OPINION:
Financial advisers tell us that investing in the stock market is for the long term: Do your research, buy your stocks then leave them alone.
The Securities and Exchange Commission (SEC) website reads, in part, “Investing for the long term is the best way to secure a strong financial future.”
Yet anyone who’s ever owned a 401(k) has at some point been frustrated watching the market. If you ask Google AI “Do day traders cause increased market variation?” The answer is “Yes” because day traders account for 20% to 35% of daily trading volume and carry tremendous influence.
On March 9, oil prices skyrocketed to nearly $120 a barrel and then fell back down to $80 due to the war with Iran. The U.S. is a net oil exporter and Venezuelan oil was added to our reserves. Economists called this a “freak-out period.”
Had it not been for day traders, prices would have stayed the same. Countries have found alternatives to the Strait of Hormuz for moving oil.
Making stock trades based on negative news is no better than guessing how injuries will affect your bets in sports.
The father of quality management, W. Edwards Deming, once said, “Uncontrolled variation is the enemy of quality.” To inject instability into a market, the best thing to do is give day traders control over 30% of trading volume.
If only traders had to hang onto their stock for a week.
BEN FURLEIGH
Georgetown, Kentucky
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