CEO Tom Gardner: No Day Trading -- Hold Everything at Least 12 Months

Key Points

• Day trading takes a lot of time and effort, and in the end most people will wind up losing money.

• Institutional investors always have more information than a day trader relying on technical analysis.

• These 10 stocks could mint the next wave of millionaires ›

Motley Fool CEO Tom Gardner recently sat down for an interview in which he discussed investments that people should avoid, particularly when first starting out on their investment journey. Among his tips was a word of caution about the practice of day trading.

Day trading is a method of picking and choosing stocks by attempting to time trades by recognizing specific technical indicators, such as Bollinger Bands, the Relative Strength Index (RSI), and moving average convergence/divergence, among others. Day traders move in and out of positions regularly, as opposed to buy-and-hold investors who invest with a long time horizon.

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If you think day trading sounds difficult, you're right. According to DayTrading.com, more than 85% of day traders fail in their first year, and only 10% to 15% report making any money at all. So, it's no wonder that Motley Fool's CEO issued a warning against day trading. In a June 2025 article, he said:

You will not day trade. You will not actively trade anything. Anything you buy, you must hold for at least 12 months. I have to get you in for 12 months. ... If you can find Costco early on and just hold it, you're going to become a millionaire. Day trading Costco, there's just a tragedy of epic proportions.

Image source: Getty Images.

The dangers of day trading

Day trading is a really hard way to make money. If you're going to try to be a day trader, there are several challenges you'll have to overcome.

Timing the market: This refers to the philosophy of buying low and selling high. Sounds great in theory, but in reality, market timing is extremely difficult, if not downright impossible. According to Hartford Funds, 78% of the stock market's best days from 1995 to 2024 occurred either during a bear market or during the first two months of a bull market. And if you missed out on the market's 10 best days in that period, your returns were cut by 54%.

Transaction fees: Sure, brokers like Robinhood offer commission-free trades. But day-traders can also lose money through a practice known as payment for order flow. The broker sells their orders to third-party market makers to handle the trades. The market makers, which process huge numbers of trades each day, execute the trade and get a profit from the bid-ask spread, which is the difference between what someone is willing to buy a stock for and what someone is willing to sell it for. The day trader gets a slightly worse price -- and the costs for that type of transaction can add up quickly.

In addition, according to Gardner, day traders will never be able to compete on a level playing field with institutional investors when it comes to "the costs, the taxes, and the fact that unless you have an incredible amount of money to build the most high-powered frequency trading system in your home, you're going to be behind others in institutions that are trading faster than you," he said. "You are always going to be a loser."

Stress: Yes, day trading can be incredibly stressful. You have to be on your game every day -- and pretty much for the entire trading day -- to try to identify and take advantage of opportunities (keeping in mind that you're playing against a stacked deck). That's a lot to handle for a career in which only 4% manage to make a living.

Alternatives to day trading

Instead of trying to time the market in a task where you're nearly guaranteed to lose, first-time investors should instead follow the Warren Buffett approach to investing: Seek out quality businesses with a distinct competitive advantage and reliable earnings. Those are the kinds of businesses that you can buy and hold for a long time.

As Buffett, the longtime CEO of Berkshire Hathaway, once said, "Our favorite holding period is forever. We are just the opposite of those who hurry to sell and book profits when companies perform well but who tenaciously hang on to businesses that disappoint."

And Buffett knows what he's talking about. Berkshire's portfolio gained 5,502,284% from 1965 to 2024, far outdistancing the S&P 500's gain of 39,054%, which includes dividends.

Another ideal investment strategy is dollar-cost averaging, which is the practice of splitting your investment into a series of transactions over a set period of time. For instance, if you had $50,000 to invest in Microsoft, you could buy $10,000 of the stock every Monday for five weeks. This removes the uncertainty of market fluctuations and any attempts to time the market, as your investment is on a set schedule.

These strategies are better than day trading and would give investors a better chance to get richer and one day enjoy a stable, happy retirement.

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Patrick Sanders has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway, Costco Wholesale, and Microsoft. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.