So why don’t we focus on the flashy elements of finance? Why don’t we comment on the latest changes in stock prices and index levels?
At one level, it makes sense for a financial firm to follow the latest prices. And we do. But most of our research is done in anticipating the market’s reaction to the latest news. Once the price has changed, 90% of the news is already out there. There just isn’t that much value to be gained by following the trend.
Also, the latest news and quotes tend to distract people from the more important issues in investments: managing risk, understanding the underlying business, and preparing for change. If all you do is watch the price change, you’re just going to make yourself jumpy.
When I walk into a brokerage house I often see a big screen TV flashing the latest prices. It makes some sense for a business that makes more money when people are jumpy. Just remember that the root word in brokerage is broke. And somebody has to pay for all that fancy equipment.
Douglas R. Tengdin, CFA
Chief Investment Officer
Leave a comment if you have any questions—I read them all!
Follow me on Twitter @GlobalMarketUpd