Short-term stock trading is not nearly as mush of a losing proposition as it used to be, because the "frictional costs" are much lower. If you can buy and sell $20,000 worth of stock at a total cost of $60 (or less) in commissions, your frictional cost is only .33 percent. For every bet on the roulette wheel, if both 0 and 00 are the house numbers, your frictional cost is over 5%, or fifteen times the cost of short term trading.
When I first began investing, short-term trading was suicidal: I had to go to Merrill Lynch and pay them something like $80 to make a $3,000 investment, maybe even more. The only way to make real money was to hold for a couple of years, at least.
Yet I still do very little short term trading unless I feel forced into it by sudden and unexpected gains that I do not believe to be sustainable. Right now, by far my largest holding (outside an IRA account) is USU, the nuclear fuel processing company, with a low P/E, a high dividend, a near-monopoly, and selling well below stated book value. |
