Why I Quit Swing Trading to Build a Long-Term Portfolio (And a Huge Podcast Announcement!)

0:00Similar kind of idea, but basically one of the things that can ruin gamblers is that same mentality where, okay, I'm down, but my luck's going to turn around. So I'm just going to double down and then I'm going to double down and I'm going to double down. And a lot of times that can get you back to even, but all you need is that one time where you just keep double down, double down, and you just keep going deeper and deeper and deeper. And it completely wipes you out. And actually, I saw a video about a guy who did.

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4:32Start now. Before we jump into today's episode, I want to address something you're probably going to notice today. Dave isn't on the mic. I want to share with you all that Dave is stepping away from the Investing for Beginners podcast and Sather Research. As this business and podcast have grown over the years, we've eventually reached a point where our visions for the future of the show started to diverge. Ultimately, we struggle with communication behind the scenes and realize we are just moving in different directions. We offered Dave the floor today to do a farewell episode, but he opted to step away immediately, which we completely respect.

5:04I want to take a second to genuinely thank Dave. We built the show together from the ground up. He has been a huge part of helping thousands of you learn the stock market, and we wish him the absolute best in whatever he decides to tackle next. But for all of you listening, I want to assure you, investing for beginners isn't going anywhere. The mission is exactly the same as it was on day one, to help you compound your wealth and understand the market without all the Wall Street jargon. We have some incredible episodes lined up. Stephen has been working hard behind the scenes with Value Spotlight.

5:36He continues to work hard behind the scenes, and now he's stepping up to the mic. We are excited for this next chapter. So with all that being said, let's dive into today's topic. Yay. Do I say something now?

5:51So before we dive into today's topic, I want to introduce you guys to Stephen Morris. Stephen, like I said, has been working behind the scenes for us. He is incredibly gifted. He is incredibly smart. He works really, really hard and he really cares. And that's something that's really hard to find these days. And he brings a fresh insight and take into the stock market. We wanted to start this episode right off the bat, just talking about swing trading, because he has some experience with that and he's been converted to the right way to invest. We thought we would cover some swing trading and just take us educational episodes.

6:30So Stephen, with that long introduction, thank you for joining us. Thank you for stepping up to the plate with this. And I'm excited for today's show. Yeah, absolutely. Not just today's show. I'm excited that, um, one to be trusted, you know, to you and Dave, what, how blessed am I to just have the two of you as mentors over the past couple of years, um, guiding me into all this. And when you approached me to, to consult a little for you in the very very beginning i don't even remember how long ago it was um i was swing trading and i was listening to you guys talk and i was like like you guys aren't gonna make money that way and uh as i listened to you guys talk you know i became more and more obvious like watching you guys invest and you're all relaxed and chill about it just doing your research and watching me invest and I'm almost sweating on a daily basis, like rushing to my computer because, you know, I got a notification that a stock is going down or up or whatever.

7:38So, um, no, totally. It's an honor to be here and I, I can't wait. Um, I do kind of wish you hadn't set the bar so high, like I'm not that smart. Um, but one thing you did say that was true is I do care. I care massively for our audience. And so I hope that shines through. So, you know, let me know. I think it will. It will be obvious very soon. So I want to dive into like, how did you find swing trading? What was it that was attractive to you? And how did that whole journey start? So I didn't initially find swing trading. I found day trading. okay and that's how I started um so uh I retired from the army and you know um I was in the army my whole adult life so whenever I went to the civilian world I didn't know what to do with my next chapter and so I just did what everybody does and got a corporate job and it sucked I was not happy man and so I was like man there's got to be something better where I can make money and I just started looking on YouTube for other ways to make money and I found this guy and I cannot remember his name to save my life but he just taught people how to day trade and he was very upfront and honest about it like you know it is very hard to day trade you got to be a very specific mind to day trade it's you know not for everyone and I'm like well you know I'm good at pattern recognition and all that stuff so I'll give it a try and um I mean you talk about stressful dude like that was brutally stressful um and literally you're eight hours a day you're you're sitting well more than eight hours because you got to get all your screeners set up and, you know, read the news real quick.

9:37See, see what, if you can identify anything that's going to pop. And, um, so I mean, 10, 11 hours a day, you're sitting in front of a computer screen and you can't, you know, you're not moving. Um, and that was not fun. Um, I, I gave it a, I gave it a go, I want to say for probably nine months. And, uh, that's when I was talking to a friend of mine who was a very active swing trader. And he was like, yeah, I can't day trade, but I swing trade. I'm like, the heck is swing trading? And so he was like, oh, it's a mix between long-term investing and day trading. It's like kind of in between. And that's total BS.

10:23And you know the guy, Brian, I think I've introduced you to Brian Montez. Shout out to him. Um, but yeah, he, uh, he, he introduced me to swing trading. And so from there, I just started to learn from him and YouTube and took a couple of courses and yeah, that's how I got into it. Okay. So now I'm interested swing trading is sounds like long-term investing in what way does it share similarities with long-term investing? So swing trading is, you know, you buy a good example. Well, Ford took a big hit, I want to say in 2023, Ford was struggling and they got down to like$10 a share, maybe even lower for a while.

11:14and um so i jumped in on ford and i brought on a couple hundred dollars worth of shares and um you know it i just sat it sat there for probably three or four months before i finally went back up and i was able to exit out of ford um so a day trader you it is the ultimate bad juju if you have a if you have a pl open at the end of the day you never have an open position at the end of the day as a day trader at least i'm you know the day traders i know um and swing trading that it doesn't matter you know if you buy in and it doesn't quite go up as fast as you expected it to um that's fine you just sit on it it's going to go back up eventually and as soon as it does you hop out um so it's similar i guess to long-term investing in the regards like you're looking for the same thing pretty much you're just expecting it to happen on a much shorter time frame and time frame and you're going to get much smaller returns for the most part until you find that that that home run grand slam you know hail mary touchdown whatever of your sports analogy you want to apply.

12:35So you are like digging for deals, like always looking for a stock that's beaten up or is that not accurate? No. Um, you're, you're, so it's one of the things you absolutely hate and is trying to time the market. Okay. Okay. Just like, you're looking for a signal, you're looking for a certain signal. Okay. When you say wanting to take profits faster? Is there, you know, I come from the Buffett and Munger school of, we try to hold things for 10 years or longer. I probably personally lean closer to like five years. So I'm somewhere in that five to 10 year range of if I find a stock, this is something that I am hoping will happen.

13:20For swing trading, it's obviously going to be a lot shorter, but how short do a lot of swing traders tend to do it? The goal is no longer than three days. For most, I think three days is usually the turnaround you're looking for. Some can be a week, but for the most part, it's you want that pretty quick. And there are a ton of trades I've done same day. okay i entered in the morning uh based you know whatever signal and then got a decent return by the afternoon so i just exited um because you never know what's going to happen as soon as that bell goes off the next morning so and how many of those just kept going up and you just kicked yourself oh bro that happens all the freaking time yeah and so that was one of the biggest emotional problems i had with day trading and swing trading is i got it was so hard for me to regulate whenever i sold something starting to trend down it was so easy for me to ignore the signal that it's going to continue to trend down like nah it's going to turn around it's going to you know i've already lost a hundred dollars it's going to turn around and then it's like all right I've lost 200, but it's going to turn around.

14:44And that's such a huge trap because that's what turns the stock market into a casino. Right. And that was one of my biggest downfalls was day trading and swing trading was my emotions were just, and you know me, I'm not that emotional of a guy, but apparently when it comes to my money, like super emotional. So. I think you're in good company there. We all know how important it is to make smart decisions in our business, our investments, our finances. Getting the best for less matters. Yet how many of us have looked at our life insurance policies lately? You have to ask yourself, is your coverage enough given all the economic uncertainty?

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17:49Have you heard of the term gambler's fallacy? No, I haven't. Okay. It's a similar kind of idea, but basically one of the things that can ruin gamblers is that same mentality where, okay, I'm down, but my luck's going to turn around. So I'm just going to double down and then I'm going to double down and I'm going to double down. And a lot of times that can get you back to even, but all you need is that one time where you just keep double down, double down, and then you just keep going deeper and deeper and deeper. And it completely wipes you out. And actually, I saw a video about a guy who did that back in the 90s or something.

18:28He ended up finding a loophole. And I can't remember which bank he worked for. But he found a way to cover his losses. And he spiraled. And he ended up losing the company. I don't know if it was like$10 million or$100 million. Like some crazy number. And it was because of this gambler's fallacy where he was like, I'm just going to keep doubling down, doubling down. and then it just completely blew up well and it's like i imagine well i know for for me it's that um well you're an athlete you know and to those listeners out there that are athletes like you know whenever something gets in your head whether it's a free throw you're trying to catch a pass whatever you know if that defender's got in your head like oh man or if you're down and you only got you know a minute and a half to get that that score so you win like you're trying so freaking hard that you end up just shooting yourself in the foot because you you trying so hard forces you into an error making a mistake and we've seen that in professional sports college sports professional uh the professional world like you were saying gambling um i'm sure it happens all the time in the stock market as well and for me trading like definitely 100 that happened where i get so frustrated that it just caused me into unforced errors like you know and then instead of losing 200 instead i lost a thousand gee thanks you know that's a great place and so um yeah that's i've never heard of that but that makes a ton of sense so what is it about the way you invest now that helps mitigate that problem um it's less you know it's more scientific i would say um you know because because you could have the greatest signals the strongest candlesticks like it doesn't matter you know like it could all every and all the experts look at it and be like, oh yeah, that's going to explode.

20:43And then it just trends down and you lose a ton of money. Um, and, and no one really knows why, at least that I know of, no one really knows why. Um, with the way we, we invest, it's the exact opposite almost like we, we can look at a company and we've done so much research into it. You know, we, we know the leadership. We know the market they're operating in, and the space, and the competitors, and their moat. That's one of the most fascinating things I've learned from you and Dave, is a moat, and that's so strategic and powerful, especially, which one was it?

21:29Stephen Morris:Casey's. Casey's, it was Casey's, when we when we um we're talking about casey's one day you were talking about how strong their moat was compared to 7-11 and um what was the other one 7-11 and circle k two no one circle k it's one i've never been to i think um so it's big in the northeast um wawa okay um you you were comparing it to those two and it just didn't make sense to me so like you and dave i don't know how long you guys took probably an hour to sit me down and like explain to me like the strategery in their moat and like this wasn't an accident it was intentionally done that way because they saw a rift in the market i guess i don't know if that's the right word but they saw they saw a gap in the market where they could expose and get a foothold.

22:30And man, you talk about really like hammering it down. And then, you know, I go to my dad's house who, he lives about an hour away from me and in a real small town and they have, they have a Casey's and like, they have, that is the best freaking pizza, man. It is so good. I still haven't had one yet. Really? All this talk of Casey's. Yeah. Yeah. So I think that's the biggest difference, at least for me, is it's all scientific. There's of course there's risk. Of course, there's some guesswork. There's some predictions to it, but it's not just straight up. I think this is going to happen. We actually have proof that it's more than likely going to happen.

23:22um so i like it because it's less stressful my wife likes it because it's more stable and our money isn't just up in the air like it used to be um and it just creates a much more stable environment for the family as a whole knowing that we have these investments here this money just sitting here but it's actually working for us but if we need it it's there we don't we don't want to grab it but if we if we have to we can um so yeah it's just it's such a good security blanket um outside of the emergency funds and all that stuff so yeah did i answer your question i don't remember what your question was now that is the greatest uh sales pitch for long-term investing i think i've ever heard awesome

24:12um okay do do you remember any other things about swing trading and we can move past swing trading if if um if we've beat that horse but there are other parts of swing trading that you found to not work for you that long-term investing was a better fit for i would actually say it's the opposite um because i still do swing trade today um and sometimes if i'm bored and don't have a whole lot of work to do which is rare nowadays but um i'll even do some day trading um but for me it's more of a dopamine hit um it's it's and this probably sounds so stupid i hope i hope you some of you listeners can can at least relate to this i just have an itch to sell something.

25:04I just want to freaking sell something. I'm looking at my portfolio and it's like, okay, you know, I got that. That's doing great. You know, whatever. Yeah, it's not doing so good. I can sell that. And it's like, no, I can't sell that. Um, Costco, like I can sell Costco. Costco's been ticking me off lately. Um, but then it's like reason sets in. It's like, no, don't sell Costco but um but yeah a lot of times it's just an itch I want to I want to trade um so I have uh you know I talked to my wife about it actually like we because my wife and I we do um weekly budget uh meetings um so like and we go over like my my work calendar her calendar um the budget like you know just every Saturday we sit down for a couple hours and go over that stuff and it's literally like a meeting like i prepare a slideshow i'm such a geek i know um but yeah it's it's cool but anyway like i sat her down in that meeting i'm like look i was like i need a little bit of money just because long-term investing is boring so freaking boring i want to just play so we set aside a little bit of a budget for me to to get a swing trade or day trade whatever i want and if i lose it i lose it and it's okay it's not really meant to make me money it's just for me to have fun i guess is more of a better exam and it's not much it's like 150 bucks like that i can fill once a month and yeah you know anything i make great um which i haven't so i mean it's hard to make a lot of money off 150 bucks but um it still scratches that itch you You know, so I don't know if anyone can relate to that, if anyone has like a similar journey or they started out day trading, swing trading, and then got into like I did.

27:03But I know I have talked to like some of our members of Value Spotlight and one in particular who's been on the podcast several times, Tyler. He totally can relate with me because he and I are kind of a similar personality. So I know I'm not alone. At least there's one other like me out there that just sometimes wants to go sell. Is your wardrobe well stocked for the upcoming season change? I'm recording and it's the first warm day we've had in a while. And I'm realizing my wardrobe isn't as robust as it should be. So I went to Quince and got myself a three pack of 100 % Pima cotton teas. I can't wait to report back to you about how those feel.

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28:44Hank, what's going on? We haven't worked a case in years. I just bought my car at Carvana, and it was so easy. Too easy. Think something's up? You tell me. They got thousands of options. Mm-hmm. Found a great car at a great price. Uh-huh. And it got delivered the next day. It sounds like Carvana just makes it easy to buy your car, Hank. Yeah, you're right. Case closed. Buy your car today on Carvana. delivery fees may apply i feel like that's so stupid no i mean uh i i get i get the i the like the itch idea like my my version of that which sounds i don't know like as if what we do is not value investing enough um i play this digital card trading game and like i just love buying low and selling high.

29:37Like I could just do that all day long. You know, like I sold it for 97 cents. I waited for the price to spike and I, or no, I bought it for 97 cents. I sold it for$6 and 25 cents. Like that just gets me going, you know, like, like pure value investing. So I have to scratch that itch because I, I also like you, I enjoy the fact of these companies working for us and like compounding capital, like a Casey's or a Costco, they're going to do all the hard work to continue compounding our money. And we just have to let them do it once we make the right choices. So I get the itch not to sell, but to practice my superiority in discerning value.

30:21And I have to go do it in digital card trading. So no, I get you. And I fought that for a long time. And I think it's good to have that outlet. Yeah, definitely. And I think, you know, and vice versa, you know, I have massive respect because it is not easy what you do. And as I've learned and grown and kind of ventured out, and I'm going to brag a little bit. I don't remember if it was you or Dave, but um i i was talking about it wasn't knock it was um g uh gd general dynamics and i had done all this research for general dynamics and one of you i don't remember which one was like i think now's not a great time for the defense sector and gave me all these reasons why i'm like nope and i pulled the trigger on gd and i actually ended up making like a decent profit off gd and and it's still going.

31:21I'm like, yes. And I'm so stoked. Like I beat Dave and Andrew.

31:31Well, let's talk about that for a second. Cause one of the things we've said for a long time is you want to buy things where you have a circle of competence. So did you feel like you had a special knowledge that helped you with that research? Oh yeah. I know tons of contractors in GD. um i actually know a lot of the leadership in gd not like the ceo level but like the management level of gd um just from being in the military for so many years um i know a lot of their sub companies um but what sold me um on what they were working on is they're working real heavy and a lot of drone technology uh they're also working really heavily on guided munition

32:17Stephen Morris:and let me tell you how crazy it is like like a guided missile or guided bomb that is much easier science than a guided munition like we're it's like thinking taking a bullet and making it go pre-programmed where you want it to go. And that's literally the level that General Dynamics and some of their competitors, Northrop Grunman and some of those others, that's literally the level they're getting to now is to where just the munition itself is guided. And that's so insane. But they're working on a bunch of that. They're working on overhead displays for combat soldiers. And one of the coolest things I saw them prototype was you could literally watch like your team member because it knows exactly where your team member is.

33:23So they could be behind a wall, but you can still kind of see them. Because like their computers talking to your computer. So you're seeing their silhouette behind the wall. So no friendly fire. Right, exactly. And that's such a huge concern, especially whenever you're in an urban environment where you're going building to building looking for bad guys or whatever. For fratricide or friendly fire, blue on blue, whatever you want to call it. That's such a huge danger. And we train on that daily almost to avoid it. but it's still going to happen, unfortunately. And that is a solid way to prevent stuff like that.