Three Good Reasons You Shouldn't Trade Stocks
Welcome to Saving Money with Andrew!
Each year, I urge my readers - Please Don’t Trade Stocks (and the 2020 edition). In the past couple of weeks, I read three great articles with new reasons not to trade stocks.
Robinhood, Three Friends and the Fortune That Got Away is about three friends who, with work slow during the pandemic, got caught up in trading stocks on Robinhood. The story has plenty of ups and downs, but in the end two of the three end up with five-figure losses, along with hundreds of hours of wasted time.
New Investors Discover Tax Pitfalls of Robinhood and Other Trading Apps tells a few stories of the tax woes faced this year by those who daytraded stocks in 2020. Even some who made a bunch of money trading are unhappy with the challenge of filing taxes with hundreds (or even thousands) of trades.
Why You Shouldn’t Pick Individual Stocks adds yet another good reason not to trade stocks—it’s almost impossible to know whether you are good at it, or are instead just lucky.
If, after all this, you are still intent on trading individual stocks, at least be honest with yourself. Consider calculating your returns (making sure to factor in taxes) or, even better, your time-weighted returns (factoring in deposits and withdrawals) and comparing it to the results of a simple index fund. You may be surprised at what you find.
And now…Andrew’s pick(s) of the week:
I really enjoyed this sprawling New Yorker profile of talented and ruthless superagent Ari Emanuel, one-third of (arguably) the most successful sibling trio in history.
I hope this has been helpful. If you liked it, please share it on social media! Also, please send me your feedback, requests, and success stories.