Friday, August 29, 2003

Day Tripper Trader- I'd like to make a quick squeal about this BBC piece which seems to want to scare off people from investing in the stock market. This quote seems to be about as honest as their David Kelly pieces.
Alpesh Patel, a private investor and stock market pundit who has been trading full time since walking away from a career as a barrister seven years ago, is keen to dispel the notion that there's easy money to be made by dabbling in shares. Mr Patel reckons that up to 80% of private investors lose money, while the remaining 20% achieve their gains only by immersing themselves completely in the lore of the market, and trading actively.
That would be true of day-trading type of activity, where investors make short term, hour-by-hour trades, trying to time a stock's next move. Long-term investors will tend to make money in the long haul. The type of active trading that the BBC piece implies will tend to lose money, for any profits you may get from price changes are quickly eaten by commissions. When you're trading stuff that often, you're relying on more luck than skill. If you make the assumption that stocks are usually fairly priced, it will take exceptional insight or knowledge to successfully second-guess the market. Since most people don't have that level of skill (including finance professionals), short-term profits rely on luck. I hear that old Sinatra song in the background, Luck be a Lady. Luck ain't no lady tonight, Frank, that lady is a tramp, she ain't staying by your side. How you invest successfully is for the long-haul. You can have above-average insight, but don't count on it. Buy good stocks and watch them grow over the months and years; stocks will tend to make money over the long haul. Quick stock trading only makes money for the stock brokers, raking in your commissions.

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