Most stock market 101 books tell you that buy and hold is the way to start all of our investing careers. In fact most of us never get beyond the buy and hold mentality. We simply accept every up and down. When things are good we are happy and when they are down we pray they will be back up in time for us to retire or send our kids to college or whatever we intend on doing with the investment money. Perhaps I’m a little too controlling, but I just don’t think that holding in all situations makes the most sense. The stock market literature usually quotes about an 8% return on a long term buy and hold strategy per year. Some newer literature is stating as much as 12%. Let’s give buy and hold investing the benefit of the doubt and assume 12% per year annual returns. That means trading 200 days per year you would only have to profit 0.06% per day to reach your 12% goal. (Actually it would be less because of compounding effects, but we’ll negate that for this example.)
Even if you only traded once per day, controlled your losses to 2%, lost 50% of the time, your wins would only have to be 2.06% to reach this feat. That is not a very aggressive trading plan at all and you are only assuming that you trade once per day.
If you can stay away from gambling and take the time to learn the stock market well you shouldn’t have too much difficulty beating the traditional stock market investing game. Unfortunately, you’re not likely to find someone willing to do this for you because if they earn more money they are going to charge higher fees until your actual return is more in line with what traditional mutual funds provide. They are just no free lunch you’ll have to learn to trade stocks on your own.