I used to love playing soccer and investors used to enjoy investing
November 22, 2013 by Editor, InvestingForMe
About three years ago I stopped playing soccer. I used to drop in once or twice a week to play in an ‘Adult Recreation’ league. The other players were typically in their late thirties, forties and fifties with a few players in their late 60s. (The players in their 60s were amazing and often slowed their play to make the rest of us feel part of the game.)
The games were social and active with plenty of passing to ensure that everyone had opportunities for lots of touches on the ball. We would rotate positions, so no one was stuck playing a position they did not enjoy (For example, goalie – no one likes having to jump in front of a speeding ball or the wings, which always involves a lot of running.) and every once in a while you’d score a goal – yes!
Playing was a lot of fun and I looked forward to each game.
So what changed?
Simply, it stopped being fun. You see eventually younger players (former college/university players and former Metro and Rep players) soon began to drop in. There was nothing wrong with this shift in demographics. As always, new players were all greeted with open arms and warm smiles.
But the style of play changed. The younger players viewed the game differently. They were faster, had quicker feet, harder shots and a hunger to win that altered the experience. Playing was no longer about the game or those playing – it was about scoring the goal.
No longer was Adult Recreational soccer about having fun, getting some exercise and playing the beautiful game, but rather about fast play, hard shots and, of course, winning – always winning.
Soon, us old guys and gals found ourselves always playing the not-so-fun positions, rarely touching the ball and constantly faced with younger, faster, stronger and more aggressive players. The experience had changed.
Investors (and advisors) used to enjoy investing
I wonder if individuals feel the same way about their investing today?
Investing used to be enjoyable. You worked hard, saved a little, did your homework and invested intelligently.
Investing was somewhat simple – mutual funds, stocks and bonds/GICs – those were your basic choices. Everyone had the same choices, played by the same rules and regulations and you felt that you had a reasonable chance at success.
Analyzing an investment, stock markets and even the economic cycles seemed relatively straight forward. You followed a few well defined, time-tested rules and you could feel comfortable with your choices.
So what changed?
Simply, it has stopped being fun.
You see the young players (High-Frequency Traders, Algorithmic Trading, Hedge Funds, Dark Pools, Structured Investment Vehicles, Derivatives, etc) seem to have taken over the game. There is nothing wrong with this shift in demographics. No rules have been broken; markets and regulators still welcome all new players with open arms and warm smiles.
But the new players have changed the style of investing. They have altered the experience. The new players view investing differently. They are faster, have better technology, more money at their disposal and a hunger to win - at any cost. Where individuals simply want to make a reasonable return for their savings, the new players want or need to make a ‘killing’, build a reputation and make their fortune – all before they turn 30. They move their operations closer to exchange floors to gain that milli-second advantage. They trade whereever and whenever they can to gain that extra half penny. They use highspeed computers and complex math.
A question for individual investors to consider: If a computer, following a mathimatical formula, buys a stock, then sells it 5 seconds later, how much analysis goes into that investment decision? Does the company’s revenue and profit even matter? What about it’s price-to-earnings ratio, dividend growth, market share, revenues, profits, etc?
No longer is investing enjoyable. For individuals, investing has become hardwork, full of worry and frustration. Those well-defined, time-tested rules no longer seem as true as they once were. Investment analysis and corporate profitability seem to constantly be overshadowed by financial crises, government bail-outs, central bank intervention and sovereign credit risks. As if these were not enough, almost every week we hear of some new scandal or failing of regulators to detect subversive behavior – sub-prime mortgages, credit rating agency graft, interest rate rigging, unforseen derivative losses, bond market manipulations and so on and so on.
So, I don’t think investors enjoy investing as much as they used to.
For individuals, investing has become a difficult, frustrating and frightening experience. The experience has changed for them. Investing has changed. The players have changed and the game has changed.
At least with soccer, it was only the players that changed. The game’s rules are the same. The player positions are the same and the goal posts are still where they always are – at each end.
Investing has changed. I accept the changing players, but, to be honest, some days I am not certain yesterday’s rules apply to today’s game; which players go where - are the goal posts still where they were yesterday?
It appears that many investors are coming to the same conclusion I did about soccer – What is the point in playing, if you are always out-run, out-played and never seem to be on the winning side.
Maybe it is time to for a change? A change in the way you view your savings. How you invest for your future.