An old Wall Street adage is that “Success does not come from timing the market but time in the market.”
Traders try to time the market every day. Brokerage houses have traders who successfully time the market for a while. They make money, get more confident, and increase their bets. Like the gambler at a casino who has an impressive winning streak, they stay too long at the tables and eventually lose their gains. Traders will often double down on their wagers as they grow more confident, but eventually most will lose their winnings, often losing more than they ever made. Once this happens, they end up getting walked out of their cushy office into the street and bid adieu.
Trading a lot often works against the trader; call it the activity paradox. We’ve all done activities that take a lot of work, but often we feel like the large amount of work contributed marginally to the outcome.
While some people are successful traders, the number is very few and new investors are highly unlikely to be in this group. Also, the longer the period of time, the less people succeed in trading.
The idea of trading to make really big bucks quickly is seductive to a new investor, but the reality is that few are successful at it. It is akin to the fantasy of a new golfer beating Tiger Woods on the links.
Be smart, be well-read, be aware and be successful.
“All there is to investing is picking good stocks at good times and staying with them as long as they remain good companies.”
- Warren Buffett
