Trading Is Hazardous to Your Wealth [pdf] (2000)
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Trading Is Hazardous to Your Wealth [pdf] (2000)
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Re: Trading Is Hazardous to Your Wealth [pdf] (2000)
#2why do people think trading will make you rich?
Re: Trading Is Hazardous to Your Wealth [pdf] (2000)
#3why do people think trading will make you rich?
Because of posts like these:
https://i.imgur.com/IbygTNX.png
https://old.reddit.com/r/wallstreetbets/comments/gjkpel/4k_1...
https://old.reddit.com/r/wallstreetbets/comments/gj0v2v/35_1...
Most people do not fully internalize survivorship bias and are tempted to jump in on the easy money.
Re: Trading Is Hazardous to Your Wealth [pdf] (2000)
#4A related blog post: "Why I don't trade stocks and (probably) neither should you" http://edmarkovich.blogspot.com/2013/12/why-i-dont-trade-sto...
Re: Trading Is Hazardous to Your Wealth [pdf] (2000)
#5> Trading costs are high. The average round-trip trade in excess of $1,000 costs three percent in commissions and one percent in bid-ask spread.
A lot has changed in 20 years. The conclusion may still be the same, but spreads are much tighter (thanks in part to HFT) and trade commissions no longer exist.
Re: Trading Is Hazardous to Your Wealth [pdf] (2000)
#6Cognitive biases play a large role in poor investment performance, see "Thinking Fast and Slow" by Daniel Kahneman.
Re: Trading Is Hazardous to Your Wealth [pdf] (2000)
#7> Trading costs are high. The average round-trip trade in excess of $1,000 costs three percent in commissions and one percent in bid-ask spread. A lot has changed in 20 years. The conclusion may still be the same, but spreads are much tighter (thanks in part to HFT) and trade commissions no longer exist.
> trade commissions no longer exist
In US.
Re: Trading Is Hazardous to Your Wealth [pdf] (2000)
#8> Trading costs are high. The average round-trip trade in excess of $1,000 costs three percent in commissions and one percent in bid-ask spread. A lot has changed in 20 years. The conclusion may still be the same, but spreads are much tighter (thanks in part to HFT) and trade commissions no longer exist.
Trading also subjects you to short term capital gains tax rates, as well as losing the effects of compounding.
Re: Trading Is Hazardous to Your Wealth [pdf] (2000)
#9> Trading costs are high. The average round-trip trade in excess of $1,000 costs three percent in commissions and one percent in bid-ask spread. A lot has changed in 20 years. The conclusion may still be the same, but spreads are much tighter (thanks in part to HFT) and trade commissions no longer exist.
Trading also subjects you to short term capital gains tax rates, as well as losing the effects of compounding.
Yes, and that is also lower now than it was in 2000!
Re: Trading Is Hazardous to Your Wealth [pdf] (2000)
#10I read an article a few years ago that compared the trading performance of various strategies. The number one performer was the "dead people" strategy, which happens when a person dies and his portfolio cannot be traded while the inheritance issues are sorted out. Next best is the broad index fund, and dead last was the average investor.
Edit: Found the article!
https://www.businessinsider.com/forgetful-investors-performe...