Squaring up with one another weekly, Dylan Ratigan, former CNBC host, and Tom Sosnoff, Co-CEO of dough, Inc. and tastytrade host, go head-to-head on the state of the market, opportunities for individual investors and traditional approaches to investing.

In the third Episode of Truth of Skepticism, these two financial heavyweights face off in a discussion about responsibility, complexity and frequency as they apply to the average investor. Ratigan addresses a few specific points of skepticism with Sosnoff throughout the piece.

  1. complexity (can an average investor with limited financial experience overcome the initial barriers to entering the world of trading?)
  2. frequency (can an average investor realistically keep up with the level of frequency a more engaged approach to investing requires?)
  3. responsibility (can an average investor come to terms with the amount of personal responsibility that comes along with trading?)
  4. stimulation risk (can the average investor avoid the pitfalls of becoming overconfident after limited exposure, or initial success?)

In this blog post you'll find some of Ratigan's main arguments, along with Sosnoff's rebuttals. Watch the full segment below and catch a brand new episode here.

Truth or Skepticism | Episode 3 - 7th Inning Stretch

is the tastytrade methodology too complex for the average investor?

Ratigan kicks off the episode titled, 7th Inning Stretch, with a challenge Sosnoff and his team have been trying to disprove for more than a decade, the idea that the sort of financial management tastytrade encourages viewers to partake in is simply too complex for the everyday investor. He argues that, though the math and risk behind the sort of active participation Sosnoff advocates does indeed make sense, someone who's only tangible investing experience has been to put their money in an index fund, or buy stock in a publicly traded company and hold it, is likely going to struggle during the learning process. "Depending on where you are in the financial learning curve," Ratigan says, "complexity is in the eye of the beholder." Sosnoff begs to differ. 

If you can order a pizza, you can trade. Choosing a product is like choosing ingredients, there are only a few.
— Tom Sosnoff

Sosnoff eludes to the fact that people said the same thing in 1999 when he and Scott Sheridan created thinkorswim. Critics accused the platform of being too difficult to figure out and predicted that no one would use it. "Now over a million people use it," Sosnoff says. He argues that the learning curve is actually only a few hours of someone's time, which is well worth the inherent benefits of becoming more financially savvy. He also points out that with emerging technology like dough, his newest trading platform (launched in 2014), the learning curve has actually become less steep, more interactive and fun.

Does the tastytrade methodology require an unrealistic amount of frequency for the average investor?

Ratigan's second challenge is that the level of frequency required in regard to checking in on the market and one's active positions is too much to expect of the average investor. "Passive investing, index investing, or even long-only, buy and hold value traditional investing allows me much less anxiety in my day-to-day relative to the financial and markets. It opens my life up to be involved with other things, while receiving some percentage of the benefits of a bull market," he says.

Sosnoff argues that a much larger percentage of the population is capable of both understanding and behaving with this level of frequency. Referencing behavioral learning he says that taking more personal responsibility in finance and investing is just another behavior that anyone is capable of learning.

Frequency is a by-product of success and engagement. There’s no such thing as too frequent.
— Tom Sosnoff

Sosnoff finishes by reiterating that some of the most actively engaged tastytrade viewers and options traders he interacts with are doctors, lawyers and technologists. Though they're professional lives demand an absorbent amount of time and focus, they've made time to actively manage their money because they're interested in learning more, even if only the slightest bit, about finance, investing or business.

Does the tastytrade methodology require too much personal responsibility for the average investor?

Ratigan's third challenge deals with the traditional investor's relationships with personal responsibility. "At the very least, when I take a loss on my S&P 500 index fund I have the capacity to assign responsibility for those losses away from myself," he says. Ratigan points out that most investors live in a world in which most people are encouraged, even trained to think that they're better off assigning the responsibility for their own financial well-being to someone who has been labeled as an expert, someone who is, in fact, not themselves.

I’m a little anxious about being forced to have no one to blame but myself.
— Dylan Ratigan

He admits that while he is indeed uncertain, even doubtful, about the so called "experts" ability, he's even more uncertain about the individual investor's ability. "Not only am I skeptical of the pick your favorite pro to generate alpha, I'm equally skeptical of my own ability to generate alpha." Speaking on behalf his constituents, which he and Sosnoff consider the majority of the population remaining skeptical of playing a more active role in the management of their personal portfolios, Ratigan painted an interesting portrait of this individual's opinion.

"If I make money, I made money by virtue of participating passively in something I wasn't really in control of, but I'm an optimist and I'm a bull on America. I'm basically long on America. I'm long on the global economy. I believe that over time it's going to be more valuable, not less valuable and I don't want to get stuck in the ditches along the way."

Sosnoff argues that there's no downside in learning more about finance and that that looking for a scapegoat is no excuse for sitting on the sidelines. His thought is that a person who can articulate something and explain a financial concept to another person is someone who's reached a level of empowerment that a lot of investors never reach, which is special. He argues that a state of ignorance is the most self-destructive state.

Either you’re smarter, PERIOD. Or you’re a danger to yourself for not knowing anything.
— Tom Sosnoff

Does the tastytrade methodology evoke stimulation risk in the average investor?

Ratigan's final challenge covers what he calls "stimulation risk." He believes that in becoming a more actively engaged investor, the additional power and capacity new traders experience can cause them just as much grief as it can joy. 

I want to put them (his constituents) in a position to be smarter and not be a danger to themselves.
— Dylan Ratigan

Though Ratigan argues that investors can easily get in over their heads after a limited amount of experience and/or success, Sosnoff argues that risk can be minimized by practicing a level of restraint through respect to the size of a trade. He hopes to change the way that the everyday investor interacts with the market and truly believes that though, many investors are under-engaged or under-educated in finance and investing, they're not opposed to becoming more active, and can excel when given the right tools.

Watch the full episode of Truth or Skepticism here!

How can the tastytrade methodology change the way people look at their finances?

While consistently generating new financial content to help the investors of all experience levels stay abreast of the financial market, Sosnoff and his team have made it their mission to provide people with all the essential resources to seek and attain financial empowerment. His latest project, dough, offers people a new window to view and manage their portfolios through. Created with the intent to take the complexity out of investing and replace it with a logical, mechanical process, dough helps investors circumvent learning on outdated trading platforms and cast aside the clutter and chaos of traditional financial media. 

You can learn more about the platform on dough.com and watch Ratigan and Sosnoff confront some of the hottest issues in finance every Wednesday at 10:00am CST on tastytrade.com.

What did you think of this episode of Truth or Skepticism? Let us know in the comments below!

Want more of Dylan and Tom? Check the previous episode or watch the next episode here!