The most recent volatility that we have seen in the market has finally brought some hard facts to the surface on the day-trading industry. Recent data from state and federal regulators have further advanced the ideas that we have been talking about here in the Markowski Monthly and on our national radio and television programs around the globe. To quote Matthew Nestor, director of the Massachusetts securities division, “Amateur hour is over.”
Regulators advise that most people should never get into day trading in the first place. “It’s perilous in reasonably good times,” states William Galvin, the Massachusetts Secretary of State who oversees the securities division. He adds, “In a volatile market it is much more dangerous.” William Galvin has closed several day-trading firms over the past year for numerous violations.
Two recent studies commissioned by U.S. securities regulators found that about three-quarters of day traders at seven firms surveyed lost money. Marc Beauchamp is the executive director of the North American Securities Administrators Association; he stated that the studies are used “to warn the population that investing is not easy.” He adds, “Trading is not a shortcut to easy street, you can lose a lot of money in a hurry.”
A study conducted by the Washington state securities director, Deborah Bortner, examined 124 accounts at seven different firms. The study found that 77 percent of the accounts lost an average of $36,000 within three months.
We like to remind people that there has never been anyone in the history of the securities markets that has ever been able to judge the point-to-point swings in equities. The key to successful investing is having a strategy that will carry you over short-term volatility to long-term profitability. Most of our readers and clients are small to mid-sized business owners. The same strategy you applied toward building your business must be applied to your investments. A portfolio is a business, it must be handled and managed as such, there is no room for brash decision making. Like anything else in life, when hard work and great care are applied over time, great things happen.