Have you ever wondered what the lifecycle of a investor or trader is? 

Through my years of experience I've been lucky enough to have witnessed the progression that most investors and traders make. I've dealt with some of the most sophisticated investors in the world, the Moms and the Pops, and I've seen some of the biggest scammers at work.

Here I share my experience:

Phase 1: The Rookies

These people are defined as new entrants into the capital markets.  They realize they don't know much at all, but they are absolutely correct. They don't know much! This can lead to devestating losses initially. However, over time they actually realize they know even less than they thought, which actually helps them out.... why?

Phase 2: The Indexers

Now the rookies finally know enough to know that they don't know. They generally understand benchmarks and the different vehicles available. They know they don't stand a chance against the pros and machines. So what do they do? They index.

Phase 3: The Destroyers

Many people simply stop in the Indexer phase (which is probably a good thing). However, some move onto to arguably the most dangerous stage of them all. The Destroyers.

These people still do not hae a ton of experience or knowledge. But they certainly think they do. They are arrogant. They scam. And they brag. But generally these people still do not produce an excess return. Excuses are the norm here. Benchmarks aren't worthy for them, the markets were manipulated....

To top it off just wait to see you see the picture of them on a yacht..... (ps: its photoshopped)

Phase 4: The Alphas

First and foremost, not all alphas can achieve excess returns consistently. But this is the only phase where they even have the potential to get consistent excess returns.

They've been around the block, but they are humble enough to know that they don't know everything. They recognize that beating the markets is really damn hard. They recognize that a backtested crossover strategy is probably bullshit going forward. 

These are the people that you should be learning from, but their answers are truly "it depends". Unfortunately the Destroyers are the primary teacher due to their brash nature.

Phase 5: The Madoffs

Very few people get to this phase. Heck, very few people even become alphas. The outcome of a Madoff is similar to a Destroyer.  Overconfidence kills them both. But if I had to pin it down Destroyers are more prone to investing/trading incorrectly. For example they utilize a strategy that will not produce long term excess returns (although they think it will). Madoffs generally have good investment strategies, but practice poor risk management. 

Which phase do you think you are in?