Research indicates that investors who closely monitor their portfolios and trade quickly in response to minor fluctuations in price

Question

Quizplus · Accepted Answer

Research has consistently shown that investors who engage in frequent trading and try to time the market underperform those who adopt a buy-and-hold strategy for the long-term. This is because frequent trading leads to higher transaction costs and taxes, which can eat into returns. Additionally, investors who try to time the market are more likely to make emotional decisions based on short-term fluctuations, which can lead to poor investment decisions. Therefore, the best choice is B - investors who monitor their portfolios closely and trade quickly in response to minor fluctuations in price typically underperform those who hold investments for the long-term and trade infrequently.

Research Indicates That Investors Who Closely Monitor Their Portfolios and Trade