The gamification of investing
“‘You are encouraging your customers to tap 1,000 times a day,’ said [Rep.] Ritchie Torres, Democrat of New York. Mr. [Vlad] Tenev responded, ‘We wanted to give our customers delightful features.’”
– Exchange between a member of the U.S. House Financial Services Committee and the CEO of investment trading app Robinhood. Torres took issue with Robinhood using virtual confetti to celebrate trades. The committee was investigating a recent controversy in which traders using the Reddit social media platform, many of whom trade stocks using Robinhood, dramatically bid up the price of GameStop and other heavily-shorted stocks. Read more in this 2/19/21 New York Times article: nyti.ms/3siqSNm.
FOMO is not an investment strategy
“There is nothing as disturbing to one’s wellbeing and judgment as to see a friend get rich.”
– Charles Kindleberger, author of Manias, Panics, and Crashes, quoted in a 2/5/21 Financial Times article. He cautioned investors not to let the “fear of missing out” sweep them up in the current wave of speculation. Read more at on.ft.com/3sgd6L4.
“If you’re flying on an airplane, normal means everything is smooth and calm. Investing is closer to whitewater rafting. You’re going to get wet and tossed around.... Many investing blunders occur when people expect ‘normal’ to be a period when nothing goes wrong when in fact it’s normal for things to constantly be breaking and falling apart.”
– Morgan Housel, in a 2/4/21 post about “unfortunate investing traits” on the Collaborative Fund blog. Read more at bit.ly/2ZLSu0R.
What’s true throughout the market cycle
“These businesses will continue to be run by hyper-intelligent management groups with the sole goal of enhancing the long-term value of the business for its ownership. That’s you. And they’ll do this while accounting for all of the unknowns that exist at any given moment, be they political, economic or any other scenario you can think up.... You literally have people working for you while you sleep, which is a core tenet of wealth accumulation.”
– Ashby Daniels, in a 2/18/21 post on his Retirement Field Guide blog about the essence of long-term investing. Read more at bit.ly/3aGVTnZ.
How supply and demand really works
“If you missed five haircuts due to the pandemic, a single haircut makes up for that loss.”
– Schwab Chief Investment Strategist Liz Ann Sonders, in a 2/22/21 post on the importance of managing expectations about the anticipated economic recovery. She pointed out that a pent-up demand for services is very different than a pent-up demand for goods. Read more at bit.ly/3aKKUu2.
Investing under the influence of inflation
“Most current investors have lived most of their lives in a low-inflation environment, so they have had no opportunity to learn the lessons that history teaches us about inflation and the stock market.”
– Richard Warr, a finance professor at North Carolina State University, quoted in a 2/20/21 MarketWatch article. While there are growing concerns about inflation, Warr’s research indicates that equities are a good long-term hedge against inflation. Still, he isn’t counting on investors to act rationally in the face of rising inflation. Read more at on.mktw.net/3skZYnM.