[originally published March 21, 2018 on medium]
Spoiler Alert: We already knew that.
Much has been written about the wave of “passive investing” sweeping The Street. Years and years of underperformance by actively managed funds has driven the nail home that only suckers invest with active managers. And the data has surely been on the side of the ‘passive’ promoters. It’s bad enough the bulk of active managers have proven to be no less effective at stock picking than a barroom full of monkeys, but they rake generous (sometimes scandalous) fees off the top for the pleasure of losing money for you with a smile. But are the passive investments really that much better? And will that always be the case?
Well, perhaps the masses are wising up.
There are several things we might point to as possible catalysts for people taking more active roles in their portfolios:
The Robinhood Effect. The commissions-free (previously mobile only) trading app built with the millennial investor generation in mind has dramatically lowered the barriers and costs of entry for these newest entries into the stock market. And slowly, these players are getting hooked.
Cryptocurrencies. The headline grabbing volatility, the loud-mouthed early adopters flouting ridiculous gains, and the sexy world-changing and possibly anarchistic blockchain technology behind it has certainly attracted attention to the #HODL Trading Lifestyle
A long lasting, low volatility Bull Market. Nothing attracts success seekers more than higher and higher stock prices.
Social Media. Never has it been easier to quickly find market moving information (and read the latest loonie bragging about his gains) since twitter and StockTwits and even Reddit came on the scene.
And of course, ego. Just like everyone thinks they are a “better than average driver,” so too do most market participants think they can easily outperform the S&P 500 index with just a little bit of effort and elbow grease. This will never change.
Whatever the reason(s), a recent research note out of Goldman Sachs on March 16 made light of the fact that “passive investing” may lose its mojo in the immediate future and that those willing to put in the effort to manage their own portfolio will likely see the best opportunity to make money (never you mind their inherent vested interest in seeing their clients pile up some more trading tickets).
Nonetheless, we at @TradeIdeas, of course, agree. But we’ve felt this way since Day 1. Trade Ideas was founded 15 years ago under the basic belief that active investors, armed with cutting edge technology, can vastly outperform their peers. And this is a vision that hasn’t wavered one bit since 2003.
And while we don’t have any visibility into the account balances of our customers (we aren’t a brokerage), we do see membership data which shows new paying subscribers coming into our service in record numbers. But more importantly — we see paying customers staying with us longer than ever before. Surely, these are people who are seeing success in their market activities thanks to tools they utilize with Trade Ideas every day.
You intrepid Active Trader souls — we salute you for making money in a marketplace where Blackrock and Vanguard executives brainwash you into the herd of Index Funds. And for staying afloat in a dirty pool where hipster fintech startup wannabe CEOs operating out of co-working slacker dormitories continue raising money from 4th generation VC late-comers looking to find their lottery ticket so they can keep building their ‘killer’ set-and-forget magic stock market passive money machine app.
Yes you — the old school, do-it-yourself, take-a-shot, manage the risks, celebrate the wins, learn from the losses, resilient, stoic, success story. We at Trade Ideas salute you.
Long live the Stock Pickers.
~ Sean McLaughlin, @chicagosean