63% of Americans Say Investing Needs Patience, Yet 43% Are Trading More Than Ever

"Over 63% of Americans believe investing today requires more long-term patience, yet 43% of active traders report trading more frequently than when they first started investing. The gap between stated beliefs and actual behavior is sizable, and for pre-retirees and retirees who depend on income-focused portfolio s, it carries implications for retirement risk."

"According to Schwab, 89% of investors trade at least once a year, and 24% trade daily or weekly. Trading every week becomes a concern inside an account meant to fund 25 or 30 years of retirement spending. Each trade introduces tax friction inside taxable accounts, bid-ask spread costs, and the possibility of selling a dividend payer right before its ex-date."

"Schwab found that the top motivations among those trading more frequently were access to better trading platforms and tools (51%), the desire to capitalize on market opportunities (51%), and increased confidence from experience (48%). Better tools and rising confidence are platform features and personality traits. They describe why the trade is easy to place rather than the investment thesis behind it."

"The current market environment makes the temptation worse. The S&P 500 is up 29.2% over the past year and 12.24% in the past month alone. The VIX has fallen from a March peak of 31.05 to 18.02, a 42% decline in 30 days. Sharp rallies after volatility spikes are conditions historically associated with rising investor confidence and increased trading activity."

Over 63% of Americans believe investing today requires more long-term patience, while many active traders report trading more frequently than when they began. Most investors trade at least once per year, and a sizable share trade daily or weekly. Weekly trading can be problematic in accounts designed to fund decades of retirement spending because each trade adds tax friction in taxable accounts, bid-ask spread costs, and risks such as selling dividend payers before ex-dates. Increased trading is often motivated by better platforms and tools, desire to capitalize on market opportunities, and confidence gained from experience rather than changes in portfolio fundamentals. Recent market strength and falling volatility can further encourage this behavior, raising retirement risk for income-focused portfolios.

Read at 24/7 Wall St.