But with freetrade the costs are basically gone, other than stamp duty and PTM levy for large trades. You can trade in a size of Ā£10,000 and only have 0.5% stamp duty and the spread to make up. Stocks swing 5-10% weekly, so itās fair game to make a couple of hundred pound a week doing this.
Personally I do not swing trade, since I invest for dividends, but I could very easily sell my whole portfolio and start swing trading with Ā£78,000 (which will not move the market whatsoever). I see a lot of Ā£100,000+ trades on the LSE order book, must be the big banks doing this. But I and many others would be happy to collect a few percent off a Ā£100,000 every week for sure.
I really want to know why Freetrade didnāt focus on indexing. If their target audience is new investors, picking individual stocks is very dangerous. The only thing worse is options trading.
But there are plenty of index ETFs, eg S&P500, FTSE100 etc to choose from. Itās down to what the investors do with their money, put in index trackers or go for individual shares.
I donāt disagree with the spirit of what you are saying.
I suspect itās possible to learn how to calculate the liquidation value of a company. I suspect not many people will bother to learn and apply it. Even though as little number it may be they may become too many.
I think there is a set of questions one must ask her/himself. Not me. Not you. Not s/he. One. Which one? Every one.
Can I beat Michael Jordan or LeBron James at basketball?
Can I beat Ronnie OāSullivan or Stephen Hendry at snooker?
Can I beat Roger Federer or Serena Williams at tennis?
Imagine one buys a stock for Ā£10. One week after it trades at Ā£6. What to do now? How long will one be able to live with an unrealized loss?
And many other questions one should ask in order to self assess.
If one reaches the conclusion it canāt beat Jordan, Hendry or Williams in the fields where they are experts. And if one canāt sleep with price volatility (synonymous of risk and opportunity at the same time). And many other thingsā¦ Then itās ok. Thereās no shame in it. Thankfully one can index. And by indexing one has been getting results aligned with the top 20% of professional money managers. Historically.
For most people indexing is a victory in itās own right. A massive breakthrough.
Weāre big fans of indexing & weāve explained the benefits lots of times. We also want to give people a choice of investing in individual companies too, which they may choose to do because they believe in the companyās prospects / like their brand or for all sorts of other reasons. So I think that itās overly simplistic to brand investing in individual stocks as āvery dangerousā.
In the future, weāll also add more tools to the app to enable users to see how well diversified their portfolio is, compare it with benchmarks etc. to help give people the information that they need in order to avoid taking too much risk.
In the meantime weāve created a whole series of posts explaining the principles of investing, you can see them in our Introductory wiki š£.
As you say, the question to ask is whether I can identify and exploit that mispricing. My feeling is that for the vast majority of retail investors (including me), the stock market should be considered simultaneously pretty efficient (from my point of view the stock market participants are LeBrons, OāSullivans and Williamses) and random (I have no special insight into why prices are changing or what direction theyāll go).
If I buy Twilio (or Freetrade) and it goes up, have I been smart or lucky? Honestly, I canāt tell.
Do you want to know what I really like about what you just said? Itās a rethorical question. Iāll tell you anyway: it seems to me you are well aware of the borders of your circle of competence and you navigate the waters within those borders.
Do you want to know a secret? Another rethorical question. In the realm of principle it seems to me youāre doing exactly what Warren Buffet does: staying within your circle of competence. And as long as you stay there the chances are you will succeed. And I hope you do. Specially with your Freetrade investment