Seneca Pilot

The hard numbers on day traders is that 95% lose money. Investing and day trading are two very different skills. Investing in solid companies or index funds have the benefit of the tailwind of the persistent long term bias of the market to rise approximately 8% per year. Day trading has a dismal track record for traders and therefore I would never recommend it for anything but "extra/fun" money.

Market orders are fine, as long as volatility is not too off the charts and the stock you are trading is stable. During the GME run up a few weeks ago there were times where the volatility was so high and share availability so low that spreads were out of control. As long as a trader can recognize the conditions they are trading in have at it. Most of the advice you will see posted here is aimed at beginning traders because we don't know the experience level of the one asking the questions.

The tax issue you allude to is the reason I use futures and options on futures. I benefit from the 1256 tax rules and the effective rate works out to somewhere between twenty and thirty percent. (60% long term capital gains rate and 40% regular income rates even if you never hold for more than a few hours) Also with futures you don't have to record every trade. I get a 1099 for the year and I file, simple.

The presumption is that one will need their retirement account for that purpose. If not, if for you it is extra money and doesn't affect your lifestyle later then disregard the advice and trade away. It is impossible for us to know everyone's situation so I default to the traditional and assume anyone who is sophisticated enough to day trade profitably is also sophisticated enough to know what type of account to use to do it.

Seneca Pilot

Because some 95% of day traders lose money and if you lose principal at a young age and lose the compounding you have to add that much more later to make it up. If you lose $20,000 from your retirement account at age 20, assuming an 8% return it costs you $800K by age 67. Big risk. As Buck said in his post, the time to gamble if you want to is much closer to retirement when you have taken advantage of compounding to build a large account and you can set aside a small play amount to try day trading. If you lose you don't hurt yourself more than a few thousand to learn if you can do it or not.

JamesBond

I'm a yuge options trader. I don't do it in my retirement account though. ymmv.

Good luck amigo.

Gunfighter

Record keeping on a large volume of options trades is cumbersome. One IC per day creates close to 1000 entries on the tax form at the end of the year. Using the fun money corner of my retirement account for that activity simplifies tax returns and doesn’t trigger STCG.

Trading futures and options on futures provides 1099 simplicity and 1256 tax efficiency in non retirement accounts. If a bad trade wipes it out the money can be replaced.

Making investments above the retirement account limits in long term holdings like BRK and VOO creates minimal annual tax liability.

Not to be confused with retirement accounts, my retirement funds are invested in real estate. This allows for riskier short term trades using retirement account fun money. It’s a nice mix of assets and strategies that fit into different accounts and entities. One size does not fit all, YMMV, DYODD, objects in rear view mirror..., etc.

Trip7

Take notes folks. Now this is a solid plan that not only grows wealth, but limits the downside due to sufficient Margin of Safety. Some of the stuff being talked about on here(SPACs/Bitcoin/TSLA etc) when done at Scale (which is how to truly build wealth) will very likely result in your portfolio blowing up and permanent loss of capital.

"It is a tenet of my investment style that, on the subject of common stock investment, maximizing the upside means first and foremost minimizing the downside. The deleterious effect of permanent capital loss on portfolio returns cannot be overstated."

Dr. Michael J. Burry

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JamesBond

tbh, I am not really sure of the point trip and gunfighter are trying to make with the latest posts. Other than to diversify your portfolio, which I think no one will disagree with...

Humboldt

What about Airbnb’s? I have a college roommate who has been building houses out in a little beach town in Costa Rica for 20 years. I’ve been down to visit multiple times and am now thinking of buying property. I’m lucky I have an insider with intel on the workings of this area. It’s really starting to boom with Google and Amazon “work pods” operating in the area. My friend is currently building a place for the guy who just won his 7th Super Bowl.

Anyone out there have an Airbnb, in an exotic locale, that has found success and good cash flow?

Humboldt

Seneca Pilot

There are people who made millions with air b&b and never took on the liability and risk of owning any property. They used short term renewable leases. The pandemic pretty much killed their model but again they just didn't renew the leases so no risk. Once things get back to normal I am sure they will be back in business. Anything within a few blocks (walking distance) from a beach rents well.

Gunfighter

There had been some discouragement of active or riskier trades in retirement accounts earlier in the thread. My point was that trading actively in a retirement account can be part of a broader strategy. There are tax advantages of creating STCG in retirement accounts while holding assets for LTCG in taxable accounts. If done in reverse order the same investments create higher taxes.

mispoken

permabears be permabearing....always....so when things like last week happen they can say “I told you so”. Meanwhile, I’ve been laughing my way to the bank for the last decade on “bubbles” like TSLA, AMZN, SHOP etc. Their “ridiculous valuations” have created wealth far beyond my wildest dreams. Both stock and options.

My credo has worked well, for me; “Buy good companies, keep buying them and never sell”

There is a lot of group think in investing perpetuated by the wind socks on CNBC that have no skin in the game. Their message is always one of doom and they continue to program society and scream the big banks message that investing is hard, scary and risk; so it’s best left to them.

Follow true investors like Tom and David Gardner from The Motley Fool, emulate them and become wealthy. Its very simple, the discussion that this thread has turned into is a very good cross section of societies thought process on money and investing. There’s almost nothing on here that is right or wrong, they’re just different philosophies (some say valuations are high, some say they’re not and in reality nobody knows). Some say indexing is the only way to go, some say there are better ways. None of these have right or wrong answers, ultimately it’s whatever fits your style and risk tolerance.

Realize that there are other ways to invest other than indexing and you CAN Do much better. Had I indexed the last 10 years my wealth would be MILLIONS less than it is today. Can I lose all that? Sure. But that risk is what allows me the ability to beat the market and I’m quite accepting of that. It doesn’t make me right, or wrong, just of differing experience and style.