The fact that so many new investors lose vast sums of money through market exploitation via the Internet points to “the need for the establishment of investment analysis as a profession with its own academic standards,” as John Goodchild and Clive Callow, experienced investment strategists, put it (Double Takes 76). There needs to be a set level of expertise in investment know-how, by which investors can call themselves “informed.” Assuming that such a standard is set, that knowing all about security types and investment strategies designates you as educated in the field, the level of application of such a standard becomes an even greater topic for debate. As it stands now, in order for a person to sell securities to individual investors, and to manage money for them, they must have passed two examinations called the Series 7 and the Series 63. In order to pass these exams and obtain state licensure, an individual must be well educated in almost every facet of investing and money market activities. These individuals, as a result, manage money for others once they have ascertained a sufficient knowledge base. New investors, under current statute, are not required to know anything about investing whatsoever in order for them to be allowed to invest, online or elsewhere, unsupervised. Clearly, a discrepancy is present in the arena of money management. As Abell, Koppel, and Johnson insist, “the emergence of the self-directed electronic trader brings with it an overwhelming need for training” (xiii). It is agreed upon by many that the need for training in the field of online investment is greater than ever. The way traders think has completely changed, as the psychology behind market behavior has changed with the utilization of the Internet for almost all trading activity today.
There is no doubt that the implementation of the Internet’s vast resources has helped thousands of investors in ways unimaginable. On the contrary, the Internet has proved to be quite a detriment to many new and experienced investors alike. With the spread of the Internet as a tool for learning about investment opportunities, an expert analyst like Brendon Seeto has seen many investors act on false or speculative information, noting that “information from electronic trading systems…distract[s] market participants from their basic investment principles” (ix). Because these investors get distracted, they end up “not taking the time to properly evaluate [security] stock before buying,” says Dr. Victoria Collins. Here she is outlining what she believes is one of the greatest downfalls of Internet trading: lighting fast trade execution times (25). The Internet has reduced the average trade execution time to only 2 seconds, and as a result, traditional principles that once guided rational investing behavior have gone out the window. Instead, hype and euphoria have begun to surround the environment of online trading that give the impression that instant, unlimited profits are only a few mouse clicks away. As a result, new investors get an entirely incorrect perception of what the market is and how it works.
Works Cited
Abell, Howard, Robert Koppel, and Ken Johnson. The Sixth Market. Chicago: Dearborn Trade, 2000.
Carreon, Charles. "Mutual Funds." 401KInvestor.Net: Charles Carreon's Simple Guide To Investing. 9 Apr 2007 .
Collins, Victoria. InvestBeyond.com. Chicago: Dearborn, 2000.
Goodchild, John, and Clive Callow. Double Takes. Chichester, England: John Wiley and Sons Ltd, 2000.
Masonson, Leslie N. Day Trading on the Edge. New York: Amacom, 2001.
Pasternak, Melvin. "Technicals versus Fundamentals." Street Authority. 18 Apr 2007 http://www.streetauthority.com/terms/t/technicals.as>.
Seeto, Brandon C W. The Psychology of Electronic Trading. Singapore: John Wiley and Sons (Asia) Pte Ltd, 2004.
Thomsett, Michael C. Mastering Online Investing. Chicago: Financial Publishing, Inc., 2000.
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