Is getting in and out of the stock market a better strategy than buying and holding?
Answer:
It really depends on how much money you have invested in a given security. Most on-line brokerage services charge a flat fee per transaction.
If you are charged $8.00 per trade you are in for $16.00 round trip. If you are investing $1000 that will amount to 1.6% of principal. If you are covering yourself at the drop of a hat then you are probably not making more than a couple of percent in gains between trades so that 1.6% will quickly eat up your profit.
On the other hand if you are investing $10000 the round trip cost of your trade is only .16%. This is quite a bit less significant.
That's the question. In this market, I swing trade and enjoy looking at my cash balance.
However, get in the right picks and you can still make money. I agree with you however, the market is nuts right now and I'm in and out, refusing to hold.
Some good market action since the delay in rate hikes. We'll see!
Of course that depends on your tolerance for risk; upon your investment strategy; and on which particular stocks you are holding or selling.
BUT do be aware of this -- getting in and out,can get you into trouble, and assume losses for you if you don't really know what you are doing. ALSO REMEMBER: If you make a gain on your stock sales which you have held less than one year - you pay a higher rate Capital Gains Tax. ALSO REMEMBER: once you sell a stock, there may be tax implications to buying that same stock, (or one that is 'essentially' the same) within 30 days.
Depends if you want fast cash or retirement cash.
If your going for those highly volatile stocks to make a quick buck, jumping in and out is a good way to do that. If ya get lucky.. woo-hoo... if ya don't..doh... The bigger the risk the greater the reward.
If your saving for retirement buying and holding Blue Chip stocks is not a bad strategy because there is less risk and they do seem to grow over the years. Same with the ETF's nice slow and steady rise over the years. Like riding a kiddie rollercoaster.
Only a few people can do this successfully. It take balls. You have to be extremely reactive, has well as knowledgeable enough to hedge bets with options. Also a large asset base helps.
Some estimates say only 10% of day traders who actually stick with it can just beat the market. and then there's taxes. For all the work, it's not worth it for most people.
I have a question: Are you putting a stop loss on every transaction? Thats less risky and minimies your losses.
In the secular bear ( megatrend) as we are in right now, the answer is yes
In the secular bull market(megatrend) as 1982-2000, the answer is no.
But you have to learn the right way to invest
Yes you could learn invest by yourself. it is your money, you should know how to do with it. for starter check this site out.
http://www.pathtoinvesting.org/index_fla.
http://www.stockcharts.com
http://www.streettalklive.com>. university. a lot amount of information. It will serve you well
I accumulate in good amount in 401k at the young age.I could share with you. when consider invest in stock market. you should consider basic 3 things:
fundamental analysis==(economic data,finincial health, management, business model, competetion)>>what to buy
technical analysis==(chart+indicator)>> when to buy
Sentiment/schycho analysis==>>mood of investor, Contrarian point of view.
Market cycle===>> check out book Trader Almanac by jeff hirsch will give you inside stuff
When you combine 3 thing, It is one of the powerful knowledge goinh with you for the rest of your live
At the age of 32. my 401k is amassed 71,000.00 and 30000.00 in taxble account. by follow simple rule
Two strategies come to mind here:
IF and ONLY IF you are right in fundamental analysis of a companies long term internal finances, AND the continuing trends it is "levered" to and by, then, LONG TERM investing MAY work. If things change, it may not.
Long term RELATIVE STRENGTH analysis can work for you, if you catch the trend just after a bullish change, AND, time your investment purchases to catch the stock in its lower half band for say a calendar quarter.
The superiority of relative strength analysis, is that anything that may change [within the purview of this theory] is discounted in the manner and amplitude of the relative strength change.
So some long term analysis investing works.
Now for short term, you might want to find companies that pass all your critical financial criteria, BEFORE you apply some form or combination of technical analysis. That would be similar to Hoa's approach.
Take your pick, both can work, its you that makes the difference.
Good Luck
Academic studies show that those who buy and hold outperform those who trade frequently.
I do both.
I have a couple stocks (defensive) that I bought for an investment (long term) and I have a couple that I bought as trades.
Here's what I do.
I purchased 500 shares of a company, I figured out my cost basis. Every time I get a 25% gain I sell 100 shares. If the stock dips below my cost basis I purchase more shares. Once I sell all of my shares I invest in a new stock.
Set up a model portfolio and monitor some stocks and see if this will work for you. It's a lot of work, but it could pay off big time.
The best investor in the world doesn't think so. Read up on Warren Buffett.
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