Why Passive Investment can be an ideal strategy for most investors?
February 26, 2020 | Gaurab Subedi
When it comes to working, people typically have an assumption that those who are most active are the one who is likely to excel and go past over the passive ones. Well, when we talk about stock trading, that may not be the case always.
“After all, a happy way to live life-and often save a life-is do nothing when nothing must be done”-Vishal Khandelwal
So, sometimes when you limit your stock trading activity, you will profit better. Being passive doesn’t refer to negative behavior in stock trading. Instead, it suggests that you are confident that your choices of the stock portfolio will perform well and generate profit in the long run.
When you develop a tendency to profiting from day trading, you always look for the opportunity. In doing so, when the market goes up or down and becomes unstable, you may panic. For instance, when the market goes bullish, you have a chance of picking a bad stock at a high rate in the expectation of making the profit. On the other hand, you may sell good stocks with your hope of picking the same stock at a low price when the market is bearish. Sometimes being a watchdog, you have to let the market go by during bearish and bullish times. But if you always look for some activity, you may run into a mess and have a chance of losing through the continuous transaction.
The greatest misery comes when you want to offset the loss of one transaction by performing another transaction; during which you make random decisions in the hope that some of your purchase will profit you, which leads to the harsh judgment and eventually you will lose chunks of money.
Another aspect is that every time you perform trading, some amount of your investment goes to the broker commission, tax on profit, and other fees. Although it may be small for a single transaction, when you calculate the charges for a large number of transactions, the amount you pay as fees can be high.
If you can develop a habit of profiting from less activity or being passive, then you can generate a sense of confidence even when the market is not doing well. It is a kind of a psychological boost that will lead you towards being a successful investor.
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