The joys and sorrows of trading

The Stock Market is designed to transfer money from the Active to the Patient.” Warren Buffett, June 25, 2019. As everyone knows, Buffett is one of the most successful investors in history. 

Isn’t Buffett paraphrasing Paul Samuelson? The Economics Nobel laureate, a decade earlier, stated: “Investing should be dull. It shouldn’t be exciting. Investing should be more like watching paint dry or grass grow. If you want excitement, take $800 and go to Las Vegas… It is not easy to get rich in Las Vegas, at Churchill Downs, or at the local Merrill Lynch office.”

In their study of 66,465 accounts (the number is not a misprint) titled Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors published nearly 20 years ago (12 Apr 2000) Barber and Odean show that active trading by individual investors results in poor performance. (Brokers do all right; investors could do better, much better.)

In their paper titled Trading is Hazardous to Your Wealth: Evidence from Mutual Funds Around the World, last revised: 26 Jan. 2018, Dyakov et al show that the performance of a large number of actively-managed mutual funds is significantly lower than market returns. (Fund managers do all right; investors could do better, much better.)

Active traders use a large number of strategies. The elegance of simplicity eludes them. To get an idea trading systems, glance at 101 Formulaic Alpha  or  151 Trading Strategies..   None have a long-term record of profitability.

The Monday Morning Millionaire Program (15.5% annual return since 2012) offers a safe way to experience investing excitement, joys of excitement without leaving home.

Invest 5% or less in a “fun” portfolio.

For your core portfolio, follow the six habits of Monday morning millionaires and grow rich. Many of our members don’t feel the need for a “fun” portfolio

Please note that the Monday Morning Millionaire Program contains opinions only. It does not provide any investment advice or endorsements.

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Dr. Milan Somborac

The Monday Morning Millionaire Program supports do-it-yourself (DIY) investors which I have been for over 50 years. About my team and me

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