Bull or Bear Market? Day trading is plain stupid.

A friend of mine was concerned about her brother; he has started day trading. A day trader rapidly buys and sells stock throughout the day in the hope that their stock will continue to climb or fall in value for the brief period (often seconds to minutes) they own the stock, allowing them to make a quick profit. It is extremely risky and can result in substantial financial losses in a very short period of time.

My friends brother isn’t the sharpest tool in the shed but it has been proven that 4 out of 5 people who day-trade lose money and only 1 in 100 do it well enough to be described as “predictably profitable.”

I’ve met this guy a few times and he is bone idle as well as being stupid – but as is often the case he is imbued with a great sense of confidence in his ability. He has been doing it for a few weeks and believes that he is doing well and he might be. However once he deducts the costs of this trading (commissions, taxes, research and information, time) he would be better off working at the drive through of a local fast food place.

Sure there are people who are employed to day trade but my friends idiot brother doesn’t understand that they trade with other people’s money!!!!!

My friend was concerned because her elderly parents are worried that any money they might leave to the brother in their will could be frittered away.

I explained to my friend that a testamentary trust can be an effective estate planning tool to provide for children, grandchildren and others in the right circumstances.

As we have previously discussed a testamentary trust is any trust created under a will. The key aspect of a testamentary trust is that, although assets of the trust may be controlled by the intended beneficiary they are not part of that beneficiary’s estate; therefore it can be protected from creditors.

In the instance that you have a sibling who is as stupid as my friends brother a testamentary trust allows the giving of an inheritance on a controlled basis. This can help them manage their financial affairs.