Investing as we know it is becoming a dying art. When I read books like Snowball: Warren Buffett and the Business of Life, the way that people invested back then just doesn't happen anymore. For young investors, it's all about the technicals, it's all about price movement, it's all about Forex, or futures, or options, or something else.
But the bottom line is that investing is important, and it serves a great purpose if done right. Plus, for individual investors, investing in solid companies over a long period of time can reward you handsomely.
Investing is a dying art, and here's why:
1. Machines Control Everything
After the last flash crash, we've learned just how much machines control. It's currently estimated that about 80% of trades on the stock market are automated. And while there is some art to programming a brilliant high-speed trading algorithm, gone are the days of actually investing in a company. Now, the game is this: can I make a trade a millisecond faster than my competitor and profit from the $0.001 spread?
That's not art, that's science and mathematics, and essentially scalping money. Potentially good business, but poor art form.
2. There's More Information Than Ever Before
When I read books like Snowball, I love hearing stories about how investors would actually go to company headquarters to get research information. Or the library. Or interview people. Now, there is more information available than ever before in the history of the world. And everyday, more and more information is added. This really takes the art out of investing.
The more public information that is available to everyone, the less work any investor has to do. While that has serious positive benefits for the individual at home, it takes away the potential advantage away from those who are willing to do the work. It also makes investing much less of an artform when you can just Google something.
3. People Are Lazy
I'm also a believer that as a country we are becoming more and more lazy. We don't want to have to think about things, even important things like our money. It's why our savings rate is so low, and why so many Americans aren't taking advantage of employer retirement plans. Then, even when they do take advantage of these plans, they usually opt for things like target date funds, which are the lazy-man's way out of having to think about their investments.
Don't let this be a rant against index funds – because those can be solid strategic investments for long term investors, and investing in the right funds and having the right asset allocation can be an artform. However, laziness and opting for the easy way out is not artful.
4. Investing Isn't Cool Anymore
In an interesting survey recently published on USA Today, millennials rated their dream jobs and working on Wall Street didn't make the Top 10. Instead, they included jobs in healthcare, technology, and working for the government. There's no talk of Wall Street. There's no talk of finance. Instead, college graduates are looking to “help people”, and they clearly don't view investing money as helping people – which is sad because that was the original premise of investing.
Since investing isn't cool anymore, it means that less and less people will flock to the profession, possibly meaning less innovation and more reliance on machines. Bye bye investing as an artform.
5. Wall Street Runs At Lightning Speed
Finally, Wall Street runs at lightening speed, and art takes time. It used to be that you thought about a company to invest in, called or mailed their headquarters to get an annual statement, received the statement, then poured over it. You could also get charts in the mail from investment companies that would chart the stock prices for a period of time. All manual and all time consuming. But with time allowed for more research and a different decision process.
Now, everything moves in microseconds. If you wait days to make a decision you could have missed the boat. The speed is a factor that really works against the art of investing.
But there are still a bunch of reasons why it's still an art:
1. Anyone Can Research Anything
But these reasons that investing is becoming a dying art doesn't mean it is going to die. In fact, some of the same reasons that it is dying make it rise like a phoenix. Think about information – in this day and age, anyone can research anything – and they do. Want to know how a retailer's sales might be? Crowdsource people to count cars in the parking lot or pay for a satellite to fly over their parking lots. (Want a job like this? Check out our 100+ random jobs for college students).
Some of the smartest minds are continuing to look for new ways to use information to research and understand the future of companies. And that's art – leveraging information to decide how a company will perform. It's like painting a picture using various information sources to see what the end result would be. Any because there is so much free information, anyone can do it.
2. Computers And Technology Make Charting And Tracking Easy
Gone are the days of having to wait for information and not knowing how your investments are performing. While this greatly increases the speed at which transactions take place, it's also incredibly easy to track you investments and understand the stock market. No more waiting for your brokerage statement, you could log onto your brokerage website at any time of day and see how your positions are performing.
You want specific charts and information? No more having to make a stock chart by and hand plot everything out. This can help you increase your speed while allowing you to plot out indicators that you've never been able to before – or at least do it easier than you were able to before. Check our our favorite websites for free stock charts.
3. Business Deals Will Still Need To Happen
Finally, business deals will still need to happen in a productive economy. So, while millennials are not flocking to Wall Street, there will come a time when demand is back and people are feeling that greed is good. There will always need to be bankers, and bankers will always need to be out there helping construct investment deals. And every deal, merger, acquisition and investment involves part luck, part skill, which is what art is. No two deals are the same, and there will always need to be players that can make the art of the deal happen. This is the key to investing success.
In the end, investing is going nowhere. Just talking about it becoming a dying art is sensationalizing a trend that has been occurring for generations. As long as there are companies, there will be investors. The methodology may change, but the fundamentals will not. Investing is still an art, an art that is changing. Some of the paint brushes from the past are gone, but new paint brushes are here today, and there will be different ones tomorrow.
What are your thoughts on investing as a dying art? Is it dying, transforming, or evolving?