Why does the retail investor continue to lose?

[Millionaire]

Fidelity's research of all their accounts: dead people had the largest profits.

The problem is those 50%+ drawdown (80%+ in tech stocks) you have to take as a stock investor every now and then.

That is way too much volatility for most people to handle.

People are better off investing in illiquid low volatility assets. Like real estate where it is harder to panic sell.

Stocks are so liquid it is so easy to panic sell. And the volatility in bear markets while the market grinds down making new lows every few months will drive most people crazy.

Or a retirement fund type of account where the government prevents you from cashing out until you 55 or 65 years old.

 

[stochastix]

Retail investors have been winning for the last 100 years at a rate of about 8% a year.

"Traders" are yes typically slaughtered.

Dude shut the fuck up about this retail trope. I trade retail with 8% return a month consistently

 

[zdreg]

Fidelity's research of all their accts: dead investors did the best by far, runner up inactive accts forgotten about.

This post is definitely in the running for the number 1 post on ET this year.

 

[zdreg]

Dude shut the fuck up about this retail trope. I trade retail with 8% return a month consistently

Either you are a liar or an outlier which means you have not proven anyhing.

"I trade retail with 8% return a month" The last person who said that was Bernie Madoff, who claimed 12%/year. We all know how that ended up badly.

 

[Millionaire]

Either you are a liar or an outlier which means you have not proven anyhing.

Investors who have the strength to hold through 50%+ to 80% drawdowns to get a 8% p/a return are outliers too. Except maybe for those cases where they are forced to hold due to regulations.

Only the outliers make big money in the stock market, both as investors and traders.

 

[KGTrader4]

I’ll chime in as the “retail Trader” you guys are talking about.
Came here a while ago, just curious about day trading, hung around for a while, then got busy with other crap, and left. Came back about two months ago, thinking I’d learn a few things about swing/position/day trading. I did.

I learned I have no interest in day trading
I learned I’m more interested in longer time frames, but the days of buy and hold forever for me are over, I’ve been able to sidestep most of this downturn by seeing the warning signs, and I like that
I learned that the legit guys here know way more than I’ll ever know
And I learned that I don’t want to spend the enormous amount of time necessary to become a great trader. (I’m 71, I don’t HAVE an enormous amount of time lol)

I still want to learn, study, and read books about and practice technical analysis, just not full time. I’m retired and don’t need income from this.

so yeah, from my experience, it takes more than most retail guys (and gals) are willing to put in to become great, so most just give it a try, lose a few bucks, or a lot of bucks, and then they split.

I still think I can use TA to make better risk management decisions, in combination with some level of fundamental analysis. And long term investing has a different meaning to me now.

from a different perspective, as a CFP/Financial Advisor I saw lots of clients succeed. They had patience, and a strong stomach, and weren’t looking for short term gains, and home runs. They were happy with their 8% annualized returns over a number of years.

and I’ve seen some clients fail, because they just didn’t have the stomach for big drawdowns. Those clients aren’t investors, they are savers, who want to be investors when things are rockin.

 

[SimpleMeLike]

The problem is those 50%+ drawdown (80%+ in tech stocks) you have to take as a stock investor every now and then.

That is way too much volatility for most people to handle.

People are better off investing in illiquid low volatility assets. Like real estate where it is harder to panic sell.

Stocks are so liquid it is so easy to panic sell. And the volatility in bear markets while the market grinds down making new lows every few months will drive most people crazy.

Or a retirement fund type of account where the government prevents you from cashing out until you 55 or 65 years old.

Hello Millionaire,

I think day trading is great way to get rich fast

retirement money, dollar cost average in index funds forever

we have to both to get to millions of dollars and stay away from the scams and the messing around clowns.

 

[TheDawn]

Because subconsciously people want to lose and don’t really want to make money trading. Most people don’t actually takes it that serious. It’s a weird mixture of people both wanting additional information and to get better via pseudo working with or getting information from people , but somehow against meeting in person or having voice conversations where you can actually effectively communicate. It’s pretty interesting. Think about how many people say trading on voice distracts them. I am sure for some people that is true, but if you can really trade well and know what you’re doing than at that point most people aren’t so fragile that they will suddenly fall apart just because there on voice. You either know what you’re doing and confident in it or you don’t. Again sure there are some expectations but on a macro level it doesn’t really hold water to me, but of course these are just my opinions. Trying to get anyone to trade, discuss or have a healthy debate in any manner other than typing is like you’re asking them for a million dollars.

It's not that people do not want to make money trading but rather they don't know what it takes to make money. Most of them think making money is getting a windfall from one lucky investment and becoming rich instantly, very much like hitting the jackpot in those slot machines or winning it big on the Russian Roulette in the casino because this is what they see from all the Hollywood movies and stories and etc. They don't know what is it like to trade day in and day out, daily grind, the painstaking research, the designing and the relentless testing of the trading plan, the failure of the trading system in real-life trading basically erasing all of the months of work and going back to the drawing board. They don't see all that. They don't know that trading is really like running a business. And just like running a business, you have to be entrepreneurial and dedicated with a single-minded focus. They don't see all that and that's the main reason, I think most of them fail just like running any businesses.

 

[Concinnity]

It's not that people do not want to make money trading but rather they don't know what it takes to make money. Most of them think making money is getting a windfall from one lucky investment and becoming rich instantly, very much like hitting the jackpot in those slot machines or winning it big on the Russian Roulette in the casino because this is what they see from all the Hollywood movies and stories and etc. They don't know what is it like to trade day in and day out, daily grind, the painstaking research, the designing and the relentless testing of the trading plan, the failure of the trading system in real-life trading basically erasing all of the months of work and going back to the drawing board. They don't see all that. They don't know that trading is really like running a business. And just like running a business, you have to be entrepreneurial and dedicated with a single-minded focus. They don't see all that and that's the main reason, I think most of them fail just like running any businesses.

I mean it one sense we could be potentially saying the same thing just viewing it differently. However for majority of cases I still believe and hold the opinion subconsciously they do not want to make money. If you ask everyone here if they want to make money trading 99.9% of them will of course say you’re wrong! I really do want to make money! That’s stupid why wouldn’t I want to! But that has nothing to do with subconsciously actually wanting to make money or not. I guess for an example it’s like asking people if they want to be in really good shape, yet they never even do one push up. If you ask those same people if they want to be in great shape most of them would again say yes of course! But how much can you truly want something if you can’t even take the smallest step toward that.

ps: just to be clear not trying to debate and maybe I am incorrect and failing to properly explain what I am trying to say. But I think you get the macro point at least.

 

[ET180]

You want to make 50% a year with 8% drawdowns. Thats where trading comes in.

To make 50% a year, you need to be taking a lot of risk. That additional risk competes with the 8% drawdown objective. I think most traders fail because they try to do that and end up swinging for the fences on every trade. The drawdown objective goes out the window quickly.