In light of all the recent media chatter about High Frequency Trading (HFT), and with the brilliantly marketed release of Michael Lewis' new book Flash Boys, I have a question for readers:
Why do so many people think the stock market's rigged?
Here's one possible reason. It's a rationalization. If you believe the market's rigged against the small investor, then you have a bulletproof "reason" for entirely ignoring stocks as a wealth-building tool.
If you really wanted to run with this rationalization, it could enable you to avoid the entire process of saving and investing for your future. "What's the point of learning how to invest? Why should I bother to read books about stocks? Forget it. The whole system's rigged anyway."
I'll go further. If there were ever an ideal time to deploy a psychological defense mechanism to rationalize not saving and investing, it's right now, after a multi-year period when it was a really, really, REALLY good idea to have been in stocks all along. The past five years have offered patient investors one of the best bull markets in history. But if you believe "it's all rigged" you can very easily excuse yourself for missing out on an extraordinary period of wealth-building.
Are you getting vaguely irritated, even angry, reading this post so far? Then this post is for you. Consider the possibility that you might be making this exact rationalization.
The point, of course, isn't to beat yourself up for past investment mistakes. Despite all the authoritative and decisive-sounding commentary in the financial media, nobody knows what the stock market's going to do. Know this, and act accordingly, by keeping some modest exposure to stocks at all times--usually via low-cost index funds or via shares in dividend-paying stocks. Along with other asset classes and a fully-funded emergency fund, stocks must be a part of your long term wealth-building strategy. Build your competence in using this important wealth-building tool.
Have you taken all the steps you should to protect your family's long term financial future? If not, perhaps it's time for you to stop rationalizing... and start taking action. Consider it.
Forget about HFT. If you act prudently, save aggressively, invest predominantly in dividend-paying stocks, don't overtrade, and--most importantly--use limit orders (not market orders) to make your investments, none of this HFT stuff matters. At all.
Ask Casual Kitchen: Best Investing Books
The Top Lame-Ass Excuses Between You and Better Health
Consumer Empowerment: How To Self-Fund Your Consumer Products Purchases
Your Money Or Your Life: The Full Archive
Becoming a Knowledgeable and Sophisticated Investor: Six Tips
How can I support Casual Kitchen?
Easy. Do all your shopping at Amazon.com via the links on this site! You can also link to me or subscribe to my RSS feed. Finally, consider sharing this article, or any other article you particularly enjoyed here, to Facebook, Twitter (follow me @danielckoontz!) or to bookmarking sites like reddit, digg or stumbleupon. I'm deeply grateful to my readers for their ongoing support.