Scott Pape warns against this one incredibly risky investment

The Barefoot Investor has issued a stern warning to everyday Aussies thinking of taking up day trading claiming even the savviest traders have gone broke.

Scott Pape gave the advice after a concerned reader wrote to him explaining her firefighter husband wanted to invest some of their $75,000 in savings. 

Day trading is a notoriously volatile form of investing whereby individuals seek to profit from short-term fluctuations in stocks, currencies and other assets. 

‘My husband wants to invest in day trading, and has been doing a trading course to “educate” himself,’ the worried wife wrote in a column for the Daily Telegraph.

‘I’m not very investment savvy and would definitely be the more money-cautious out of the two of us. 

She said it appeared ‘risky’ but her husband assured her it was an opportunity to make their money ‘work’.

But Mr Pape was quick to pour cold water on the idea.

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‘I’m hearing a fire alarm, and your firefighting, risk-taking hubby is running towards the danger, he responded.

‘The only problem is that if he begins day trading it’s your money that he’s going to set on fire.’

Mr Pape said that even the ‘savviest day traders’ he knew had gone broke several times, claiming that the investment strategy was even harder nowadays with the rise of AI bots tracking and predicting fluctuations in the market.

‘It’s just not a game you can reliably win,’he said.

The finance guru likened the couple’s financial situation to summiting a mountain. 

Instead of relaxing in retirement, Mr Pape said the husband’s desire to embark on a crash course in day trading was akin to strapping a snowboard to his feet and performing tricks, rather than enjoying the view.   

‘I’d gently remind him that your money is working for you, via your superannuation. I’d focus on how much you need to contribute to it to live comfortably,’ he said.

‘Once that is set up, I’d get him busy thinking about all the exciting things he could be doing with his time, rather than risking his money.’

In 2021, there were over 1.25 million active online traders in Australia, of which almost half a million placed their first trade on a share market in 2020, according to research firm Investment Trends. 

Almost half of first-time investors were aged between 25 and 39. 

Only a small fraction of day traders make a profit.