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Why I Want to Avoid Day-to-Day Stock Trading in Favor of Long-Term Stock Investments


It's the bear market which is where financial experts like Warren Edward Buffett would recommend buying undervalued stocks from good companies (read here). Recently, I decided to invest in the Philippine Equity Smart Index Fund (read here). It's pretty much the recommendation of Buffett for most investors who don't have the time or energy to do so. Buying the Philippine Equity Smart Index Fund from ATRAM would give bits and pieces of the Top 30 companies that comprise the Philippine Stock Exchange Index (PSEi). I also felt it would be time to discuss daily stock trading. I heard of people who trade stocks daily. However, hearing Buffett's advice to buy and hold for the long term with this quote:
If you aren't willing to own a stock for ten years, don't even think about owning it for ten minutes

Such a principle is all about long-term investing. I decided to go through Motley Fool and found on why day trading differs from investing: 

Day trading vs. investing

Investing in the traditional sense generally does not refer to day trading. While "investing" is a broad term, it's well-established that the most efficient way to consistently earn stable and positive after-tax returns is to simply buy stocks or bonds and hold them for the long term.

Long-term, buy-and-hold investors typically do not experience the emotional swings that afflict most day traders -- even when their holdings gain value. If you were to create and maintain a portfolio of low-cost exchange-traded funds (ETFs) instead of day trading, the odds of turning a profit over a long time horizon would be overwhelmingly in your favor.

Investors with long-term holdings are well-positioned to diversify their investments and mitigate the risk of large losses. Day traders who buy and sell just a few popular stocks have portfolios that are much less diversified, so the movements of any one stock have a much larger impact on their financial health

Is day trading gambling?

It's fair to say that day trading and gambling are very similar. The dictionary definition of gambling is "the practice of risking money or other stakes in a game or bet." When you place a day trade, you're betting that the random price movements of a particular stock will trend in the direction that you want.

In the same way that expert poker players study and practice relentlessly to excel at the game, the few successful day traders (who may be at institutions) tend to be extremely well-versed in how markets move in the short term. If a novice poker player were to challenge a table of experts, he or she may conceivably win one or two hands but would almost certainly lose money overall. While day trading is not precisely the same as gambling, one thing remains true about the practice: Most of the time, it is not profitable.

Just reading it makes me think, "Is this the reason why social media gossipers are panicking about the bear market?" That's why I dare say that social media gossipers are (1) poor economists (read here) and (2) poor financial advisers (read here). I bet their way of "investing" is based on instant earnings. A bear market would mean that stocks will dive more than they rise. I think they're actually investing their based on short-term thinking. I guess they want to do day-to-day stock trading. However, the bear market would mean that they would have to deal with more downs than ups. Just looking at Marketwatch daily (for the guilty pleasure of doing it) made me think, "Okay, I'm probably going to buy more stocks!" For them, it's probably them panicking because there are more lows than highs. The Marketwatch is anything but encouraging for selling but not for buying. Buffett would think long-term instead. 

I was thinking of what if I decided to do day-to-day trading. Granted, I've got a short attention span and hyperactivity going on. Instead, it becomes safer for me to buy an index. Right now, I decided to buy more units from the Philippine Smart Equity Index Fund reaching up to more than PHP 8,000.00. I want to continue cashing in as long as the bear market goes on. Watching how the ups and down goes--the profits are very small. It would be just a few centavos to a few pesos. However, it's not like if I decided to buy an index (or buy some highly valued stocks on my own like mixing Jollibee, SM, Ayala, JG Summit, etc.) and decided to hold on long-term. The NAVPU can go down by the next hour during the opening hours. NAVPU can go up the next day. I was noticing the fluctuations and increases. Right now, both the ATRAM Global Consumer Trends Feeder Fund and ATRAM Global Technology Feeder Fund are rising up. However, the earnings (if I sold them now) are barely a tenth and just a few PHP. It would be unlike if I decided to hold on to them, maybe add PHP 1,000.00 when I feel like it (due to the increase), and then sell both funds when the NAVPU rises up to a much more favorable rate for selling

The idea of stocks (as I've learned) should be long-term. I wanted to withdraw from my AXA Chinese Tycoon Fund but found out it'd be not so favorable yet. It'd be better to wait maybe until 2023 to see how it went. Maybe, it's best to wait until 10 years. Stocks aren't meant for hasty buying and selling to make a big profit. Sure, I won't get the money now. Trees don't bear fruit immediately either. Neither will stocks make money immediately either. 

References

Websites

"Buying the dip: Is this a good strategy when markets are falling?" by James Royal (May 26, 2022)

"Day Trading Definition: Why It Differs From Investing" by Sam Swenson, CFA, CPA (Updated: June 28, 2022)

"Warren Buffett: Why This Bear Market Could Be an Investor's Best Friend" by Catherine Brock (July 9, 2022)
"What Is an Index Fund? An Easy Way to Enter the Stock Market" by Kevin Voigt (March 20, 2021)

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