Has the Internet Made Us Better Investors?

By Matthew Hougan

I've spent the past three days without access to the Internet, and it's got me thinking about information.

Usually, when I'm away from the Internet for a few days, it's because I'm on vacation. Then, the last thing I want to think about is ETFs or index funds. Expense ratios and sector weightings can wait.

But for the past few days, I've been trying unsuccessfully to get the Internet installed in my new office, so I've actually been working full days without access to the Internet. And that's been an interesting experience.

For starters, all the clichés are true. Yes, I've gotten a tremendous amount of work done. Yes, I've spent a more time on the phone actually speaking with people, and a couple of good ideas have sprung from those discussions.

But this isn't a homily to the good old days, or a stump speech to turn back the clock. The downside of not being on the Internet is that it makes my job ... impossible.

Try finding out even the basics about ETFs without the Internet. What's the least expensive small-cap value ETF that trades at least 100,000 shares a day? Which alternative energy ETF has the most exposure to wind? What's the best performing ETF over the past year? The past three months?

It's impossible. The sheer volume of information at my fingertips (when the Internet is working) would have boggled the most sophisticated research analyst ten years ago. I can find out more about an ETF or a public company in 10 minutes today than I could have in 10 hours in 1998.

But here's the question: Has this made us better investors? Is the average investor doing any better today than they were 10 or 20 years ago?

I have no question that they CAN do better today. Tools like ETFs and a wider array of index funds have made it possible to create very solid, very sophisticated asset allocation portfolios at very low costs.

But are they? Is the average investor making more sensible decisions?

My best guess is no, and that raises an important question for me.

Is all this information being presented in a useful way? After all, my job is to help digest this information and lay out the facts so people can make smart decisions.

What do people really need in terms of ETF coverage? What are they really looking for?

Got ideas? Send me an email.

I should be back online in a couple of days....

Comments

[no-man:]

I would like to know more about index fund management reviews or even better an ETF management performance tool to follow (and evaluate) decision making quality.
no-man

2008 May 01 07:17 AM

[bluesmoke:]

Although all the tools are out there, from a wide moat of new investment vehicles to websites, newsletters, and tv shows dedicated to analyzing them, I now see two fundamental problems.

1) This new internet frontier has increased the flow of information, both pro & con, so much so that it's becoming a level of "white noise". Everybody and their brother, including you & I, are now bloggers. In fact, I am amazed at the poor level of writing abilities, spelling, and grammar that I am seeing. It's a sad reflection of the state of our educational system. In that regard, it tends to create more confusion. Good for the brokers who make money on the buy & sell.

2) There are a lot of people out there who are trapped in crappy funds by their company plan, or trusting a financial advisor who works on commission. These are the very people who need to get out and learn how to research, invest and think for themselves.

2008 May 01 09:40 AM

[704RE:]

I would like a more detailed disclosure as to the the top holdings of an ETF, especially with regards to the short and ultra-short funds. I realize that this can be achieved to a degree via prospectus and contacting the management company, but I still feel that the information should be included on the major finance sites in a manner that can be quickly accessed. Maybe its just a generation Y thing...

2008 May 01 10:45 AM

[karchad:]

I think the internet has made people worse investors, and thus, the bubbles. Notice how the bubbles (tech, housing, and soon, gold&oil) have suddenly arrived with the internet. We all think we know more than we really do, due to the internet. Then, to trade, you used to have to make a call. Now, press a few buttons, you've made your very cheap trade. Only one thing. It ends up not so cheap, because, as statistics prove, the more you trade, the less well you do. So, while the internet is a wonderful, wonderful thing, I think it's made the average investor's track record even worse than it was before (which wasn't that good to begin with statistically).

2008 May 01 11:42 AM

[fran:]

for every operation, there are one or more ways to perform it. the better the process and the better educated on technique, the results ought to be better.
i look at the internet as a tool in the information processing portion of investing.

i believe better results would occur if the investor is better schooled in the whys, hows etc than perhaps in making the tool more effective. the investing process,clearinvestmen... goals, adherence to same is where the leverage is. lack of direction and sound process won't be helped by more a better tool. work on the craftsman before giving him an improved tool. kinda like the old apprentice program--for those old enough to remember.

2008 May 01 09:08 PM