Trade as Seldom as Possible

If you want long term investment success, then trade as seldom as possible.

The only people who can “trade” successfully are those who have some built in advantage unavailable to the general market. High frequency traders have both inside information and the bid -offered spread. These are unavailable to you since the former is illegal and the latter is too expensive to implement in terms of the huge infrastructure cost.  Many hedge funds rely on illegal information – watch Billions, it’s fact not fiction.  Or Wall Street -the same applies.

If you want an only slightly exaggerated explanation of how the financial world works, be sure to watch Wolf of Wall Street.

Stockbrokers, whether full service or discount, are little different to casino operators. The edge is stacked in their favour and against you. They get their fees by encouraging you to trade. You diminish your wealth by following futile trading “tips”, absurd technical analysis humbug, or highly curve fit trading systems.

Make Millions in Up and Down Markets” screams the front cover of one book written by a salesman.  “Trade Your Way to Financial Freedom” writes another salesman who has presumably chosen to “write his way to financial freedom” instead.

If you have to read anything on investment stick to people like John Bogle who founded Vanguard.  The Little Book of Common Sense Investing tells it how it is. How it really is.

As I write elsewhere profitable investment is very simple. Buy and hold cheap index tracking funds.

Above all take a look at this website for free: Mathematical Investor.  After over 30 years in the industry I can assure you these people have it right. The overwhelming majority of “Masters of the Universe” crash and burn in time: the hedge fund industry has been a huge disappointment.  Trading stars and stock pickers have their time in the sun, mostly by being in the right place at the right time.

In the very long term however investment success comes from simple global diversification .

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