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 in their rearview mirror. This ‘new-breed’, which I reference as a DIY 2.0 Investor, has been transformed thanks to the Web 2.0.
The newest paradigm of DIY investors has chosen to harness the potential of this real time knowledge revolution and its’ instant availability, accessibility, verifiability and deliverability of information to anybody, anywhere, anytime and to any web capable device. Exactly what a powerful transformative resource that’s now at our fingertips providing factual and truthful information and all at no cost. Self-empowerment at its best!
A good place to begin this discussion has been a brief history lesson.
Investing right from the start up until the early 90’s changed very little. Being fully 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 on your own behalf. In the mid 90’s, the net provided the catalyst for low-cost brokers to leverage the internet’s ability and begin offering on-line trading for those DIY investors brave enough to battle 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 research, analyze, buy and sell on the own. Naturally, few investors were brave enough to battle this rogue span of action.
By the mid to late 90’s however, the net and it ability to generally share information, access websites and stream stock quotes, advanced this rogue band of DIY investors into what we now know as ‘the-crazed-day-traders’ ;.With the technology stocks heating up, analytical tools coming ipe real assets 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 that were overcome with “irrational exuberance” while the markets were increasing, unfortunately were rationally humbled when underneath fell out. Lesson learned and most of these 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 have all the answers and protect their client’s assets. Investors found this is not the case as the financial firms of Wall Street were busy serving their own 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 learn how to play a brand new game…a winner’s game…transforming themselves into DIY 2.0 Investors!
This new paradigm evolving from the Web 2.0 is definitely an intoxicating and empowering movement providing knowledge at the speed of thought. The Web 2.0 is allowing each of us to produce informed decisions that individuals could not have done 10 years ago, and it’s all inside our hand.
The DIY 2.0 Investor is embracing this real time Web 2.0 Revolution to compete, and competing to win. A recent 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 turned to an expert financial advisor for guidance, reported only 3%, during the same time frame period. Whose game would you rather play?