Grounded planes, virtual education, online weddings/graduations/dates/doctor visits; our world has changed in every way imaginable. But as a business-ish publication, one of the changes sticks out more than others—the move of many amateur investors to the day trading model.
What’s day trading? SImply put, it’s buying and selling an asset within the span of a single day. As market volatility has been front page news for months, many people with a little extra time on their hands are turning to day trading in the perhaps far-flung hopes of getting rich quickly.
To discuss this investing model, and its many pitfalls, we’ve once again turned to The Fools at The Motley Fool. Let’s get into it.
Short Vs. Long
We’ve said it once, we’ve said it half a billion times: investing is a long game. Day trading, however, is all about the short term. A recent study found that, over a 12-month period, only 5% of day traders were profitable. Consequently, roughly 80% of day traders stop after two years.
While the stock market can feel like a slot machine spewing out gold coins, for the average investor it’s a long-term solution where risk should be minimized.
Got The Time?
One more time for the day trader in the back: you can’t time the market. In fact, most of investing’s “banner days” tend to happen in a bear market. So rather than spending your time guessing the future, get to researching stocks that will perform day in and day out.
Don’t focus on the next week or month; think about your needs years and decades to come. Risking your future on a gamble will hardly be worth it.
A stock for the future of driving. Self-driving cars are steering quite a bit of interest from investors, and the experts behind The Motley Fool’s Stock Advisor service think this stock is poised to be part of the revolution. When you join Stock Advisor, you’ll get access to The Fool’s research and data on this stock, and all of the others they think will potentially generate wealth for years to come. Sign up here.
Slow and Steady Compounds the Wealth
Performance data from The Motley Fool has shown that steadfast investing on a consistent schedule can compound wealth over time. They’ve got the data to back it up, too. Their flagship service, Stock Advisor, is up 173% in the last five years by employing the slow and steady strategy.
In fact, 13 of their recommended companies have made returns over 100% in the last 5 years. And none of that was achieved by panic buying or selling; it was all done with research and an eye to the future.
Become a Decade Trader
While the lure of a quick buck and prestige will always be there, the best investors recommend playing the long game. It’s not what your portfolio achieves in a day, it’s what it will do for you in a decade.
So before you jump in wallet-first, think hard about what a really good (or bad) day trade will do for your future. You might find that neither outcome is worth the stress and risk.