The Barefoot Investor has issued a stern warning to ordinary Australians thinking about starting day trading, claiming that even the smartest traders have gone bankrupt.
Scott Pape gave the advice after a concerned reader wrote explaining that her husband, a firefighter, wanted to invest some of their $75,000 in savings.
Day trading is a notoriously volatile form of investing through which individuals seek to profit from short-term fluctuations in stocks, currencies and other assets.
“My husband wants to invest in day trading and has been taking a trading course to ‘educate himself,'” the worried wife wrote in a column for the Daily Telegraph.
Scott Pape (pictured), who wrote the best-selling financial advice book The Barefoot Investor in 2016, was questioned about whether day trading was a risky financial move by a worried wife whose firefighter husband wanted to invest some of his $75,000 in savings.
“I’m not much of an investment expert and I would definitely be the more cautious of the two with money.”
She said it seemed “risky,” but her husband assured her it was an opportunity to make her money “work.”
But Pape was quick to pour cold water on the idea.
“I hear a fire alarm and your risk-taking firefighter husband is running toward danger,” she responded.
“The only problem is that if you start day trading, it will be your money that goes up in flames.”
Pape said that even the “smartest day traders” he knew had gone bankrupt several times, stating that investing strategy was even more difficult today with the rise of artificial intelligence robots that track and predict fluctuations in the market. .
“It’s just not a game that can be reliably won,” he said.
The financial guru compared the couple’s financial situation to the top of a mountain.
Instead of relaxing in retirement, Pape said her husband’s desire to embark on a crash course in day trading was akin to strapping a snowboard to his feet and performing tricks, rather than enjoying the view.
‘I would kindly remind you that your money is working for you, through your retirement. I would focus on how much you need to contribute to live comfortably,” she said.
“Once set up, it would keep you busy thinking about all the interesting things you could do with your time, rather than risk your money.”
Day trading is a notoriously volatile form of investment through which individuals seek to profit from short-term fluctuations in stocks, currencies and other assets (file image)
In 2021, there were more than 1.25 million active online traders in Australia, of which almost half a million made their first trade on a share market in 2020, according to research firm Investment Trends.
Almost half of first-time investors were between 25 and 39 years old.
Only a small fraction of day traders make profits.