When Too Much of a Good Thing Is a Bad Thing

Modern technology has revolutionized the way we communicate. But it has also created a culture of distraction. It’s difficult to focus when we’re bombarded with an endless stream of information on the internet, television, radio and social media.

And it’s especially troublesome for individual investors. Contradictory reporting and conflicting messages from the talking heads on TV make it nearly impossible to navigate the news. Steve McDonald gives his two cents on the matter in today’s Two-Minute Retirement Solution.

Transcript:

In 1983, when I made my first investment, investing was a lot more difficult. We didn’t know it at the time, but looking back, it was a real chore.

Information wasn’t available.

You could read the Wall Street Journal or Barrons, but just as it is today, that’s only the first step in what should be a very detailed process.

In 1983 the only other sources of information were Value Line or calling your broker. And, it stayed that way until the internet came about and took over our lives. But relying on Value Line or a broker presented its challenges. In both cases you had no way of knowing how timely or even accurate the information was.

So, you could wait for earnings reports. But they’re usually a day late and dollar short.

There was no 24/7 news cycle. And until the 1987 crash, stock news available on television was a ten second report at the end of the nightly news. It told you whether the Dow was up or down and by how many points.

That was it.

Today as you know, if anything, there is too much information. And, lately many of the better known, mainstream financial news sources have become vehicles for hedge funds and well known investors to manipulate stock prices.

While we are in a much better place now when it comes to the availability and ease of accessing information about stocks and bonds, this information is only helpful if you know how to use it.

Most people do not know how. And in this environment of nonstop information about the markets and companies, it’s led to the idea that stock picking is easy. That it’s just a matter of collecting information.

Believe me, it is not. And this mistaken idea has caused a lot of bleeding in  retirement accounts.

The other thing that’s been improved by the internet is the cost of trading.

When I was broker, if you wanted to buy or sell anything, you either went through me or another broker, or you trade anything at all.

Costs were sky high at that time, too. 100 shares of a stock cost around $100 in commission, both ways. Imagine paying $200 round trip to trade 100 shares of stock.

Today trading may be too cheap. I say that because it’s become too easy to jump in and out of positions on a whim. And, the screaming meemies on the business television networks can scare you out of your holdings.

At pennies per share, and on a moment’s notice, you can dump it all.

And’s created one of the biggest problems everyone faces when it comes to their money; emotional trading.

I know I have beaten this to death but, believe me, internet trading and the nonstop flow of information hasn’t helped stop the bleeding in our accounts. In fact, the numbers indicate that it has made matters worse.

So, go ahead and use all the options computers have made available to us. But, don’t think for one moment it has changed anything about the little guy’s propensity to lose money.