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More share trades, but no more profits

The annual 2012 Australian Share Ownership Study has just been released by the ASX and it makes for interesting reading.

One of the many remarkable findings of the study was that the average number of trades made in 2012 was 32% higher than in 2010. This is a significant increase in trading activity, albeit from a marginally lower number of participants. The report also noted that although the number of trades had increased, the average value of each trade had decreased by around 11% from 2012 to 2010.

Of course correlation between trading frequency and higher profits is very weak, although plenty of brokers would probably “tell” you otherwise! In fact had an investor purchased just three companies — Ansell (ASX: ANN), Brambles (ASX: BXB) and CSL (ASX: CSL) — at the beginning of 2010, then as the chart below shows, he or she could have made no more trades for the next two years and still have handily outperformed the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO).

chart1

Source: Google Finance

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The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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