The Nasdaq has announced its intention to have 24-hour trading, five days a week, starting the second half of next year. The main argument is that 24-hour trading will draw more investment from the rest of the world. That could be true, but it's still a bad idea. Nothing is stopping the rest of the world from investing in American publicly traded companies right now, just as nothing is stopping Americans from investing in internationally publicly traded companies. Ultimately, the change in trading hours would encourage more emotional and obsessive trading from individuals.
It used to be that if you wanted to trade a stock, you had to call your stockbroker. He took your order and wrote it on a piece of paper. That piece of paper was put in a tube and shot up to trading via those tubes that now only exist at banks and pharmacies. Trading got your order and began processing it. The trade settled in three days.
The time it took to trade was like a longer fuse on a bomb. The hassle kept people from entertaining the idea of trading with the frequency we see today. Technology has made our lives so much more convenient, but that convenience comes with a cost. Imagine walking to a water source with buckets to have water for drinking or cleaning. Naturally, you would have a greater appreciation for the advances that pipe water into our houses today. Of course, you would use technology, but respect for the work you're saving would always be in the back of your mind. This same thing is happening in investing right now. People have become so comfortable pulling up an app on their phones and buying and selling instantly that we have forgotten the ramifications of investing. These companies that are bought and sold are incredibly complicated. They employ thousands of people and generate billions in revenue. One bad headline, and people can't sell fast enough.
Serious investing requires research, contemplation, and patience—something that rapid, instant-gratification trading doesn't want you to consider. Emotions are not your friends in investing. Having a longer fuse between "I might buy or sell" and executing that idea would serve most investors well. At the time of this writing, the Nasdaq is down over 10% in the last couple of weeks. During this stretch, the index has swung 2, 3, and 4% some days. If you haven't followed the market and you are just hearing this for the first time, let me ask you: have you noticed people shopping, driving, or spending less? Of course not. Business and market cycles take time. Volatility in the market is a physical representation of emotion. Giving people the ability to exercise more emotion probably is not the best idea.
Lastly, here is a reminder that you are not a trader. There is a fine line between investing and gambling. Often, when people find out what I do, they immediately begin to describe how they invest their money. It sounds like me finding out you're a surgeon and telling you how I've used a hot glue gun to seal an open wound. I'm not a surgeon; you're not a trader, and that's ok. Embrace it. A great way to manage some of the emotions and hard decisions around investing is to work with a financial planner and investment advisor. Not all financial advisors are created equal; invest in finding the right one for you. I'd welcome a conversation to see how we can help.