So long” financial advisors, “goodbye” financial services industry and “help you later” Wall Street. A ‘new-breed’ of DIY investor has been empowered, equipped and enabled to leave all three of them within their rearview mirror. This ‘new-breed’, which I reference as a DIY 2.0 Investor, will be transformed because of the Web 2.0.
The brand new paradigm of DIY investors has chosen to harness the potential with this realtime knowledge revolution and its’ instant availability, accessibility, verifiability and deliverability of information to anybody, anywhere, anytime and to any web capable device. What a powerful transformative resource that is now at our fingertips providing factual and truthful information and all at no cost. Self-empowerment at its best!
A great place to start this discussion is with a quick history lesson.
Investing from the beginning up until the early 90’s changed very little. Being truly a ‘1.0 Investor’ meant your only choice was to invest via an inventory broker that bought and sold individual stocks and or mutual funds in your behalf. In the mid 90’s, the internet provided the catalyst for low-cost brokers to leverage the internet’s ability and begin offering on-line trading for anyone DIY investors brave enough to defend myself against the challenge. This shifted the control of investing from the stock broker to the DIY investor and these DIY’ers were pioneers as they’d to analyze, analyze, buy and sell on the own. Naturally, few investors were brave enough to defend myself against this rogue span of action.
By the mid to late 90’s however, the internet and it ability to generally share information, access websites and stream stock quotes, advanced this rogue number of DIY investors into what we now know as ‘the-crazed-day-traders’ ;.With the technology stocks heating up, analytical listed infrastructure funds tools coming on-line, investors dumping their stock brokers and advisors to brave the DIY waters, their only thoughts were the riches and wealth that awaited them. This amount of “irrational exuberance” lasted until the Technology or Dot-Com Bubble burst in 2001-2002…and burst it did, costing trillions in investor losses. These early DIY investors which were overcome with “irrational exuberance” whilst the markets were increasing, unfortunately were rationally humbled when the bottom fell out. Lesson learned and these types of early DIY’ers returned to the comfort of financial advisors.
In 2006-2008, the ‘Housing Bubble’ formed and it too burst with similar results for investors, trillions in investment losses, again. The investor’s professional financial advisors were supposed to possess all of the answers and protect their client’s assets. Investors found this is not the case while the financial firms of Wall Street were busy serving their particular interest by selling highly complex and speculative products to their investors. Another tough lesson learned.
DIY investors and professional financial advisors both failed miserably from 1998 – 2008. These historical events and developments caused a metamorphosis for a ‘new-breed’ of investor. This ‘new-breed’ of investor lifted themselves up, licked their wounds and focused on discover ways to play a fresh game…a winner’s game…transforming themselves into DIY 2.0 Investors!
This new paradigm evolving from the Web 2.0 is an intoxicating and empowering movement providing knowledge at the speed of thought. The Web 2.0 is allowing each folks to make informed decisions that people could not have done a decade ago, and it’s all within our hand.
The DIY 2.0 Investor is embracing this realtime Web 2.0 Revolution to compete, and competing to win. A current study by Cogent Research of Gen X Investors demonstrated a dramatic change in fortune. This ‘new-breed’ of Gen X DIY 2.0 investors experienced a 28% return in 2010, while their peers who considered a specialist financial advisor for guidance, reported a mere 3%, during the same time period. Whose game can you rather play?