So long” financial advisors, “goodbye” financial services industry and “see you later” Wall Street. A ‘new-breed’ of DIY investor has been empowered, equipped and enabled to leave all three of them inside their rearview mirror. This ‘new-breed’, which I make reference to as a DIY 2.0 Investor, is being transformed thanks to the Web 2.0.
The newest paradigm of DIY investors has chosen to harness the potential of the realtime knowledge revolution and its’ instant availability, accessibility, verifiability and deliverability of information to anybody, anywhere, whenever 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!
An excellent place to begin this discussion is by using a quick history lesson.
Investing from the beginning up until the early 90’s changed very little. Being fully a ‘1.0 Investor’ meant your only choice was to invest via an investment broker that bought and sold individual stocks and or mutual funds in your behalf. In the mid 90’s infrastructure debt , the web 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 their own. Obviously, few investors were brave enough to battle this rogue length of action.
By the mid to late 90’s however, the web and it ability to 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 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 period 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 going up, unfortunately were rationally humbled when underneath fell out. Lesson learned and many 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 own most of the answers and protect their client’s assets. Investors found this is incorrect whilst the financial firms of Wall Street were busy serving their particular interest by selling highly complex and speculative products with 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 committed to learn how to play a new game…a winner’s game…transforming themselves into DIY 2.0 Investors!
This new paradigm evolving from the Web 2.0 can be an intoxicating and empowering movement providing knowledge at the speed of thought. The Web 2.0 is allowing each of us to make informed decisions that individuals could not need done a decade ago, and it’s all in our hand.
The DIY 2.0 Investor is embracing this realtime Web 2.0 Revolution to compete, and competing to win. A recently available study by Cogent Research of Gen X Investors demonstrated a remarkable change in fortune. This ‘new-breed’ of Gen X DIY 2.0 investors experienced a 28% return in 2010, while their peers who looked to an expert financial advisor for guidance, reported only 3%, during the same time period. Whose game can you rather play?