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Beyond having to expend an incredible amount of effort to track stocks on an hour-by-hour basis, active day traders have three powerful factors working against them. First, trading commissions can rack up quickly, dramatically eroding returns. Second, there are other trading costs in terms of the bid/ask spread, or the small spread between what buyers are bidding and sellers are asking at any moment. These more hidden frictional costs are typically only a small fraction of the stock price, but they can add up to big bucks if incurred often enough. Finally, frequent traders tend not to be tax efficient, and paying more taxes can greatly diminish returns.

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In a study of investors at a large discount-brokerage firm during the 1990s, Brad M. Barber and Terrance Odean of the University of California at Davis found that women investors outperformed their male counterparts.

What's their secret? Women are more likely to do research before they make an investment decision, rather than to gamble on a highflier. Once they decide on a stock, they're more likely to stick with it. They trade less often, Barber and Odean found, and the less often you trade the better your returns because you save money on commissions.

Barber and Odean found that men actually traded 45% more often than women -- a result they attributed to overconfidence.

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