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What is the percentage of profitable traders versus investors over a period of time!!
Part One
This is one of the most important questions that comes to mind for every new person or even someone with experience in trading or investing in the financial markets!
The team has put together a summary that we are sharing with you in a series of summaries starting with this post!
💡 In this section, we will learn about basic concepts, along with a brief overview of the performance of each category over the past decades.
Don't forget to like this summary ♥️ and come back to it whenever you like 😉
👈 Introduction
Individuals’ strategies in the financial markets vary between long-term investing and short-term trading. While some individuals prefer to invest for the long term to ensure capital stability and gradual growth, others prefer to trade for the purpose of making quick profits in the short term. This statistical study aims to compare the profitability ratio of traders versus investors over a certain period of time.
👈 Definition of trader and investor
- Investor: A person who buys assets (stocks, bonds, mutual funds) with the aim of holding them for long periods, usually several years, to make profits from growth in value and distributed dividends.
- Trader: A person who buys and sells assets frequently over short periods, either daily or weekly, with the aim of taking advantage of price fluctuations to make quick profits.
👈 Traders vs. investors performance
According to many studies, statistics show that only a small percentage of short-term traders make regular profits, while investors rely on stable growth over time.
Studies on traders' performance
- A study from the University of California (2000): showed that 80% of short-term traders lose money in the long run, while only 10% of traders make sustainable profits.
- eToro platform study (2021): It reported that 75% of day traders on its platform lose money, while only about 25% make profits in the short term.
Investor Performance
- A study by the Vanguard Group (2017): It showed that investors who hold stocks for more than five years achieve annual returns ranging between 7% and 10% on average.
- S&P 500 Analysis (2019): Over the past 20 years, stocks in this index have delivered an annual return of approximately 6.06% despite market volatility.
Comparison based on time and profitability
- In the short term: Day traders face higher risks due to violent market volatility and the inability to predict exact price movements. However, professional traders with clear strategies can make significant profits.
- In the long term: Investors enjoy greater stability thanks to the benefits of compounding returns and economic growth. Although returns may be lower at times, risks decrease over time.
👈 Profit and loss ratio
General statistics indicate that:
- Only about 10-20% of short-term traders make sustainable profits.
- In contrast, 60-80% of long-term investors achieve consistent and sustainable profits.
👈 Reasons why investors outperform traders
1. Benefit from long-term growth: Large companies tend to grow over time, which supports the stability and value of assets.
2. Lower costs: Traders incur recurring trading fees that may impact profits.
3. Risk Management: Investors focus on diversification and asset allocation, which reduces overall risk compared to traders who rely on high concentrations.
👈 Results and conclusion
Looking at statistical studies, it is clear that short-term traders often have difficulty making sustainable profits, while long-term investors have a greater chance of making consistent returns. The final results depend on the level of knowledge, experience, and financial discipline.
🌟 Sources:
1. Brad M. Barber and Terrance Odean. *Trading Is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors*. Journal of Finance, 2000
2. eToro. *Retail Investor Statistics*, 2021
3. Vanguard Group. *Investment Returns by Asset Class*, 2017.
4. S&P Global. *S&P 500 Historical Returns*, 2019
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