Why Long-Term Value Investing Beats Day Trading

in #investing22 days ago (edited)

If there was way to predict the stock market accurately everyone would do it and a day trader would never bust.
If you really want to find the "best investment" get into company valuation and balance your qual and quant work out. Find companies that are undervalued compared to books and have strong leadership and competitive advantages. Then hold them and don't sell it, that's your best way to have good return with low risk.
The problem is when you really study investing all it is is putting a dollar price tag on the risk. If you can't successfully justify that price you don't, which is why pretty much most people don't because most day trading strategies are super super volatile and are only hedging out miniscule very marginal returns compared to other funds.

I personally look at "trend analysis" or the prediction of stock prices based on trends to be an absolute pseudoscience. The problem here comes in for the value of the thing if you can get 9-12% return year over year just investing in indexes and have practically 0 risk because you are inherently investing in a diversified portfolio of underlying assets, then why would you spend 3 hours a day doing technical analysis to try and hedge out a 15% return over the course of a year and take on practically infinitely more risk depending on the strategy used. Then you have to ask how much your time is worth. If you are managing a few MILLION then it'll make your extra 3% return worth it, but anything short of a 1 mil capital pool to work with and state of the art instant news sourcing where you get info before the rest of the market you're toast.
Like if you invest actively you are eating trading costs, time costs, liquidity risk depending on how you're investing. You're opening yourself up to psychological investing pitfalls, you invest in as undiversified of a portfolio as possible, and often take on trading strategies with unlimited or beyond principal risk. The cost is WAY too high compared to the gain unless you are a hedge fund sitting on a few million dollars with a team of people behind you, and even then they bust.

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