The Guilt of Trading Too Much
By JEFF SOMMER at The New York Times
FOR nearly all investors, frequent trading is a terrible proposition. Many people know they trade more than they should — but they just can’t stop.
The fundamental problem with frequent trading is that very few people can consistently outsmart the market — at least not while playing by the rules. Behavioral biases lead many of us to trade at the wrong times. It can be comforting, for example, to buy when stocks are rising and nearly irresistible to sell when they are plummeting, as they did last week. This means buying high and selling low, a fine recipe for financial misery. Furthermore, when costs mount, as they will when you trade frequently, the odds of beating the market are slim indeed.