Reading this weekend’s WSJ, I came across an article about “ Amateur Investors ” (WSJ Subscription needed). What I discovered was these “investors” were actually speculators (some may call them gamblers). They were taking short-term bets on stocks using frequent trading, options, and the like. Most of them lost most of their money. In my opinion, they were not investors at all.
What’s the difference? To me, investors are those who build portfolios of stocks, bonds, and cash (with E2E, we use mutual funds and ETFs) for the long term. Long-term means 5 years or longer. If you hold the S&P 500 index for the short term, say 1 year (1950 to 2022 history), your range of returns is from + 47% to -39%, if you hold the index for 5 years the range narrows from + 28% to -3% (see JP Morgan’s graph ). Simply by holding the investment you improve your odds of a positive outcome.
We have clients that enjoy trading with some of their money. Our counsel is only trade short term money you can afford to lose. We are here to help with the long-term money you need for your future goals.
Need a second opinion on your long-term investing? Be sure to schedule your free session with me.