“The media and marketing deluge has spawned a new type of Wall Street loser: the armchair momentum player. These are novice investors who engage in short-term stock buying and selling based on media reports or an expert’s enthusiasm. It’s an investing phenomenon that’s far more widespread, faster-growing, and more troubling than day trading. Robin Dayne, a trading coach in Nashua, N.H., says investing has practically become a sporting event. And all too often, investors are getting knocked out of bounds. Says Dayne: ‘Amateur momentum players are do-it-yourselfers who, unlike day traders, use no discipline or real trading strategy. They buy on the short-term tip and overwhelmingly get burned.’
“…But all too often, the pitchmen are selling the notion that if you gain ‘control’ over your financial destiny–pick your own stocks and execute your own trades–it will be the first step on a short road to riches. ”There is an intellectual component, which is, ‘Hey, I’m getting a great deal,’ and there’s an emotional component, which is how I feel about myself when I take charge of my finances,” says J. Peter Ricketts, Ameritrade Holding Corp.’s senior vice-president for sales and marketing.” —Business Week, 4.3.00
I’ve talked before about the danger of confusing investing with entertainment. As this cover story highlights, this practice becomes even more dangerous when combined with our sense that we should be in control of our finances. Control is overrated if you don’t have a plan. In fact, as we discussed last week, the only control you have is over the levers you pull, but you won’t know which levers to pull or when to pull them if you don’t know what you’re trying to accomplish.
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