1st Quarter 2019

Posted on April 25, 2019 · Posted in Newsletters

“Education to take your trading to the next level.  Only at TDAmeritrade.” – TV Commercial

“Gut check and keep your trading plan on track.  Schwab is the better place for traders.” – TV Commercial

“Transfer your account to Interactive Brokers and expect your finances to start improving the very next day.” – TV Commercial

“Your career is rewarding.  Just not financially.  Don’t get mad.  Get E*TRADE and start trading today.” – TV Commercial

“Unleash your inner trader.  Traders trade with Tradestation.” – TV Commercial

Wow, that sounds easy.  Above are direct quotes from television commercials.  They are all selling trading services and they are all implying, some subtly and others not so subtly, that you can get ahead, be more independent or be more successful just by using their trading platforms.  Of course, if your eyes are still able to read the fine print on the bottom, you will also see “All investing involves risk including the possible loss of principal.”  Maybe not so easy.

We all know that beating the market is difficult but beating the market through day trading is extremely difficult.  It also gets harder the more you trade.  Terrance Odean (UC Berkley) and Brad Barber (UC Davis) found a linear relationship between the amount of trading and deteriorating returns.  In their study, the 20% who traded the most underperformed the 20% that traded the least by 7.1% per annum.

According to Terrance Odean, “The vast, vast majority of day traders were losing money. Unless you really had a strong reason to think that your ability to day trade was much greater than that of most people, it made no sense to start day trading in the first place. It’d be like, to some extent, going into a casino and saying I’m really good at roulette; even though I know everyone else loses money at roulette, I’m going to win.”

Think about that.  They are not just underperforming the market, they are losing money.  So, what is the common denominator of the five quotes detailed at the beginning of our newsletter.  They are all ads from financial services firms that are not fiduciaries.  They are trying to convince you to do something, trade (actually, trade a lot), that is not in your best interest in order to make money.  Remember, when it comes to helping you to save and invest, Registered Investment Advisors are the only legal fiduciaries.

We thank you very much for the trust you have placed in our firm.  Please do not hesitate to contact us with any questions.  Further, if your financial circumstances have changed, please call the office to set up an appointment to review your plan. 

Best regards,

Shoreline Financial Advisors, LLC