You Traded More. Did You Actually Earn More?
Investing Mindset, Part 1: The first question is not "what was my return," it is "what was left after costs."
A portfolio returning 11.4% a year sounds like a win. It looks different if the market returned 17.9% over the same stretch. Making money and having a good reason to pick a particular method are not the same claim.
The missing comparison on your statement
Brad Barber and Terrance Odean studied 66,465 households at a US discount brokerage. From February 1991 to January 1997, the group that traded most often earned an annualized 11.4% after costs. The group that traded least often earned 18.5%. Before costs, the gap between the two groups was small. The extra activity did not pay for itself. source
These numbers should not be pasted onto today's investors without caveats. It is a single brokerage's sample from an earlier fee environment, and sorting households by trading frequency is not the same as labeling them "swing traders" and "long-term investors." Still, the underlying question holds up: does the extra trading earn back the extra cost it creates?
| Comparison group | Annualized return, after costs |
|---|---|
| Highest-trading-frequency group | 11.4% |
| Lowest-trading-frequency group | 18.5% |
Both figures come from the same US household sample over the same observation window. They describe what happened, not what to expect going forward. source
The stock market as a whole is not a casino
William Sharpe's argument is more precise. Within the same market, the dollar-weighted average return of all active money, before costs, equals the market's return. Once that money pays more in costs, its average return after costs falls below the market's. This is not a claim that no individual investor can succeed. It is arithmetic: not everyone can beat the average at the same time. source
01 Reward for being in the market 02 Extra performance from selection and timing 03 Minus trading and holding costs
Conceptual. The return the market itself pays and the competition for extra returns are two separate things.
There is no good reason to call the stock market as a whole, where companies earn profits and pay dividends, a negative-sum game. But in the separate contest of "who bought and sold better than everyone else," costs are a real drag. And costs do not only matter when a portfolio loses money. Even in a rising market, a trader can end up with less than a simpler alternative would have delivered.
Professionals are not exempt either
According to SPIVA, 67% of US large-cap active funds underperformed the S&P 500 in the first half of 2026. The same report found a lower miss rate for emerging-market equity funds, at 38%. Results varied by market and by period. This statistic does not measure how often individual technical traders fail, and it does not measure the odds that a fund loses money outright. source
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