“There can be no real individual freedom in the presence of economic insecurity.”

So said Chester Bowles, the former Connecticut Governor and adviser to JFK and others, famous mostly for having been around when interesting and important decisions were being made at the highest levels of government, rather than actually having made them himself. Just like the proverbial blind squirrel, however, even Mr. Bowles could find a nut once in a while, and his words above constitute an observation worth noting.

The continued chaos in the various financial markets is becoming a daily expectation. When does an aberrant event forfeit its distinction as such? When financial pundits and prognosticators are made to appear the fool with distressing regularity, what is the average investor to do? I don’t pretend to know what they ought to do, other than in the global sense, but I can say what they are doing – some are blithely proceeding like lambs to the slaughter while others are quaking in fear on the sidelines. Both postures are nothing less than either the complete lack of a plan for approaching a given market or a lack of discipline to follow a plan if one does exist.

I speak every day to active traders, and those who perform well consistently, inform me that the reason that they can reliably reap a positive harvest (given that no one succeeds every time and even the best are sometimes whip-sawed) is that nearly everyone else is diving into the volatile waters without the slightest idea what they will do if their wildest dreams do not immediately come to pass. Most investors have no plan – they make an investment or open a position because they heard somewhere that they should, and then they sit back, checking the financial news from time to time or staring fixedly at the colorful charts and graphs on their computer screens, and hope it “goes up”.

As has been so often repeated, hope is not a plan.

Personally, I am comfortable neither giving nor receiving advice about specific investments. Establishing a plan – taking into account one’s available assets, tolerance for risk, and clearly defining one’s goals – is an entirely different thing, and something which should be priority one for any investor who hopes to achieve the ability to make their own decisions, and to have at least a fighting chance to achieve their individual freedom. And notwithstanding the opinion of Mr. Bowles, who implies that the economic security he speaks of can only be bestowed upon us by some vague and distant entity (most likely he refers to the government), the truth is that if you are to have it, you must take it yourself.

Hence, the need for a plan.

For reasons I won’t go into here, I am no fan of George Soros – but he is right on when he says, “It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.”

The title of this article is a reference to the fatalistic emotional state of the all-too-prevalent unprepared, drowning in information investor-without-a-plan that one encounters whether at birthday parties or brokerages when the subject of investing comes up. Everyone seems to be either dispensing or searching for the proverbial “tip” that, in one fell swoop, will make up for all those losing trades of the past.

These poor souls would benefit from the wake-up call sounded by Elliot Wave International’s Futures Junctures Service editor Jeffrey Kennedy, writing earlier this year in his popular Trader’s Classroom column, when he isolated what he referred to as “The 5 Fatal Flaws of Trading”. He refers to a “monstrous, invisible hand” that seems to just reach into your trading account and take out the money, no matter how hard one has worked, how many books have been read, how many seminars attended, or how many trading platforms tested. Regardless, it seems to many, the hand will ultimately reach in, grab your money, and go.

The fact that this applies to both the novice and the apparently well informed is the big tip-off here.

The simple truth is that investing is as much art as science; more so than ever as investors and investing volume have increased to unheard-of levels. One can do all the research one cares to, and because the markets move based not upon corporate fundamentals but instead upon the emotions of large groups of people – the ability to predict their movements remains elusive. And still, just like in Las Vegas, there is always another investor, eagerly waiting to take a seat at the table without regard that the former seat holder relinquished his spot poorer than he was when he first sat down.

Kennedy thinks he knows why this is, generally, although no magic formula has ever been found. It is much more about what the average, and even the better than average, investor fails to do than what they often have done (study, practice, read, etc.). His Fatal Five are these -