Skip to main content

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)

Popular posts from this blog

The Idiocy of Typing Anti-FDI Rants Using IMPORTED Devices, IMPORTED Platforms, and IMPORTED Social Media

Bulatlat It's very easy to open Facebook (or any related platform) and find lots of stupidity , right? There have been idiotic comments I find on Facebook such as FDI is this and that. We can find "thought leader groups" such as Alliance of Concerned Teachers, Anakpawis, Anakbayan, Bayan Muna, IBON Foundation, Kabataan Partylist, League of Filipino Students, and Philippine Anti-Fascist League (PH Antifa) who keep ranting about FDI as this and that. I even remember somebody dared to say that FDI caused Egypt to dry up. Ironically, North Korea and Venezuela, two protectionist countries, have very bad pollution problems. I'd blame it that they don't have the money to do a clean-up drive. How can you clean up a polluted river without the right equipment? How can you expect better power efficiency with outdated equipment that keep coughing up, cough, cough, lots of black smoke?  All the talks on social media can be very funny. The big irony is that all calls for "...

Get Stuck with EDSA, End Up Like Nokia

  Yes, we should never forget what history teaches us. A classmate of mine, back in high school, wrote a simple and blunt essay called "History: A Teacher". I doubt he still has a soft copy, given it was already more than 20 years ago. I'd like to quote Duterte critic Andrew James Masigan wrote this in  Philippine Star --something that should remain relevant: I would never undervalue the 1987 Constitution. It dismantled the legal framework of a repressive regime and established the democratic institutions we enjoy today. For this, I am grateful. The 1987 Constitution was crafted with the best of intentions. It sought to put the Filipino first in all aspects of governance and to level the playing field amongst sectors and peoples.  But it is far from perfect. It failed to consider the importance of foreign capital and technologies and the stiff competition we would have to face to obtain them. In short, its economic provisions were short-sighted . So despite the Constitut...

It's Incredibly Frustrating to Discuss Economics with an Overspender

Overspending is just bad economics, isn't it? Economics is defined as the following for the sake of a review of high school basics: Economics is a social science concerned with the production, distribution, and consumption of goods and services. It studies how individuals, businesses, governments, and nations make choices about how to allocate resources. Economics focuses on the actions of human beings, based on assumptions that humans act with rational behavior, seeking the most optimal level of benefit or utility. The building blocks of economics are the studies of labor and trade. Since there are many possible applications of human labor and many different ways to acquire resources, it is the task of economics to determine which methods yield the best results. Economics can generally be broken down into macroeconomics, which concentrates on the behavior of the economy as a whole, and microeconomics, which focuses on individual people and businesses. It had me thinking of 2016 wh...

[UNPOPULAR OPINION] Why People Power Anniversary Should Be a Special Working Day Instead

  As a blogger, I shouldn't turn on the PC in hopes of becoming popular . It should be to turn on the PC and blog to make a difference . Right now, I think about the controversy when President Ferdinand "Bongbong" R. Marcos Jr. declared the 1986 EDSA Revolution's anniversary as a working holiday . The call for some of the "minority lawmakers" is that they want to return the People Power Anniversary to a regular holiday once more. There are times I feel like, "Should we let it be a regular holiday again, so as not to repeat the Marcos dictatorship?" Sadly, the real answer is that the Philippines has been relying too much on EDSA , so it's practically ending up like Nokia . I was thinking about the reality of February being the most hectic month. February only has 28 days (and February 25 is near the month's end ). I thought that the Philippines also has too many national holidays more often than not. In fact, the Inquirer article written by...

Talking Economics with an Overeating Glutton

Two years ago, I wrote an entry about why discussing economics with an overspender is frustrating . Now, I was looking at certain fat people who say really dumb things about economics. Just recently, I was looking at a certain fat idiot (fortunately, he only has 1K+ followers) who posted on Facebook that not only will the parliamentary system cause the Philippines to become a dictatorship, but he also says that changing economic provisions will cause the Philippines to collapse and the country to fall into the hands of foreigners. I won't name the person out to avoid getting personal. However, the person is apparently very fat and he blames capitalism day in and day out. The person even says that businessmen do nothing and it's the employers that do everything. Has that fat slob ever heard that businesses are run by bosses and that if the bosses do screw up, they're the ones who are the most answerable? The employees are the cogs and the boss runs the cogs. I was looking at...