Actual Question:
Why
does there seem to be so many more day traders than value investors in the
style of Warren Buffett, etc.?
Answer:
Dear
Friend!
Such
a wonderful question!
I
too wonder the same.
In
my opinion there are three fundamental reasons for the gross aberration that
there are more day traders than value investors operating in the stock market.
Greed:
Greed
and fear are the most common and difficult to control human emotions. Of the
two greed comes first and fear follows. When markets are rising (present
situation) greed attracts more players. Most of the people enter not knowing
anything about stock markets. They have simply overheard somebody saying that
markets are rising and there is a killing waiting out there!
Desire for making a quick-buck:
Many
people have a strong desire to make a fast-buck. They do not want a longer but
surer path like value investing. This fundamental nature of human beings is
further reinforced by modern technology, which strives to provide instant
gratification of needs - people just don’t want to wait anymore - they want
internet banking, immediate downloads, and so on. Marketers, online shops, et
al, work hard to satisfy this craving for instant gratification.
Gambling Instinct:
Man
seems to have been created with an inborn gambling instinct. This is not new.
We have been having it since the Mahabharat times, with the Pandavas
betting and losing even their beloved wife in fit of gambling rage.
Day
trading provides a very convenient dignity to what is otherwise pure gambling.
Families of day traders honestly believe that day traders are engaged in
serious and respectable business or profession, and they spread this belief
about their day trading family members among the larger family and the society
at large.
Related:
- Trading/ Day Trading
- Margin Trading
- What is Short Selling?
- What is the Differences Between Fundamental and Technical Analysis?
- Why Day Traders Cannot Quit?
- Is Algorithms Based Trading Safe?
- How Warren Buffett Trades in Stocks?
Conclusion:
Finally,
my dear friend, please do not think I am delivering this sermon standing tall
from a high moral ground.
I
had been once what I have described above, till one day I lost all my life’s
savings in the fraction of a second during a market meltdown.
After
this costly burning of fingers, I had abandoned the stock markets for a very,
very longtime.
Fate
touched me and made a value investor after a long interlude.
I
too am striving my bit through my blog ‘Wealth Vidya’ to convert day traders into
value investors, but cannot fail to wonder, just like you, why there are more
day traders than value investors operating in the markets today!
Thank
you,
With
Best Regard,
Anand
