Some of the greatest investors of all time have pointed to one very important, yet often forgotten about, factor which can be the difference between beating or falling behind the major stock index of choice – trading fees.
Day traders, or those who invest in stocks for relatively short amounts of time, will (as a mathematical function) experience substantially larger trading fees and taxes over the long-term than investors who make large investments in long-term investments which are expected to never be sold.
The concept of never selling a stock, or investing for decades (or until macroeconomic or structural changes within a given industry or a given company change the picture) may seem counterintuitive to many investors today.
The concept of holding a company through good times and bad is a difficult thing to do for many – who wants to see their investment account decrease? – however, having the ability to hold through a cycle (and preferably buy again at the bottom) is often the trademark of investors who have seen such cycles in the past and are able to weather the storm, and those who are investing only for tomorrow, forgetting about the long-term game which is investing and saving.
Minimizing taxes and fees, while often a secondary or tertiary goal of most traders, should be near the top of the list for those who wish to consistently outperform a given index.
Invest wisely, my friends.
