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If “this investing habit” means frequent trading or reacting to short-term market moves, the concern is supported by historical evidence—but it is not a fair description of all young investors. Repeated trades can hurt realized returns when they come from trend-chasing or attempts to time volatile markets, and fees can further reduce what remains invested. A written plan, diversified allocation, and rules for handling volatility can help you avoid decisions made in the heat of the moment.
How frequent trading can reduce what investors keep
Trading does not guarantee better results. An investor who buys after a price has risen or sells in fear during a decline may miss later gains, while each transaction can add costs. The Securities and Exchange Commission summarizes a Library of Congress report this way: “The Report concludes that active trading generally results in the underperformance of an investor’s portfolio.” SEC Investor Bulletin, 2014.
A frequently cited study by Brad M. Barber and Terrance Odean examined 66,465 households at a large discount broker from 1991 through 1996. The most active-trading households earned an annual return of 11.4%, compared with 17.9% for the market over the study period. The authors’ central message was that “trading is hazardous to your wealth.” These figures describe a historical sample, not a forecast or a result that applies to every investor today. Barber and Odean, The Journal of Finance, 2000.
Short-term trading is especially risky when it is driven by volatile markets or social-media trends rather than a plan. The SEC warns that “short-term investing in a volatile market carries significant risk of loss.” SEC Investor Alert, 2021.
Trading less is not the same as never changing a portfolio
A planned change can be different from an impulsive trade. Rebalancing—adjusting holdings to restore a chosen asset mix after markets move—may be part of an investment plan. The key distinction is whether a change follows a considered rule tied to your goal and risk tolerance, or a short-term reaction to headlines and price swings.
There is also a separate risk in leaving long-term savings uninvested indefinitely. Vanguard reported that 14% of IRAs held by its investors under 25 were in cash, citing its 2024 IRA research. That statistic describes those Vanguard accounts, not young investors as a whole. Cash can be appropriate for near-term needs, but money kept out of investments for a long horizon may miss opportunities for growth. Vanguard, 2025.
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Why fees matter when money has decades to grow
Fund expenses, advisory fees, and transaction costs reduce the amount left in an account to earn future returns. In a 2025 illustration, the SEC showed how annual fees affect a hypothetical $100,000 investment growing at 4% per year for 20 years:
| Annual fee | Illustrated value after 20 years |
|---|---|
| 0.25% | Approximately $208,000 |
| 0.50% | Approximately $198,000 |
| 1.00% | Approximately $179,000 |
This is a fee illustration using a hypothetical return, not a forecast of investment performance. SEC, 2025.
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1Clear out junk files and repair common Windows errors2Scan for outdated or missing drivers - takes under a minute3Repair Windows errors before they cause bigger problemsThe same compounding principle works in the other direction: a hypothetical low-cost portfolio earning 6% over 30 years could grow more than fivefold, according to Vanguard’s 2025 article citing its 2024 principles illustration. Neither that return nor that outcome is guaranteed. Vanguard, 2025.
Build a plan that makes impulsive trades less likely
- Write down the goal and time horizon. Money for a near-term expense has a different role from retirement savings intended to stay invested for decades.
- Choose a diversified allocation that fits your circumstances. Consider your time horizon, capacity to tolerate losses, liquidity needs, and how concentrated your holdings are. Diversification can reduce some risks, but it cannot eliminate investment risk or guarantee a gain.
- Check the full cost of investing. Review fund expense ratios, advisory charges, account fees, and transaction costs—not just a trade’s visible commission.
- Automate contributions when appropriate. Regular contributions can make investing less dependent on trying to guess the best time to buy. Keep enough accessible cash for planned expenses and emergencies.
- Set rules for portfolio changes in advance. Decide what would justify rebalancing or changing your allocation, and avoid treating every market dip or online tip as a reason to act.
A target-date fund is one professionally managed option some retirement savers use; its allocation generally changes over time according to the fund’s design. Compare its fees and investment approach with your needs rather than assuming that every target-date fund is the same.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What staying invested can—and cannot—do
Vanguard illustrated the cost of missing strong market days with a hypothetical $100,000 investment: from 2000 through 2019, an investment that missed the 25 best market days ended with $229,000 less than one that stayed invested. This is a historical illustration, not a prediction, and it does not show that staying invested prevents losses. Vanguard, 2020.
Young investors should not be assumed to be unusually aggressive traders. Vanguard’s 2025 article reports that aggressive trading was the exception rather than the norm among the young investors covered by its surveys and account analyses. The available findings apply to those particular populations, not to every young investor. Vanguard, 2025.
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If you want individualized investment recommendations, check an adviser’s registration and review how the adviser is paid, including fee disclosures. A diversified, long-term approach can still lose value, and no strategy guarantees a particular return.
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