It may be my naivety/optimism speaking, but one of the most amazing things about America in the year 2017 (and arguably for the last 2 decades) that our mature market system along with an unbelievable amount of accessible information on the internet allows almost anyone to become an “investor.” There was no good old days with investing; in my humble opinion we are living it today!
I am not advocating that most people should be, or even, should want to be an active investor. My whole point is that if your goal is to be an active investor your excuses are limited.
Why do I believe it is Easy to Become an Active Investor?
The “title” of investor does not care about your pedigree, family status or education background (or lack thereof). If you have money (and as discussed below it doesn’t have to be much money) the market is open to you! You can own a piece of business for less than the cost of a round of craft beers. That is freaking inspiring and hasn’t always been the case.
The Cost of Being an Investor has Decreased Dramatically
From a 2014 article by Business Insider,
We spoke with K.C. Grainger, a veteran broker now based in Montreal. He said the average commission in the late 1980s was $45, but that it could often climb much into the hundreds or thousands depending on the size of the order
That same article discussed $7 trades, however, 3 short years later Fidelity (and the others are following) are 25% lower at $5/trade. If you want to actively buy and sell stocks and options the cost should not be your complaint. At $5 if you went to buy $1,000 worth of a company you’d be losing .5% in commission costs; compare that to 30 years ago when that same $1,000 purchase lost 4.5% to commissions. That doesn’t even take into account inflation! That $45 should be more like $150 today.
Similarly, let’s say you want to be active with regard to jumping in and out of particular sectors and ETFs (even if it is just simple market timing) most major online brokers have FREE etfs you can jump in and out of till your heart’s content.
More Information About a Company Has Never been More Available
Want official filings? All you have to do is get to the SEC’s website and every filing is available. You can find almost every company’s 10-k in about 35 seconds. They even seem to have interactive data for some companies. Imagine what one would have had to do 30 or 60 years ago? Are you writing a snail mail letter to the SEC? the individual company? then what, they get you back your information 4 to 6 weeks later?
Want unofficial information? You can go with the trusted 2005 route and just GOOGLE IT, or if you are feeling particularly adventurous you can get on twitter and type in the ticker with $ before it. You’ll then have the ability of watching people have real time conversations right in front of you. This isn’t to say that the information you are finding is the end all be all, or even true, but unless you have an (often illegal) insider track that is always going to be the case. Another fantastic general resource for those that want both the bull and bear opinion on a particular company would be SeekingAlapha.
These resources do not even take into account the sector specific forums that are out there. I can’t even begin to imagine the amount of information that one could comb through if they want to read about the investment opportunities within telecom, AI, even boring old retail!
Sacrifices Must be Made
I don’t mean to make it sound easy just doable for most reasonably intelligent hardworking adults. If you want to be an investor all you have to do is just start spending less than you earn and get the difference into a brokerage account. I really believe it is the first step of “spending less than you earn” where most people fail – they just don’t have any extra money to invest. Want to learn options like I am? There are hundreds if not thousands of courses (free and paid).
If I Believe that Most People Shouldn’t be Active Investors Where is this Post Coming From?
I really believe that most people should stay away from active investing. This is not a profound statement. Almost every single expert (of which I am not) says the exact same thing. Notwithstanding, I had two separate conversations in the past 2 weeks with individuals that wanted to get into the active investing world but were hesitant. If there reason isn’t that passive was a better approach than all other excuses are lame and just do not make sense.
Active investing is just so attainable with regard to the actual activity, but obviously not the results. It feels analogous to the Declaration of Independence stating, “…that all men are created equal & independent, that from that equal creation they derive rights inherent & inalienable, among which are the preservation of life, & liberty, & the pursuit of happiness…” Nope, no guarantee of actual happiness – just like there is no guarantee of success.