As we look back one day, the rise of day traders may become the lasting memory we have from the massive stock market rally from the late-March lows.
Dave Portnoy, the unofficial leader of this “retail bro” army, is sure to leave his mark in the history books. After his brash proclamation a few weeks ago that he was “better than Buffett, the founder of Barstool Sports is doubling down on his efforts to disrupt the status-quo on Wall Street.
Portnoy recently wrote an op-ed piece on Fox Business. There, he says Wall Street veterans originally embraced him as a “loveable loser.” He said it came about as he struggled to transition from sports betting to wagering on stocks.
But he says as he started to win more than he lost, Wall Street turned on him.
‘In the beginning, I struggled. I was down $2 million before I could blink, and all the self-proclaimed pundits and talking heads on Wall Street treated me as a lovable loser,” said Portnoy.
“The finance community welcomed me with open arms. But then something funny happened along the way. I started winning and they started losing.
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“The more I won, the more mad they got.
“I openly wondered whether I was better than some of the legendary (albeit geriatric) traders of past generations… Yet here I am. Beating them like a drum for the past three months at their own game.”
Portnoy’s contention in his op-ed is that Wall Street doesn’t think “Joe Public can be smart enough or trusted enough to invest our own, hard-earned money. Only they have that knowledge and insight on what is best for us.”
It’s not just that Wall Street doesn’t think the general public is equipped to day trade stocks. History has also shown that “Joe Public” trying to beat the market on his own is a losing bet. This is according to Vasant Dhar, a professor at New York University’s Stern School of Business.
“There are very few things in life that are more important than money. Acquiring it is difficult and growing it is challenging. The last thing you want to do is gamble,” says Dhar, but that’s exactly what Portnoy is telling his “retail bro” followers to do.
He picks stocks by randomly combining Scrabble tiles to form ticker symbols.
That’s not investing. That’s gambling.
Dhar cautions those who are thinking about trying their luck. He feels particularly worried about the young traders who turn to apps like Robinhood, believing that their trades are free.
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“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.”
He says unless you have an edge, you are better off simply buying an index fund and taking advantage of compounding.
“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.” added Dhar.