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Monday, July 23, 2012

Jaffe: Investors Are Smarter Than We Think

News summary by MFWire's editors

Columnist Chuck Jaffe believes that investors are smarter than critics think. Jaffe writes that there is ample proof that the concern about investors hurting themselves with some innovations, "is not true and never has been."

He lists daily account pricing in retirement plans and development of mutual-fund "supermarkets" such as those run by Charles Schwab and Fidelity Investments as innovations which were said to harmful for investors.

Another innovation that is said to be harmful is the evolution of ETFs.

Yet, Jaffe reports that a study by Vanguard Group titled "ETFs: For the better or bettor", showed that investors are not destroying their portfolios with reckless ETFs trading.

Joel Dickson, one of the authors and a Vanguard's Investment Strategy Group principal, emphasizes that the presumption about ETF trading does not reflect individual investors.

Dickson said: "Generally, investors tend to be consistent animals over time. While the tools may develop and evolve, ultimately the actions that are observed are not the worst behaviors made possible by the new products and services. People may assume the worst of investors, but its not how it actually happens.

Geoff Bobroff of Bobroff Consulting also gets a quote in the article:

"The knee-jerk reaction to almost all of the advances we have seen has been 'Oh my goodness, what is going to happen to the industry?' and 'Investors will blow themselves up with this.' Surprise, surprise, the world hasn't come to an end yet and, in fact, the fund world has gotten better for each of these developments."


Edited by: HFD

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