Trading Notes: Day Trading and Other Random Thoughts

Last week was a pretty dismal week for the stock market.

Yes, the whole week was pretty much a downward spiral as investors were worried about the crisis in Crimea and a perceived slowdown of China’s economy.

I just sold some stocks for a nice profit and bought some new stock positions in the process. But, going into last week’s trading sessions, things didn’t look pretty.

But today was a bounce back day and I recouped some of the loses. No worries. I’m holding these new positions long-term, and I’ll try to go more than a year to avoid the short-term capital gains tax.

Anyway, I’ve never tried day trading, and I don’t think I ever will. I would like to Swing Trade part of the stock portfolio, holding on to stocks from weeks to months before selling them again. And I think that would be the extent of my active trading.

Otherwise, I would be happy to hold stocks for more than a year to avoid the higher tax rate.

Especially if a day trader buys and sells several stocks a week, the commissions and the taxes must be insane.

Plus, I’ve been reading that the IRS wants ALL your data of transactions come tax time. And if there are even one or two transactions unaccounted for, chances are you’ll spend a day talking to IRS agents explaining what went wrong.

So it makes me wonder if Day Trading is worth it.

I mean, part of the purpose of investing in stocks is that concept of “passive income”. Investing your money into investment vehicles that will generate profits and dividends while you’re busy doing something else. With Day Trading you are physically and mentally working and doing hours of research on many stocks, checking technical charts.

In the end, investing in stocks is risky, but if you look at Warren Buffett’s conservative value investing approach, the stock market has proven itself to be profitable in the long run. But Day Trading? Well, it is much more speculative and closer to gambling.

People tell me that they don’t want to invest in the stock market because it’s perceived as gambling, but then people go to the Indian casinos and gamble their money away on the slot machines! The stock market is a far better investment of your hard earned money!

In summary, I’m more inclined to hold on to stocks for months and years, and invest in companies with a proven track record. Let the investment become “passive income”. Like Warren Buffett, he recommends you buy stocks and don’t look at them again for 5 years. Of course, he’s studied the quarterly reports and researched the fundamentals of the company. He buys the stocks at a good price and makes sure it has a good intrinsic value at the time of purchase.

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Carlos Rull

Carlos Rull is a musician living in the San Diego area. His interests include Yoga, Eastern Philosophy, Zen Buddhism, and Gardening. He plays drums, piano, and composes New Age & Ambient music, and his albums are available on iTunes and Amazon.com.

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