Whether you trade stocks directly (online) or invest in mutual funds, you pay commission, taxes, etc.. (every time you buy or sell stocks), and you pay sales load and exit fees (every time you invest in mutual funds) — As a small time investor, it becomes very costly if your strategy is to go IN and OUT of the market very often (defined as hyperactive trading).
As a passive investor (meaning you have a regular job and you trade or make other people manage your funds), it is always advisable to go LONG. Always look at your investment in the long tern, this way you don’t have to pay high sales load, commissions, exits fees, taxes, etc. very often.
Those people who trade everyday are professional stock brokers. They are hyperactive, since they have to make a living (every time they execute a sale, they get paid, regardless if the investor earns or not)
After I read the book of Daniel Solin “the Smartest Investment Advice you’ll ever get”, it changed my perspective in trading. If you’ll be a hyperactive trader — the only person who’ll get rich is your broker (or online broker), since every single trade you perform, you pay them commissions, etc. (whether your stock picks earn or not) — and as a small investor (you buy only small lots due to capital constraints), it’s very expensive to be hyperactive. Don’t get me wrong. I have nothing against brokers, and I have my deepest respect to such profession, but I guess at the end of the day, you’re best financial advisor is still that person you see every morning in the mirror.
- set your sell price (in my case, i feel comfortable with 10%-25% gain) — never be too greedy!
- as soon as you hit your desired sell price — then SELL and reap your reward, never think twice..
- if your paper loss amounts to -10%, then SELL and accept the fact that you made some lousy choices — don’t ever look back.
After reading Warren Buffett’s biography, it gave me valuable insights about investing. When buying stocks, look at it just like buying a portion of the company. A company which you believe will deliver and bring in valuable earnings in the long run. Look at the company’s fundamentals and see if the product they offer can withstand macroeconomic factors. Don’t invest because you predict that a stock price will rise in the future, but buy a company which will sell more of its goods year on year to ensure high revenue and profits. Never time the market. Never predict the market. Always buy at a discount. And when everyone is selling, it’s the best time to bargain hunt. Diversify only to at most 6 stocks (6 best companies you believe will give the best returns). If you will pick 20 or more stocks – then better invest in Index Funds, as it will mostly like yield the same results.
Posted by artgamolo 
