The time of day
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From the barman in your local pub to the cab driver in the West End. They all knew someone who had a hidden gem of a stock tip. Unfortunately, many got their fingers burned as the bubble burst and many of the companies disappeared without a trace - and so did investors.
But Barclays Stockbrokers says that day traders are returning in significant numbers. Over the past few months, execution-only investors have been logging on every day to buy and sell almost every conceivable asset via exchange traded funds, contracts for difference, spread betting and good old equities, of course.
Day trading is often associated with reckless investors making decisions on a whim. Barclays says otherwise and that today the day trader is savvy, educated and uses all the research thrown at them.
It is not the only place where day trading is rife. The Telegraph launched a fantasy fund manager game in conjunction with JP Morgan Asset Management in April. Players were given an imaginary £100,000 for their portfolio and 250-odd unit and investment trusts to choose from.
Just three months in to the Telegraph game and the returns have been phenomenal. The top two portfolios to date have returned a staggering 100 per cent plus. There are plenty of portfolios that have achieved returns in excess of 50 per cent so far. Yet many of these returns have been generated using a strategy that would normally be frowned upon in the real investment world.
Players have been trading frequently, many on a daily basis - the leading portfolio in May made as many as 330 fund switches in just two months. Despite a charge of £10 each time a batch of trades is made, some portfolios have made a dramatic climb up the tables.
It goes against the traditional strategy adopted by fund investors. They have followed the advice that unit trusts should be viewed as long-term investments and should be held for at least five years. Experts frequently say that investors should consider ditching a fund only after a prolonged period of underperformance - or if the fund manager leaves.
But I wonder whether such consensus is becoming outdated and that the five-year time horizon should be consigned to the rubbish bin.
Take investors who correctly decided to invest in commodity funds or Eastern European funds three or four years ago. They would have made staggering returns but unless they had the nous to take some profits along the way, much of the gains would have been lost.
Naturally, the players in the fantasy game are not playing with real money and it would not matter to them whether they lost the lot but their actions suggest that frequent trading of funds can work.
There is a long way to go, of course, and three months is an irrelevant timeframe. I am also not suggesting that fund investors should be encouraged to trade on a daily basis but just as multi-managers constantly review and change their fund holdings, perhaps investors and advisers should be a little more hands-on. That people investing in equities should be in it for the long haul still holds firm but that does not mean they should religiously stand by a fund, however well it is doing.
Paul Farrow is digital personal finance editor at the Telegraph Media Group
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