Wall Street WARZONE
Q: Do You Feel a “Inner Compulsion” to Trade and “Beat the Market” in 2010? Remember the Famous Odean-Barber Research, “The More You Trade, The More You Lose” … and The More Your Online Discount Brokers Make!
by Paul B Farrell, JD, PhD
| Discuss | Print | 4/26/2010

My ears perked up when I saw a full-page ad for online discount brokers in the Los Angeles Times some years ago … and with the Wall Street Hype Machine now screaming “New Bull Market 2010, Jump In!” that ad should really worry investors even more today. Why? It’s a reminder that too many investors are addicted to trading … that trading is their drug of choice … and online discounters are their favorite “drug-pusher.”

The headline was in big, bold type: “Today, we’d like to invest in you!” Now that’s a big twist—a mutual fund company wants to “invest” in little me!? Yes, a fund company. Listen to the sweet talk: “Nothing is more important to us that the success of our customers. That’s why we invest in them, every day. And now we’d like to do the same for you.” Wow, golly gee whiz, those guys at Fidelity sure are nice people: They really, really care about me as a person. They want to invest in me. They want me to be successful. They must be wonderful people! But are they? Or is Fidelity simply pushing a new gimmick because it’s necessary to compete with aggressive online traders like Ameritrade and ScottTrade who smelled a new market filled with a new crop of investors chasing and trading hot stocks!

Warning: Online brokers are the new “drug dealers,” creating a new “investor class” of addicts. And thanks to the Internet, they don’t even have to watch you “shoot up.” They deliver a cocktail of greed, gambling, entertainment and instant gratification to online investors. A buy’n’hold strategy will generate better returns. but it’s no fun! So online brokers are creating a new generation of addicts who ignore facts, even dismissing the warning of Ameritrade’s founder Joe Ricketts: “Best thing for an investor is to buy a good company and hold it. Trading often is not something that makes you a lot of money. That’s contrary to my own interests, but it is the truth.” (More)