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Your phone’s buzzing. A sleek notification is here to tell you about the “Top 5 stocks of the day *winky face*.” A few more clicks through the hyper-gamified investments app, and done: you’ve added one — or three — of the top 5 to your portfolio, even though you don’t know much about the company. Your screen makes a happy sound, off to the next.

Not to be a buzzkill, but these trades, and the 25 others you plan to make this week, are unlikely to make you rich.

Because as fun and trendy as some online trading tools may seem, the key to building wealth has remained incredibly consistent – almost boring – over the years: education, a detailed financial plan and a laser focus on long term goals. And whether you invest on your own or with an advisor, these still hold.

On the flip side, if you are not careful, you may get caught in an endless loop of addictive, gamble-like trading behavior, costing much more than you had initially signed up for.

Market pros have seen this same trend repeat again and again: economies tremble, and suddenly thousands of often newbie investors turn into day traders overnight. And today this happens with very few, if any, barriers thanks to the latest and greatest in tech.

Have fun, but be safe

The markets are volatile, the trades are free, and people have more time in front of a computer or their phone. But countless studies and research have shown that historically only a tiny number of these traders ended up making a profit in the long run. And, the more people trade, the more they tend to lose.

Of course, all that doesn’t mean you can’t carve out a small allocation to do some “fun” investing on your own. In fact, in our own research, we have heard from investors, especially women, that dabbling in small, self-directed accounts provided a fun, “safe” way to get started before determining how to approach and manage larger, long-term investments.

Still, smart investors who do carve off a safe portion of their assets for shorter term investing research the companies deeply, know why and when they should buy, and even more importantly, why and when they should sell, so that emotions don’t lead to “trigger happy” buying and selling.

These same investors also display that same smart behavior when it comes to the other aspects of building long-term wealth, including putting money aside for retirement, having an emergency fund, increasing savings, and reducing credit card or student loan debt.

They are also open to talking to an expert whenever they have questions or are feeling overwhelmed. It’s totally fine if that’s not what you want, but it’s nice to know the help is there when you need it. And like I said before, there is decades worth of stats backing the effectiveness of this consistent and strategic wealth planning behavior.

A recent study from financial services research firm Dalbar traced investing back to 1984, showing that the vast majority of underperformance in an average portfolio occurred when investors withdrew their funds during periods of market instability. Even more telling: a 2011 study by a group of professors from UC Berkley, UC Davis, and Peking University found that less than 1% of day traders are able to outperform the markets consistently.

One would think that if it were a fair game, they should outperform roughly 50% of the time. So with all the data imploring us to stay invested for the long haul, why is day trading still compelling to so many?

Avoiding the herd

The same Dalbar study identified a number of psychological and emotional triggers that guide our money decisions, at times clouding logic and research. Getting lost in the avalanche of news, following the herd for the next “hot” investment tip, and being overconfident are some of the common ones.

And it looks like women are less susceptible to these triggers: a Warwick Business School study found that women take a more outcomes-based approach to investing, leading to better results, compared to men, who tend to chase the thrill of the process.

Technology has upended finance in many awesome ways. Anyone can now experience the benefits of commission-free investing, even if we just have a couple of paychecks to start with. A number of digital platforms have opened up access to investing to populations that have historically been left out of the market activity completely. And that’s great. It’s OK to chart your own investing course.

There are companies that are committed to educating investors on the risks of different investing approaches and products, by showing them the benefits of a long-term strategy, and discouraging empty trading behavior.

Also, by prioritizing paying down high-interest rate credit card debts, before nudging you to invest your stimulus check in penny stocks of bankrupt firms. Of course, it’s also up to us as investors to do our homework and identify the right partners – ones who focus more on our needs and goals – and less on badges and confetti.

— Kelli Keough is head of digital and client solutions for J.P. Morgan U.S. Wealth Management.



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