The E-commerce of Harding Earned Savings

I'm currently reading The Intelligent Investor which is a book written way back in 1949 ... long before this thing called in the internet was invented.   As a MBA student with a concentration in finance this qualifies as my casual reading because the disciplined, long term vision investing requires is fascinating to me.  It's fascinating to me because it is one of the most important things in your life yet people do such a poor job of putting it as one of their highest priorities.   For me, this is something I will never understand.

OK enough of the soapbox!  Onto the topic I wanted to write about today which is the rise of online brokerage accounts and the pitfalls they've create for people.   It's no secret that online brokerage accounts have become commonplace.   The revenues generated from online brokerage accounts are staggering as documented in this article.

    
The problem with these accounts is that now everyone can become a 'trader' of their hard earned savings.   At a drop of a hat you can speculate on any stock and get burned just days, weeks or years later by your in-the-moment emotional decision to sell that same security just as easily.  Of course, handing over your investment decisions to the 'professionals' doesn't safeguard you from anything as we know from our experience with The Great Recession.  That being said, the main problem I have with these online brokerage firms is that the majority of the people should not have the ability to buy and sell securities with their hard earned money as easily and quickly as they can.  The reason is because the majority of people cannot separate the emotion from their investment decisions, as shown in the chart above.  They get caught up in the emotion and the moment and make very poor decisions with their money.  Only the 'professionals' should be day trading but now anyone can be a day trading.  The daily market movements to the upside and downside an emotional roller coaster but the development of companies strategies is a years long story, not a daily one.  Naturally, companies such as TDAmeritrade know this and have made huge profits on the securities transactions.

Of course, I do not expect this trend to reverse but I think more should be done to expose the downside of these online platforms.  The online brokerages though are driving the bus in marketing all the grand possibilities of double, tripling, etc your hard earning savings.   As they as always say, if it's too good to be true it probably is.  The problem is that most people won't learn these lessons until many $9.99 transactions later and losses incurred on investment decisions that were made based off emotion instead of logic.   For all the positives the internet has created, I certainty think this qualifies as one of the negatives.