There’s a tollbooth on Wall Street that most investors don’t see. It doesn’t flash red lights. It doesn’t send you a bill in the mail. But it takes a little cut every time you pass through — and if you’re overtrading, you’re handing over more than you realize.
I’m talking about friction.
Every trade carries hidden costs. Spreads, slippage, taxes, opportunity costs. They’re not dramatic on their own — a cent here, a few basis points there. But stack them up over dozens of trades a week, and suddenly your portfolio is bleeding out quietly, like a tire with a slow leak.
Michael Mauboussin once wrote about how investors mistake activity for edge. The belief is: “If I’m doing something, I must be making progress.” In reality, most of the time, you’re just feeding the tollbooth.
It reminds me of the gym. The people who jump from machine to machine, never resting, look busy. They sweat a lot. But the ones actually getting stronger? They’re the ones with disciplined reps, a plan, and patience between sets. Markets reward the same.
The cruel irony is that overtrading often disguises itself as “risk management.” You tell yourself you’re nimble, flexible, adjusting quickly. But agility without discipline is just twitchiness. You end up reacting to noise, paying more in fees, and compounding less wealth over time.
Warren Buffett calls it the “sit on your hands” advantage. By refusing to move constantly, he sidesteps the tax of friction. It’s not that he never trades — it’s that he only moves when the odds are overwhelmingly in his favor.
So here’s the unsexy truth: every time you feel the itch to click “buy” or “sell,” imagine a tollbooth. Ask yourself if the price of admission is worth it. Most times, it won’t be.
🔑 Key Takeaway: Activity feels like progress, but in markets, it’s often just a hidden tax. The edge isn’t in motion — it’s in restraint.
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