Playing the Long Game
Updated: Oct 16, 2020
A hard truth is that 75% of all day traders lose money. Unfortunately, traders looking at the stock market as a "get rich quick" scheme are usually left penniless. And for every 100 bankrupt traders, there is one raging success story (usually a friend of a friend). This person probably quintupled their money in under a year, and if you pay him to teach you, he'll show you how.
Meanwhile investors who plan on holding stocks longer than 12 months have notoriously outperformed their peers: Warren Buffett, Peter Lynch, Bill Ackman, etc. The greatest investors of all time, some of whom who actually founded the field of modern finance, are those who understand playing the long game.
The unadulterated truth is that the stock market is volatile, and a careful person can make money by operating with precision within the microscopic margins that exist. A good day trader will have carefully deliberated investing plans and a list of trading rules they never deviate from. Most people don't have the patience, the "get rich quickers". Yet executed properly, day trading can yield excellent returns.
While day trading can yield great returns if done professionally, however, its purpose is nearly the exact opposite the stock market's intended purpose. The stock market provides individuals with the ability to purchase part-ownership of large companies through shares of stock, with the idea being that an investor will buy stock and receive a portion of the company's profits as the company grows and becomes more valuable. And the people who have performed the greatest and most consistently since the stock market's inception were people who used the markets for this purpose, long term investing.
Investing is about making individual, not mutually exclusive, investments that the investor believes will appreciate in value for a specific and particular reason. Diversification is a myth, perhaps one of the greatest myths ever told. Each investment a person makes should include a unique thesis detailing why that particular stock will go up or down, and also a target-price the investment is expected to reach.
In general, investing is more about understanding how businesses operate than understanding particular equations or day trading algorithms. Day traders usually lose money, and the number one rule for investing is Never Lose Money.