Lesson 9a: More reasons to trade rather than hold

LESSON 9a: SELLING STOCK CONTINUED! After posting yesterdays lesson #9 I realized that using $5000 didn't make the impact of trading vs. investing appear big enough, so I decided to show you why rich people trade and poor people invest. Here's the same experiment using $20,000 instead of $5000. We'll go for $1000 per trade because the math for $500 would take too long. ;) Buy the stock at $15 you get 1333 shares with a few bucks left over. Sell 63 shares at $15.75 for $992.25 profit Sell 60 shares at $16.53 for $991.80 profit Sell 57 shares at $17.35 for $988.95 profit Sell 54 shares at $18.21 for $983.34 profit Sell 52 shares at $19.10 for $993.20 profit Now we have $4,949.54 cashed out of this stock and still have 1047 shares remaining. Stock dumps to $13. The Investor has 1333 shares worth $17,329 a loss of $2,671 The Trader has 1047 shares worth $13,611 plus the $4,949.54 we cashed out for a total of $18,560.54. The trader is only down $1,439.46. A $1,231.54 cent difference, but wait, there's more! The Investor sits pat, the Trader takes the cash he got and BUYS at $13. That gets us 380 more shares to add to our 1047 for a total of 1427 shares, 94 more shares than the Investor. Now the stock returns to $15. The Investor has broken even, $20k. The Trader is now UP $1,405! That would be a 7% gain my friends. By holding on to the stock when it went up and watching it drop back down, the Investor has lost a 7% gain on their money and ended up with $0. Is that worth it to you? Didn't think so.