cryptocurrencies spread through the military like wildfire in the early 2020s, helping to drive a surge in crypto prices, according to the Journal. This crypto-mania, along with meme stocks, got many in the troops hooked on investing.<\/p>\n
But the rise of investment apps that make it easy to trade has supercharged this investment culture. And some highly regimented military personnel are falling into the same risky behaviors that plague retail traders. Accessibility, hype and even peer pressure can overwhelm discipline and derail financial plans.<\/p>\n
Story Continues <\/p>\n
Much of this investing is in single stocks and cryptocurrencies, with an emphasis on short-term gains. While there are some success stories, evidenced by anecdotes of service members spending tens of thousands on Rolex watches and hundreds of thousands on Porsches, others have also suffered large losses (1).<\/p>\n
Multiple studies show that, after accounting for fees, day traders rarely make money in the long term (3).<\/p>\n
Trader and money manager James \u201cRev Shark\u201d DePorre argues that \u201cThe biggest reason most day traders fail is that they really aren\u2019t traders; they are gamblers,\u201d and they have a gambling mindset (4).<\/p>\n
These investors typically place their capital on just one or two trades, which carry high risk. When losses occur, they often take on even more risk in an attempt to recover. They also rarely adjust their trading style to changing market conditions.<\/p>\n
Even moving from day trading to the still short-term, but not lightning-fast active trading<\/a> is unlikely to help much. While it may not come with a gambling mindset, it\u2019s still sub-optimal.<\/p>\n Read More: The average net worth of Americans is a surprising $620,654. But it almost means nothing. Here\u2019s the number that counts (and how to make it skyrocket)<\/a><\/strong><\/p>\n There are a few lessons to be learned from the military\u2019s high-risk investing culture. Service members could channel that discipline and enthusiasm into building wealth early, but leave behind the concentrated bets, unresearched speculation and FOMO-driven trades.<\/p>\n To build and preserve wealth, many financial advisors recommend staying invested \u2014 not trying to time the market.<\/p>\n Opportunity cost and unreliable trade signals are the main reasons market timing doesn\u2019t work, according to Morningstar research (5). When traders stay out of the market, they forgo the stock market\u2019s long-term returns for little to nothing in cash or very low returns in bonds. Historically, according to Morningstar, this could cost them about half a percentage point per month (5).<\/p>\n Research shows that many of the best single days in the market happen during long-term bear markets when prices are down. Attempting to time the market risks missing these key occasions, which can significantly reduce long-term returns.<\/p>\n For example, if you invested $10,000 in the S&P 500 in January 2003 and stayed in the market until December 2022, your investment would have grown to $64,844. Alternatively, if you tried timing the market and missed only the best 10 days \u2014 seven of which occurred during bear markets \u2014 you would have $29,708, which is less than half (6).<\/p>\n A qualified advisor could help you develop a financial plan that includes identifying and quantifying your long-term goals and then determining how much you need to save and how often.<\/p>\n To further reduce your risk, diversify your investments across asset classes, within asset classes and with multiple investment styles such as growth and value. You can also diversify stocks by sector, industry and country.<\/p>\n For some, it can be hard to resist the adrenaline-fueled \u201cwin big fast\u201d mentality. But balancing risk with long-term goals means your Porsche can be a symbol of wealth \u2014 not just a reminder of that one great trade years ago.<\/p>\n We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines<\/a>.<\/p>\n Wall Street Journal (1<\/a>); Defense Finance and Accounting Service (2<\/a>); Quantified Strategies (3<\/a>); The Street (4<\/a>); Morningstar (5<\/a>); Visual Capitalilst (6<\/a>)<\/p>\n This article provides information only and should not be construed as advice. It is provided without warranty of any kind.<\/p>\n","protected":false},"excerpt":{"rendered":"For some service members, the action they\u2019re seeing isn\u2019t on the battlefield \u2014 it\u2019s in the markets. 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