You can trade mutual funds in your roth ira and compound it tax free. upon 57 1/2 you can start taking money out - again tax free and meanwhile you can continue making money in some other endeavor. Most people have a business or a profession (lawyer, pilot,doctor) that best be utilized still rather than trade full time. I know many dream of trading full time and be the next George Soros but how realistic is that? Sector funds and index funds eliminate the idiot fund manager error and the need for the art of stock picking.
If one have ability to pick some good MFs, then will spend less time watching the market, and save your time & energy somewhere else
But many "traders" have no other alternatives to "trading" with their $5k. If not doing this they'd be either scratching their ass, on some online porn site, poker site or all those combined. Meanwhile, the Chinese are toiling away producing all those Christmas presents that these masses will soon be buying on more credit.
I have just spoken with a chinese guy with a wife and two kids who has two jobs (both part-time) one at a fast food place and one in a casino on the weekends. He still finds the time and trades the little money he scrapes together. His wife works so does his brother, the parents look after the kids and they all share a run down house they bought with a loan from the family and fixing up slowly.
I have a friend who is mutual fund manager at a well known bank, he hardly puts in 8 hours a day and he doesn't put lots of effort into this (by his own admission), most of his time is spent just more or less replicating some index. And he is not alone, his colleagues are not exactly go-getters too. Lot's of the time when something goes on in their sector they don't know the exact details. So don't put this people too much on a pedestal, I know there must be exceptions to this rule, hey but there are also exceptions to the losing traders.
Because all professional or successful traders have to start out as newbies, no one just steps up making 20% a year consistently. Only way a newbie is gonna know if he or she has it in them is to study and trade, study and trade, study and trade. If you do not have the time, discipline, determination, patience, or skill, then put your money in mutual funds and just check in once in a blue moon.
First thing is that there is no guarantee that the mutual fund could consistently produce 20% annual return in the future. Second, picking the right mutual fund is a course in itself. So, why not get into trading and in the meantime acquire the skills that is needed to earn that consistent 20% per year? Also, I believe a lot traders here won't settle just for the 20% return. If they do, I am sure they would rather buy Bershire Hathaway instead. Many here want to earn 100+% so they could retire within a couple of years.