Buy and Hold

I shared this link on the blog's Facebook page a few days ago, but thought I should share it here as well as some of my thoughts on it as well: The Most Successful Investors Leave Their Money Alone (The article is on Business Insider but the info is from SigFig)
The first piece of data is that the top 1% of people studied (who has synced assets of $5 million or more), had better returns than the other 99%, a return of 5.8% vs 4.3%.

Some may say that this is due to more opportunities afforded by the rich, for example, hedge funds. But looking at the next two charts, it shows that the wealthiest 1% had a much lower portfolio turnover a year and that people who were infrequent traders had a much higher return than frequent traders (frequent defined as investors who have a turnover higher than their portfolio annually)

(Images from the article)

I guess this shows that those who engage in short-term investments and speculation are more likely to have lower returns statistically (or at least among those users analyzed by SigFig). I think it's the brokerage costs and trading fees incurred when buying and selling shares that are eating into the returns of the frequent traders. 

Anyway, so moral of this is just to trade less often and be more selective with our purchases, so we don't have to keep on changing our minds as to which investment to make. But, of course, if mistakes or miscalculations are made, we should sell that investment and cut our losses to make better use of our funds. Alternatively I think index funds are a good place for investors to place their money as they allow them to diversify their risk across the index's constituents, allowing the investor to take part in their long-term growth.

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