4 ms·

> Trading costs are high. The average round-trip trade in excess of $1,000 costs three percent in commissions and one percent in bid-ask spread. A lot has chan

> Trading costs are high. The average round-trip trade in excess of $1,000 costs three percent in commissions and one percent in bid-ask spread. A lot has changed in 20 years. The conclusion may still be the same, but spreads are much tighter (thanks in part to HFT) and trade commissions no longer exist.

baal80spam 6y ago
> trade commissions no longer exist In US.
- loeg 6y ago
  > Berkeley.edu.
WalterBright 6y ago
Trading also subjects you to short term capital gains tax rates, as well as losing the effects of compounding.
- encoderer 6y ago
  Yes, and that is also lower now than it was in 2000!
- TuringNYC 6y ago
  >> Trading also subjects you to short term capital gains tax rates, as well as losing the effects of compounding. And judging from the rest of the comments, sounds like there will be lots of short term capital losses also to offset the gains. Also sounds like having lots of taxable gains might be a pretty good scenario here!
- Bubbadoo 6y ago
  Short term capital gains rates have been 15%, right? Which is, based on my last gander at the tax charts, less than the regular w2 tax rate bracket many successful traders would file under.
  - jandrewrogers 6y ago
    No, short-term capital gains are taxed at your marginal income tax rates. 15% is for long-term capital gains below $500k.
loeg 6y ago
I think it's important to point out that the conclusions are definitely still the same despite the lowering of trading costs since 2000. Trading is hazardous to your wealth, period.
- encoderer 6y ago
  I'm not here to make a case one way or the other, but I would point out the graph at the top of the page numbered 775. Most of the reported difference in net performance is due to the impact of commissions and spreads: As trading goes up, gross return was not impacted, but net return was. Retail investors in 2000 were getting fleeced. (And if you think that's bad, take a look at commissions in 1980.)
  - ashtonkem 6y ago
    Trading used to involve a lot more labor; it makes sense that the commissions have dropped.
    - encoderer 6y ago
      You're not wrong about the 1980 comp but by 2000 this was automated and very, very profitable for brokerages.
- tree3 6y ago
  Which is solely due to the extra cost of short term capital gains tax.

baal80spam 6y ago

> trade commissions no longer exist In US.

loeg 6y ago
> Berkeley.edu.

WalterBright 6y ago

Trading also subjects you to short term capital gains tax rates, as well as losing the effects of compounding.

encoderer 6y ago
Yes, and that is also lower now than it was in 2000!
TuringNYC 6y ago
>> Trading also subjects you to short term capital gains tax rates, as well as losing the effects of compounding. And judging from the rest of the comments, sounds like there will be lots of short term capital losses also to offset the gains. Also sounds like having lots of taxable gains might be a pretty good scenario here!
Bubbadoo 6y ago
Short term capital gains rates have been 15%, right? Which is, based on my last gander at the tax charts, less than the regular w2 tax rate bracket many successful traders would file under.
- jandrewrogers 6y ago
  No, short-term capital gains are taxed at your marginal income tax rates. 15% is for long-term capital gains below $500k.

loeg 6y ago

I think it's important to point out that the conclusions are definitely still the same despite the lowering of trading costs since 2000. Trading is hazardous to your wealth, period.

encoderer 6y ago
I'm not here to make a case one way or the other, but I would point out the graph at the top of the page numbered 775. Most of the reported difference in net performance is due to the impact of commissions and spreads: As trading goes up, gross return was not impacted, but net return was. Retail investors in 2000 were getting fleeced. (And if you think that's bad, take a look at commissions in 1980.)
- ashtonkem 6y ago
  Trading used to involve a lot more labor; it makes sense that the commissions have dropped.
  - encoderer 6y ago
    You're not wrong about the 1980 comp but by 2000 this was automated and very, very profitable for brokerages.
tree3 6y ago
Which is solely due to the extra cost of short term capital gains tax.