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Beginner
6 min read

Frequent Trading vs. Long-Term Investing

Trading and investing are different activities with different odds and costs.

The short answer

Trading attempts to profit from short-term price movement, while investing attempts to participate in the long-term growth of businesses, and independent research consistently finds that higher trading frequency is associated with lower net returns for individual investors. Choosing which activity you are actually engaged in determines which tools and expectations are appropriate.

What you'll learn

  • Distinguish trading from investing by their goals and time horizons
  • Summarise what Barber and Odean's and SPIVA's research found about trading frequency and active management
  • Explain why this platform is built around accumulation rather than trade signals

Two different games

Trading attempts to profit from short-term price movement. Investing attempts to participate in the long-term growth of businesses. They require different skills and have very different cost structures.

What the evidence says

Barber and Odean's studies of individual brokerage accounts found higher trading activity associated with lower net returns. S&P Dow Jones Indices' SPIVA Scorecards find that most professional active managers underperform their benchmarks over long horizons. FINRA and Investor.gov (SEC) publish consistent cautions about frequent trading and day trading.

We are not the only ones who found trading difficult; the difficulty is well documented.

Why professionals with more resources still struggle to beat a benchmark

Professional active managers have research staff, data access and experience that an individual trader typically lacks, and the SPIVA evidence still finds most of them underperforming a simple benchmark after fees over long periods. This suggests the difficulty is structural — costs, taxes and the challenge of consistently outguessing a highly competitive market — rather than a lack of individual skill or effort.

The choice this platform makes

We build for accumulation. Research is designed to inform where new contributions go, not to generate trade signals.

Why this matters

Choosing which game you are playing prevents you from using the wrong tools.

Terms used in this lesson

Turnover
How frequently holdings are bought and sold. Higher turnover means higher costs.
Benchmark
The index a fund or strategy is measured against.
SPIVA
S&P Dow Jones Indices' scorecards comparing active fund performance against benchmarks.
See the full glossary

Key takeaways

  • Trading and investing pursue different goals over different time horizons
  • Higher individual trading frequency is associated with lower net returns in academic research
  • Most professional active managers underperform their benchmark after fees over long periods
  • This platform is built to inform contributions, not to generate trade signals

Related concepts

Written by
Suggested Investments Research Team
Content type
Educational article
Published
2026-09-13
Last reviewed
2026-09-13

Sources and methodology

Your Brain Can Be an Investing RiskPortfolio Construction Basics

Educational content only. This lesson is not investment, tax or legal advice and does not recommend buying or selling any specific investment. All investing involves the risk of loss.