Hi Shahrol Sabaruddin, there are certainly many ways to make money in stocks. We don’t want to criticize other methods taught by other gurus. Anyhow, these are the reasons why we don’t trade actively:
– every trade costs money e.g. commissions, stamp duty etc. The more we trade, we are just putting more money into the pockets’ of remisier and security firms. Imagine if you have a property that’s fluctuating in value, do you sell and buy back, and sell again a few months later, and then buy back? That’s going to make more money for the government by paying RPGT and Stamp duty. We believe buying stocks should have this long term view as well.
– to trade actively, means that we will need to monitor the price closely, including keeping tracks of the latest related news, economy condition etc, and act as soon as possible. That feels like a full-time job to me. That’s why we would prefer the more passive route of identifying good businesses, there are less than a 100 in Bursa Malaysia. When the price is right, we will go in.
Peter also mentioned that trading short term is speculating the market, which is betting on the short term investors’ sentiment. It takes a very high level of skills and EQ to be successful, just like there are only a handful of professional gambler out there. There is not many successful examples, but in the meantime, in the casino, there are a lot of gamblers seeking for the thrill of winning a bet.
Moreover, value investing style still works when you have billions of net worth. At the contrary, consider a person can trade RM1000 at a time, or RM10k in short term. But do you think he still can manage the same level of profit if he is trading RM1 million, or RM10 million at a time?
What do you think?
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