December 16, 2014
Plus ?a change, plus c'est la m?me chose.
With a conspiratorial whisper, my colleague called me into his office. He reached into his desk drawer and pulled this bad boy out. "Oooh wow!" I crowed while reaching a tentative hand out to caress the pages. This is the equivalent to a dirty magazine to stock nerds like us. The Chartcraft point & figure book, from the 1960's no less! My colleague is an old curmudgeon, but it turns out that this isn't his chart book. It belongs to his 88 year old mother. Very cool.
This is how individual investors used to keep track of their charts. The extent of your trading tool box was this book, a pencil and a newspaper. Nowadays, you could have this setup in your home office:
(I'm pretty sure my wife would kill me if I tried to put this in our house)
Technology has evolved to the point where even the smallest investor has access to information and powerful analytical tools that used to fall exclusively in the domain of the Wall street professional. Is this a good thing? Certainly. The evolution and affordability of computer technology has made all of our lives easier. However, this ease of access to trading technology can also create dangerous pitfalls for investors. This is because some things have not changed since advent of the computer; specifically, human emotions.
No matter how advanced the technology becomes, people will still fall victim to those two powerful (powerfully dangerous) emotions; fear and greed. The fancy software will not protect you when you are faced with panic inducing market declines like we saw in 2008. It won't protect you from deviating from your long-term plan to chase internet stocks like a lot of people did in 2000.
In the end, technology is just a tool. Without incredible self-discipline, these tools will simply enable you to become your own worst enemy that much easier. If you don't trust yourself to have this self-discipline, then your advisor can stand between you and your emotions. Anyway, I just thought it was interesting that the more things change, the more they stay the same.
Sam DiNorma, Financial Advisor
(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).