Why Investing Has Become More Democratic Than Ever
I am pondering one sentence I stumbled upon today:
“It is ironic that the markets are now at their most democratic at time when returns are at their nadir.”
This is from the blog abnormal returns, a great source of financial debate. Basically, indivividual investors today have all the tools and vehicles to free themselves from unhealthy advice and make their own decisions:
“The ironic thing is that at a time of poor returns, the information and tools available for investors have improved dramatically. This is largely a function of the rise of Internet. Abundant data, cheap trades and an explosion in investment vehicles, i.e. ETFs, have made it ever more possible for individuals to manage their portfolios how the largest institutions did just a few years prior.”
I still think that this investor heaven is a far cry from what most private investors do today. Most individuals are still entrusting their wealth to a bank or a wealth adviser who is not free of conflict of interest when picking investment products for their clients. Most private investors still believe their advisers when they tell them how to time the markets or pick individual stocks or bonds. And on top of everything, most investors still pay way too much money to their wealth managers. It will be a long time until the majority of private investors really takes investing in their own hands. But, in any case, the revolution has begun and it offers too many advantages to individual investors to be stopped. Particularly in times of low returns the weaknesses of trading-oriented and active stratgies of most wealth managers become very clear to investors.