Bored with your job ? Sick of taking orders all day ? You are not the only one who is thinking of becoming full time investor, but before you take the plunge, I want to persuade you to remain in your job and continue as salaried investor (SI)

A salaried investor has tremendous edge over a full time participant in market, What are those edges ? Let explore them

Your bread is not dependent on returns from markets

This is an obvious edge, bear market or bull market, you take home a salary thereby ensuring basic necessities of you and your family is taken care of, you don’t have to sell your shares in distress to pay bills.

You will be less stuck to the screen

In any competitive job, no company will leave you without extracting 60-80 hours a week, which means you will have limited time outside work. This is great as you will miss the daily swings in markets, as Daniel Kahneman wrote in “Thinking Fast and Slow”

Closely following daily fluctuations is a losing proposition, because the pain of the frequent small losses exceeds the pleasure of the equally frequent small gains. Once a quarter is enough, and may be more than enough for individual investors. In addition to improving the emotional quality of life, the deliberate avoidance of exposure to short-term outcomes improves the quality of both decisions and outcomes

With a full time job you will have only 6-10 hours per week to dedicate towards investing which will force you to focus on quality reading and developing a robust reusable investing checklist

 You will have capacity to suffer

See below graph for a typical SI

SI edge-1

Investopedia defines human capital as

Human capital is the present value of all future wages. When you are young, it is usually the most valuable asset that you own. Human capital is also your best protection against inflation. With a strong professional skill set, you will always command a fair wage, no matter how inflated your local currency becomes.

As a SI, you have abundant human capital that provides you to capacity to suffer on your financial capital especially early in your career. This is a tremendous comfort factor to make contrarian and bets.

You can think long term

With no dependency on money from markets for your day to day living, you can make investing decisions on three to five year basis or even more. By making investments for three to five years you will increase your probability to making decent returns from markets

Recently, I read a very good blog post from Rajat Sharma of Sana securities, a diversified portfolio of equity of sector leaders from 2005 has beaten most of FD/Bonds return on a 3 year and 5 year rolling basis

SI edge-2

You develop a time edge over majority of market participants, who are chasing daily returns

You will have behavioural edge

Remember what Warren Buffet wrote in foreword to Intelligent investor

To invest successfully over a lifetime doesn’t require a stratospheric IQ , unusual business insights, or inside information. What needed is sound intellectual framework for making decisions and ability to keep emotions from corroding that framework

By default being busy in day job makes you less active in markets making you less prone to emotional roller coaster decisions this is perfectly captured by a wonderful article by Prof Sanjay Bakshi

SI edge-3

The Taxman will be on your side

This is what Warren Buffet wrote in his annual letters to shareholders,

Because of the way the tax law works, the Rip Van Winkle style of investing that we favour if successful – has an important mathematical edge over a more frenzied approach

With a long term focus, you will generate long term returns, which are tax free. In investing there are only two external enemies – Taxes and Inflation (all other enemies are internal) , by having a longer investing horizon you will have taxman on your side

You will have less stress

A beautiful line from Laurence Endersen’s Pebbles of perception captures this very well

An underappreciated aspect of life is that rewards received are not directly proportional to effort expended. Understanding that principle early in life will make a meaningful difference to your quality of life

As full time investor, you will strive very hard to beat markets and since everybody is trying to do so (at least in theory) it is not going to be easy conversely as a SI you will be happy with returns exceeding FD/Bonds

Finally,

As a SI you can attune yourself to work towards Gary Klein’s equation to improve performance

SI edge-4

References for post

Rajat Sharma post

Prof Bakshi post

Note – I am not suggesting full time investors don’t have above edges, but I have hardly seen daily full time market participants (read traders) depicting these