Should You Trade More Frequently or Less Frequently?

In today’s “always-on” world, people tend to wear the adjective “busy” as a token of pride. Being able to say you’re busy is a signal that you’re actually doing things. You’re working. You’re putting things in motion. You’re taking action.

Around a year ago, Business Insider released an article profiling 18 highly successful people who function on very little sleep. The list included U.S. President Barack Obama who gets 6 hours per sleep each night, Benjamin Franklin who claimed to only get 5 hours of sleep per night, and PepsiCo President Indra Nooyi who sleeps only 4 hours every night. So, that’s the key to success then, right? Sleep less and work more.

Not exactly. It’s probably more likely the case that being in positions such as the CEO of a multi-billion dollar company or the leader of the United States of America causes people to get less sleep rather than the lack of sleep leading them to those positions. But what I find so interesting about this story and other stories like it is our obsession with activity. We seem to have this notion that the more we do, the more successful we will become.

There’s an alternative perspective to the “more activity equals more success” philosophy. Instead of advocating perpetual, non-stop activity, some people instead say to “work smarter, not harder.” Of course, I don’t think people intend for this to be a license of laziness. Instead, I think people who advocate this approach are saying that there might be a way to do things better without having to put in quite as much effort. Why engage an activity that gets you no results? Why not, instead, just make smarter choices?

So, why am I talking about this issue? What does all this have to do with investing? Everything. Just like people in the professional world believe that more activity is going to equal more success, investors often feel the same way about investing. We tend to think that if we trade more frequently, we will end up with better results. If we keep busy, it must mean we’re being productive, right?

Well, just like in the professional world, I think it would be better for us as investors to “work smarter, not harder.” Rather than trading more frequently, we should focus on trading more judiciously. Of course, financial advisors will tell you that more trades are better. But remember, they typically collect fees every time you trade, so they have a vested interest in you trading more frequently. But trading with every micro-fluctuation of the market isn’t going to make you more successful–it’s just going to make you throw your money away.

We need to get rid of this addiction to busyness. Activity is not the same thing as productivity. Smart investors make measured, wise trades. Trade smarter, not harder. If you need any direction on when to trade and when not trade, feel free to reach out to us for a free consultation. We don’t want you to be merely a more active trader; we want to help you become a more successful investor.