Tools
Mirror, Mirror . . .
By MarketWatch
Aug 10, 2005, 21:43
SANTA MONICA, Calif. (MarketWatch) – The investment guru of the new millennium is turning out to be you. You, the average investor, have the access, the information and the technology to outperform those professionals who heretofore have been considered the best investors ever.
Online trading platforms and the plethora of investment information now available put you on the same playing field as the professional.
And guess what?
You can outperform them.
Most money managers – some studies show up to 90% – don't beat the index to which they are compared. That means they are underperforming off-the-shelf investment products, such as exchange-traded funds, you can buy yourself.
Direct stock ownership also is more democratic, with transparency and decimalization garnering better pricing for smaller trades, according to a recent Government Accountability Office study. That means you don't have to pay a management premium for swifter and more efficient trading.
Research, too, is off-the-shelf and in many cases freely available on the Internet or through EDGAR, the Securities and Exchange Commission's informational database. Besides, you've learned not to trust much of Wall Street's research, or its trading practices.
Investment-banking conflicts with stock recommendations and after-hours trading improprieties have proven your skepticism right.
Moreover, the mighty have fallen. Warren Buffett, considered the greatest investor ever, can't seem to produce shareholder value through his Berkshire Hathaway holding company anymore. With $40 billion-plus in cash and an adamant stance not to invest in technology, you can't relate and it puts you off. Indeed, you, the average investor, haven't taken to his class B shares either, even though they were designed with you in mind. And you're really beginning to question how his stock will perform with new investigations into possible ethical – or worse – violations in certain dealings with AIG, the giant insurer being targeted by regulators. Your posts on message boards showcase these concerns.
But it isn't just Buffett from whom you've distanced.
Bill Gross, the guru bond manager at Pimco, can't seem to get enough return in fixed income to whet your appetite. Bill Miller, the great growth manager at Legg Mason, is producing small returns this year. Peter Lynch is far in the rearview mirror, not having managed money for the masses in a decade and a half. Nor has the other recognizable name, Sir John Templeton.
It's no wonder you question SmartMoney magazine's choice of these gentlemen as the "world's greatest investors." You should be named. Your time has come.
You belong to investment clubs, The American Association of Individual Investors, and some of you showcase your abilities on such places as Marketocracy.com.
You scratch your head at all the money managers out there scrambling to beat the S&P 500 index when you surpass its results handily. Moreover, you wonder how money managers can charge you an ongoing fee for this.
No, with sites like the one you are reading now and its competitors, and research from Hoovers and Multex, as well as charts, screens, and technical analysis just a click away, you no longer have to pay for proprietary findings. You know this, and the hype behind stock analysts is just that.
Wall Street isn't there to protect you. You recall trying to reach your broker on the days following the Sept. 11, 2001 terrorist attacks and subsequent market fall, and having had to wait three weeks for a response. (You read this in a report by Merrill Lynch.) Your mutual fund managers, on average, rode the same stocks to the bottom as they rode to the top after the Internet bubble burst; so it didn't do you any good having them then either.
As your money is getting back to par after all this, you are trickling more of it into the market yourself. We who cull your voices for the benefit of others hear you on shows like CNBC's "Mad Money" with Jim Cramer. We read your posts, your blogs, even your e-ails to us commentators. We can see your trading volume, known as retail trades, starting to catch up with institutions, otherwise known as professionals.
The lauding of hedge-fund returns should give you the proof you need to invest for yourself, believe in yourself. Hedge funds are successful, you understand, because they aren't subject to the same restrictions as other investment vehicles, such as mutual funds. Neither are you. You can outperform too – if you do the work and do it right.
As the markets begin to show new signs of strength – with support levels and volume picking up on relative bases – and with this past earnings season and quarter underscoring the limitations and poor performance of professional investors, it may be time to play ball yourself; technology has leveled the field.
Many of you already know the score – and you are winning.
