Considerations of Day Trading
Let’s talk about the danger of day trading. We’ve seen here over the past couple of years an increase in the amount of day trading going on. And there’s different sources out there like Robinhood that have become very popular where they promote it very well and it sounds very attractive to investors and maybe there’s no fees to trade and all that. But again, there’s going to be great risks associated to day trading Something to keep in mind is all of your trades, if they are done within a one-year period, are going to be short-term. And so if you’re using after-tax money, money from your savings that you’re investing into these different stocks, then there’s going to be short-term capital gains, which means you’re going to be paying ordinary income tax rates. And you want to keep track of those trades throughout the year, those different buys and sells, that’s going to need to be reported on your tax return. And so if you’re not planning ahead, and let’s imagine that you have a good year and make a fair amount of money on these capital gains, okay there is going to be a tax liability. So make sure you’re thinking ahead to what that might look like for you. And there’s various studies out there that show a low percentage, maybe it’s around 10 percent or so or less that are actually successful with day trading. So you have to take if very seriously if you’re going to be in that industry and focusing a lot of your attention on it. Everybody, you know, always wants to tell you about those stocks that did really well. They made them a lot of money but you notice that they don’t always talk to you about the losses that occur as well. But you figure money managers are out there that are managing billions of dollars and they are spending millions upon millions of dollars doing research on these different stocks and what they believe projections and how they are going to do, moving forward. So there’s trained professionals in this industry. So if you’re an individual that’s maybe looking to speculate about what you anticipate the market to do, you know, there’s going to be times where you win and you’re excited about that, but there’s going to be definitely some times where you lose. And if you get a few winners back to back, it might become addicting. And that’s where it could be like gambling. So we strongly encourage you to be careful if you’re looking at getting into day trading. There are here at Centennial Wealth Advisory different money managers that we might work with that are going to be trained professionals that may look at the overall market and the economy and make adjustments throughout the year, depending on where the market is moving and everything but not necessarily getting into that high level of day trading. That’s again a higher level of risk and again we encourage you to proceed with caution if you’re going to be going that direction. So if you have questions about any of this, we’d welcome you to give us a call here at Centennial Wealth Advisory.