Question

Why does frequently buying and selling stocks lead to lower returns?

Answer 1

Frequently buying and selling of stocks leads to worse returns because,the securities that investor buys or sells needs time to transact and these bought securities are held for less time and sold before it's maturity.

These sometimes leads to the problem of odd lots.

• An odd lot refers to an order amount for a security that is less than the normal unit of trading for an asset. Typically this refers to anything less than the standard 100 shares for stocks.
• An odd lot order generally costs more due to higher commission levels.