Brainless Traders Are Putting Your Retirement At Risk

Brainless Traders Are Putting Your Retirement At Risk by Jody Chudley – Daily Reckoning

TDC Note – Not only are these traders brainless, they charge fees for the privilege of mismanaging your wealth.

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Do you have a brain?

If so, then I am very confident you are going to have a major edge investing over the next five years.

I know that sounds like a ridiculous thing to say. You’re thinking that it’s obvious having a brain is a requirement for successful investing.

But for the past five years it hasn’t been. In fact, thinking has been quite detrimental to stock market performance.

But that’s going to change…

And when it does, your brain is going to serve you well. Because when this change happens, we’re going to see stock market fireworks much bigger than those we saw this week.

So today, let me fill you in on what’s happening and how you can prepare for it…

How Does A 1,600 Point Drop Happen? — The Brainless Are In Charge

On Monday, the Dow Jones had its largest single day drop in history — down 1,600 points at the low.

Consider this your test run, folks. Because at some point in the future, we’re going to have to sit through much worse.

Here’s the problem… Which is actually something I have written about to you before…

Most buy and sell orders in the market today are thoughtless transactions.

That’s right.

The vast majority of trades in today’s stock market are being done without giving one ounce of consideration to the valuation or operating performance of the company in question.

The entities behind these trades don’t care if the company is trading at 10x earnings or 100x.  No valuation is too high.

The annoying part for fundamental investors like me is that for the past several years, being brainless has worked. As the market has chugged steadily higher, thoughtlessly buying has been a recipe for success.

Take a look at the chart below. If you’ve read my past articles you’ve seen it before.

It depicts the amount of money in recent years that has left actively managed mutual funds (red line) and how much money has poured into passive investment vehicles (blue line).

Incredible Sums of Money Have Poured Into Passive Investments

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