Is Day Trading Impossible? And Why My Experience Says Yes It Is
Anyone who is at least somewhat well educated in the field of finance, will probably advise you against day trading, and that it can be a huge hindrance to getting good financial returns overtime, and it can definitely harm you as far as your long-term success as an investor. Aside from this, all the fees that are generated in trading commissions from active trading, as well as the additional short term tax implications of doing so, definitely start to add up, and make it more than likely that she will not succeed in day trading. Like the financial expert to know what they’re talking about say, you’re better off in a passively managed index fund the tracks just about every security in the market. But for global index funds and S&P 500 index funds, with the lowest fee structure possible, in which I would recommend vanguard index funds, as the best possible way of making long-term money in the stock market. And so in this blog post, I’ll try to answer the question of is day trading is impossible? And explain to you my opinion of why I think it is.
And while I believe this now, I had some thing of a short-lived experience with day trading, on my path to learning this, and I’d like to take the time and his blog post to share my story of how I won state traded a pump and dump penny stock, got my ass handed to me, and learned a lesson that made me a better investor all the more for it. For more information on all things finance, trading and investing, be sure to comment and subscribe to our blog for more details and information.
Is Day Trading Impossible, And Why I Pretty Much Say Yes It Is
Day trading is basically impossible, at least in terms of using it to beat the stock market. If Hedge funds like Bill Ackman and Carl Icahn, who have $20,000,000,000.00 in total net worth and who would blow you out of the water in financial logic cannot beat the stock market over time, especially net of fees when you account for the 2% AUM and 20% of Capital Gains structure, then there is absolutely no way that you are going to beat the stock market, at least not over time. And if you aren’t going to beat it, then you are going to lose to it, both in time and money.
And yes don’t get me wrong, while it is a TON of fun to move money around and trade equities, whether for a living or for your own portfolio, the simple fact is that you are better off taking the 15 to 20 hours per week that you spend doing this, putting it to use going to work for Target at $15 per hour (This is about $1,000 per month after taxes) and from there putting all that money into an S and P 500 Index fund in tax advantaged accounts, like a Traditional IRA, a Roth IRA, or a 401K.
In fact, you are exponentially better off doing this, do this for 5 years vs. spending that time day trading, and you will, statistically, have an additional $100,000 in your pocket, after taxes have been accounted for, just based on historical appreciation, future growth projections, and the fact that you would literally bank away an extra $60,000.00 during that period of time.
Why Day Trading is Impossible, And Why I Am Going to Discourage You Even Further From Day Trading
So, if this wasn’t enough of an argument, try out this one. Take that $100,000 and put it into a passively managed S and P 500 Index fund, leave it in there for 30 years, and you, just based off of inflation-adjusted historical stock market returns, would have $1,600,000.00, and that’s assuming a conservative 7% annualized rate of return. Yes, the 65 year old you that just started collecting Social Security is now out almost $2,000,000.00 because you day traded over working at Target….not bad for doing a little math.
Here’s The Only Way I Think Someone Can Beat the Stock Market
And if that wasn’t enough, let me play devil’s advocate for a second. I do believe that there is one and only one way that you can beat the stock market over long spans of time, and its only going to be by a small amount. Basically the way that you beat it is with it. Say you start off day trading, or doing something rash when you are 18 years old, like putting all your money in Apple. You hold this for 3 years, and all of a sudden you’re $8,000 nest egg has turned into $16,000, while the stock market would have had you only up to something like $11,500. Okay, nuff said there, you have now beaten the market over a long span of time, congratulations, if you make the smart bet from here, you can beat the stock market over time.
This $16,000, should now be divested, and placed into S and P 500 Index Funds, with Long Term Capital Gains taxes for the 3 year holding period, and with you being young enough where you have virtually no income, your taxes on this will be virtually 0. Playing the conservative bet however lets say you end up with about $15,000 after LT capital gains taxes on this. You now have $15,000 in the bench mark, so you will always match the S and P 500. Even at a 6 basis point annual fee, congratulations, by the time you retire, you can say that you have beaten the market by a tad!
Final Thoughts on Is Day Trading Impossible? Yes, But Its a Ton of Fun
So yes, day trading is most definitely impossible, but it is a ton of fun and you do learn a lot, like how it is impossible. Personally, the only type of day trading that I think you can still win at is SEO, but it requires a lot of computer skills, writing skills, and a mild interest in Finance and Analytics. Personally, someone who is highly into the analytical side of Finance or even Accounting, would I think be a good candidate for picking this up, check out our SEO guide if you are interested. Until next time, you heard it first right here at Inflation Hedging.com.
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