10 Investment Guidelines: Part 1

3. Most investors' time horizons are much too short. Statistics indicate that day trading is largely based on luck.

Here Bernstein clearly lays down the gauntlet at the feet of day traders. Frankly, I am in his camp. Theories espoused by some of the most successful investors, such as Bernard Baruch, Benjamin Graham and Warren Buffet, rely on valuation techniques, which require holding periods of more than just a few hours. Day traders will argue that "buy and hold" does not work.

The problem with this argument is that successful investors will not buy and hold forever, as day traders contend. Rather, they will research, buy value, monitor, reevaluate and eventually sell. This process could take years but will not take forever. Furthermore, it is an interactive process with feedback loops. Only lazy and complacent investors will buy and hold blindly.

Day traders are more akin to gamblers than investors. Even successful gamblers gamblers can't win all of the time and will rely on unquantifiable luck. You have to separate gambling as entertainment from gambling as a career, as my good friend and superb handicapper Mitch Rosen is able to do. There are very few career gamblers.

Finally, Bernstein would not mention statistics that indicate that day trading does not work unless he is confident as to its source and conclusion.