Day-Trading Reality Check: Humans are Poor Investors and even Worse Traders

Vasant Dhar
By Vasant Dhar
The shocking death of Alex Kearns, a 20-year-old day trader who recently died by suicide, highlights a broader caution to young people: do not get sucked into digital trading platforms — no matter whether they have noble-sounding names or are “free.” You will most likely lose your money or worse. There are better ways to make money.

With the exception of people like Warren Buffett, humans are poor investors and even worse traders. Sure, the occasional human might get lucky, but in general, the odds are heavily stacked against you. Unless you have some special information or expertise, you are best off investing in a market index as early in life as possible and enjoying the benefits of compounding.

I have been teaching and engaging in systematic investing for over 20 years. My core message to all students and professionals is to not overestimate their competence or the quality of their beliefs, but to continually challenge them.

Read the full MarketWatch article.

Vasant Dhar is Professor of Information Systems.