by 
The Curious Bag
-
Actively trading stocks is much easier than it used to be, thanks to Internet brokerage firms. What is active trading, and are there benefits to it?
Definition
An active trader is somebody who frequently tends to his portfolio, often more than once a day, according to online investment dictionary Investopedia. Active traders tend to be short-term traders.
Avoiding Fees
Over time, mutual fund fees and other broker commissions can add up. For every .25 percent in fees, an investor's financial Independence is pushed back one year, CBS reports. By actively trading stocks, commissions can be closely monitored and minimized.
Returns
Eight out of every 10 mutual funds do not beat their benchmarks. This means that if the active trader invests money in an index fund that tracks the S&P 500, for example, she will pay less in commission and earn more than 80 percent of mutual funds.
Controlling Taxes
Active trading can be advantageous from a tax perspective. By monitoring portfolio gains and losses throughout the year, the investor can employ certain strategies to reduce the tax burden on capital gains.
Warning
Although active trading can outperform passively managed investments, active trading requires a lot of education and time in order to achieve desirable returns.
Source:
RELATED QUESTIONS
Copyright 2023, Wired Ivy, LLC