San Antonio, Texas

The more you trade, the less you earn. The less you trade, the more you earn.

That's the premise behind passive investing or indexing whereby more than 85% of active money-managers have failed to beat the S&P 500 Index over the last 20 years – mainly due to excessive trading and high expenses associated with mutual funds.

But sometimes an investor has to make a move…

Amid a near collapse of the financial system in the fall of 2008, I churned more than 50% of my portfolios in less than 60 days. Though I usually refrain from excessive trading, that was one occasion where it was desperately necessary in order to protect client capital and mitigate losses.

By January 2009, my typical portfolio had traded 70% of its assets or shed seven out of ten positions compared to January 2008. That was the biggest facelift I've ever given to my portfolios. To this day I have no regrets. If I hadn't placed trailing-stops on my stocks funds and ETFs, forcing me to unload most positions by August 2008, I would have been hammered by the time Lehman Brothers went bust on September 18th. Global markets thereafter crashed.

Normally, excessive portfolio trading is a bad idea. When an investor trades, the cost of doing business rises. And depending on your broker or service-provider, those expenses can rise dramatically and eat into your capital. That's especially true in a modest or bad year for the financial markets when every penny counts in the total return equation.

I've noticed that excessive trading has usually done me more harm than good. Since 1992, when I've left most of the portfolio unchanged, my total return has dramatically risen. Conversely, when I've excessively traded, my returns have been below-average and uninspiring.

There's no doubt that fees curb your performance and rob you of total returns in the market. Maintaining a long-term perspective on your investment goals while trying to enforce a disciplined asset allocation plan with few changes will deliver the best results over time.

In the investment world, less trading means higher returns.