Retirement Blog

Finance Blogs » Retirement » 4 reasons to avoid day trading

4 reasons to avoid day trading

By Jennie L. Phipps · Bankrate.com
Monday, July 9, 2012
Posted: 4 pm ET

Want to lose your retirement savings -- and your shorts?

Today's not-so-great retirement planning idea -- day trading -- is featured on Page 1 of the Los Angeles Times.

The story says that some 401(k) savers are day trading their retirement accounts. The story quotes several boomers who say they are desperate for bigger returns, so they are giving day trading a try. The story validates the approach by talking to author Richard Schmitt, whose book called "401(k) Day Trading: The Art of Cashing in on a Shaky Market in Minutes a Day," was published last fall by Wiley. It lists for a whopping $49.95. If it sells, it's more lucrative than day trading.

Anne Logue is also the author of a Wiley financial advice book, "Day Trading for Dummies," which sells for only $15 and offers better advice. In her book, she lists 10 reasons why most people ought to stay away from day trading. Here are four of them -- all good arguments for skipping day trading and focusing on patient investment.

Being too emotionally involved. Logue says day trading is a stressful business and successful day traders are "Zen-like in their lack of attachment." That doesn't sound much like most retirement savers.

You're too slow to stay ahead of the herd. If you are going to succeed, you have to be ahead of almost everybody else. Logue compares day trading to video games. If you can't beat your grandchildren at Gears of War, you're probably not going to be able to outsmart other traders, either.

You're not willing to make it a full-time job. Day traders make money in small percentage increments. In order to make much of anything, you have to trade for several hours a day. Remember, this is retirement.

You have to have a lot of money you can afford to lose. All day traders have bad days. If you burn through $50,000 today, do you have another $50,000 to risk tomorrow?

«
»
Bankrate wants to hear from you and encourages comments. We ask that you stay on topic, respect other people's opinions, and avoid profanity, offensive statements, and illegal content. Please keep in mind that we reserve the right to (but are not obligated to) edit or delete your comments. Please avoid posting private or confidential information, and also keep in mind that anything you post may be disclosed, published, transmitted or reused.

By submitting a post, you agree to be bound by Bankrate's terms of use. Please refer to Bankrate's privacy policy for more information regarding Bankrate's privacy practices.
1 Comment
Ray
July 10, 2012 at 9:19 am

If day trading were truly profitable, why did Wiley bother to publish a book? Wouldn't the time be better spent day trading?

Maybe day trading is really not profitable and the money is in selling the book for $49.95 a pop?