Today's investors have a lot to be thankful for, and not just because stocks are up 135% over the last 5-and-a-half years.
In a recent column, I pointed out that few investors seem to realize just how positive the investment landscape looks today.
We have near-zero short-term rates; an accommodative Fed keeping down long-term rates; a rebounding housing market; a booming auto market; unemployment at its lowest point since September 2008; an energy renaissance in the US (thanks to fracking and horizontal drilling); growing end markets for US goods and services in giants like China, India, and Brazil; US. household net worth at an all-time high of $81.8 trillion; record corporate profits; record corporate profit margins; and record corporate profits as a percentage of gross domestic product.
The trend is indeed your friend. No wonder US stocks are near all-time highs.
That friendly trend could abruptly end next week or next year, of course. But it's not just a positive economic backdrop. Investors themselves have never had it so good.
Plenty of options
Let's start with the gamut of investment choices now available. There have never been more publicly traded companies, no-load funds, or easy-to-purchase exchange-traded funds (ETFs).
You can invest in virtually any company or sector of any market in any country anywhere in the world — and without the help of a high-paid Wall Streeter.
Then there's the ease of information available.
Twenty-five years ago, I wrote research reports for an international brokerage firm. This generally required multiple phone calls to investment banks and trading houses where I coaxed, cajoled, and wheedled (OK, begged) other analysts to send me what I needed. When the information arrived — usually days later — it required follow-up calls to update the data.
The internet changed all that. Research that once required hours in the library’s periodical room or days sifting through reports is done in minutes. Information and ideas scattered or hidden around the globe can be gathered instantly. Plus, it's often free and easily available to anyone who takes the time to learn where to look.
Monitoring your portfolio has never been simpler either. It used to be you had to look up the prices of the stocks you owned in the business section of the paper. (When was the last time you did that?) Or you could call your broker, get placed on hold for several minutes, and eventually get a quote that — by the time you received it — was no longer current.
After getting your less-than-timely quote, you could place a trade with your broker, who would then put you on hold again while he jotted it down and hustled it over to his trading desk. In those days, a market order was a real roll of the dice.
Today you don't think twice about getting a real-time quote, placing a trade with a click and getting a near-instantaneous confirmation.
Trading is cheap
Costs used to be exponentially higher, too. Brokers routinely sold mutual funds with front-end loads as high as 8.5%. That's not a misprint.
And prior to May 1, 1975, brokerage commissions were fixed. Deregulation — and the debut of Charles Schwab — changed that. The internet lowered your costs even more. Now you can click a mouse — or tap your smartphone — and buy a stock for $5. Another click — another $5 — and you're out. (Compare that to your typical real estate closing.)
Spreads are far thinner today, too. When I started in the brokerage business 30 years ago, a large stock might have a spread of an eighth of a point and a small one a quarter of a point. Tack on a 2% or 3% commission and you were already down 5% by the time you got your trade confirmation.
Today — thanks, in part, to high-frequency traders — liquidity is greater than ever and bid/ask spreads are often a penny.
So be thankful. It's not just that stocks are up 135% over the last 5-and-a-half years. Your investment choices have never been greater. Information has never been more easily available. Monitoring your portfolio has never been simpler. Spreads have never been thinner. Commissions have never been lower. Executions have never been swifter.
In short, you have all the tools you need. The only thing you may lack is the most important part of all: the investment ideas to take advantage of them.
The information contained in this article should not be construed as investment advice or as a solicitation to buy or sell any stock. Nothing published by Physician’s Money Digest should be considered personalized investment advice. Physician’s Money Digest, its writers and editors, and Intellisphere LLC and its employees are not responsible for errors and/or omissions.