Day-Trading Profits Are Little Better Than A Coin Flip

Day-Trading Profits Are Little Better Than A Coin Flip
Andrew Rummer

almost 3 years ago1 min

Mentioned in story

Short-term trading is having a bit of a “moment” after Berkshire Hathaway’s Charlie Munger, close colleague of Warren Buffett, last week criticized commission-free trading apps like Robinhood for encouraging clients to “gamble the way they would in betting on race horses."

Robinhood for its part shot back that, “to suggest that new investors have a ‘mindset of racetrack bettors’ is disappointing and elitist.” Zing. 

Wherever you stand on this argument, the data does indeed show that the chance of making a profit on stocks over the course of a single day is just 54% – a little better than flipping a coin or placing your money on black at the roulette table, but not by much.

As the chart above from Richard Bernstein Advisors shows (using the S&P 500 as a proxy for stocks in general) the chance of generating a profit climbs to a healthier 69% after a year in the market – and even 90% after 10 years. 

In the world of investing, patience is a virtue.

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