Why Day Trading is High Risk and Short-sighted for Your Investment.
Unfortunately, we live in the age of instant gratification. Especially when it comes to making money, many people want to prove that it's all about being savvy and jumping onto the next best thing. ‘Get it while it’s hot’ is the idea, but sadly, the reality is that making quick, easy money, although it can occasionally happen, is a very high-risk business.
This reality is summed up by one investment observer talking about Day Trading who tells us ‘’More than 90% of Day Traders lose money, and most of them lose all or almost all of their money in the first year. That means of 100 people starting day trading today, only about 10 (or fewer) will still be making money after one year. The rest usually go broke or lose all their client’s money.’’
Okay, so we have made it clear that we don’t believe Day Trading is a good idea, but let’s examine exactly why Day Trading is high risk and short-sighted for your investment.
DayTrading is Not a Real Investment Strategy
One thing that should be made clear is that Day Trading is not investing, even though some Day Traders call themselves Investors. The very idea of making instant money contrasts with what investment is all about. Its definition in fact is ‘’To generate income, profit, or appreciation over time.’’
Long-term Investment is All About Time
The magic of compound interest only works with time. For example, if you investR10,000 and it grows 8-10% per year, it can become R25,000 in 10 years, R67,000in 20 years, and over R170,000 in 30 years — and all you’ve had to do is sit back and watch time, and your money, work for you!
Who can tell what will happen next in this crazy world of ours? We have just recently seen wars happen overnight, and we live in a world of constant change and volatile market fluctuations.
Nobody can be expected to know instantly what will happen next, and this is exactly why astute investment has always been a long-term business. It is riding the storm, catching the wave at the top, and hanging in there at the bottom.
Markets, property, shares, and many other things may fluctuate, but they invariably growing the long term. You simply cannot get that benefit from Day Trading. It is all about time!
WhyDay Traders Go Astray in the Stock Market
Apart from not having any of these benefits of time and real investment, Day Traders can also go astray based purely on emotional stress from watching things happen so fast. As one observer put it, ‘’Most day traders lose because they can’t control their feelings. One bad trade using borrowed money can wipe you out!’’
Day Traders are also competing in a global investment arena against Banks and other major players that operate way above their capabilities using experienced traders, the fastest computers, and the most up-to-date market information available.
They can’t hope to compete in the long run against such odds and if they are not regulated by the Government they carry the added risk of having no way to get their money back if they break the law!
Finally, Day Traders have to pay a small fee for every transaction. If you trade 10 or 20 times a day, those fees add up fast and can turn your small wins into losses.
Make the Smart Investment Choice
It is fun to have that winning lottery ticket or get lucky at the casino, but these should be just fleeting pleasures - not a way to create wealth. WarrenBuffet said, "Someone's sitting in the shade today because someone planted a tree a long time ago."
If you are interested in real investments, Digiwealth isa global fintech platform designed to open global investing to everyone, not only the wealthy. We combine easy-to-use technology with independent financial expertise and advice to help you invest confidently from as little as R500 per month.
If you want to build real wealth for your future, forget Day Trading and talk to us today so we can appoint an experienced Investment Advisor for you, and with just a little money invested every month into a low-cost index fund, watch time work its magic!
