Ari writes:
Easy to get caught up in the "excitement" of trading stock when you can time the market down to the second. Too bad quibbling about who has the fastest trades entirely avoids the question of whether you should be trying to market time at all.
Send other interesting personal-finance pics to ramit@RamitSethi.com.
It's really not about fast executions, it's about getting the information first. 90+% of investors (if not way more) don't have the resources or abilities to get the information first, so chances of getting abnormal returns on that are very very slim. I agree with Ari in the fact that timing the market won't do the average investor any good.
Dimitry
If they have a "guaranteed" 2-second server excution time, then I hope they've got some beefy infrastructure powering their system. Even so, it still feels like a pretty hefty claim to make.
You should note that no serious trader can make use of this guarantee anyway. It's irrelevant because it applies only to "market" orders, meaning you aren't setting your price, but will accept whatever price the system makes for you at the moment your order reaches the top of the queue. Even in fairly quietly traded stocks, this can vary enough to make a noticeable difference in what you actually make on the deal. In crazier conditions, you can get creamed placing a market order. Anyway, even assuming your a long-haul stock investor, you'd do well to understand how to place a limit order.
I use Etrade, but am not a day trader. I like the quick execution since I know right away what I paid for a market order. I buy at the market since I don't expect to sell in the immediate future so I don't worry about a few cents--the higher commission for a limit order would probably cancel any advantage of the lower price
They really don't care if this makes any sense. They just want you to open an account. If they think people feel this is important they'll push it.
Truthfully, people probably do think this makes a difference. Kind of funny really. But not nearly as funny as some Credit Card offers I get.
- Bryan
http://www.BryanCFleming.com
Market timing is almost always a bad idea. 2 seconds typically would help you more with smaller stocks than those in the S&P.
Market timing, stock selection and other flavors of "active" management are at best educated guessing because no one knows what's going to happen in the future. At worst, it's just plain old guessing.
2 Second Guarantee just lets you guess faster, I guess :)
This is not about market timing. It is about marketing strategy!!
Domino's delivers pizza in 10 min......
Get an oil change in 10 min.
Get a college education in 10 months.....
People react favorably shorter time.
Learn JAVA in 24 hours. Honestly, you cannot learn JAVA in 24 hours....but the title of the book SELLS!!
Hey Ramit,
I don't know if you are interested, but I just tagged you in these "meme" game that is going around. You just are supposed to tell 5 things about you that most of your readers don't know.
pssh...fidelity offers a guarantee that beats e-trade's by 100% - it executes the same orders in 1 second or less!
Ahhh, I appreciate it! Actually, I already got tagged by somebody else, too, but I'm too swamped to take part this time around. Thanks anyway...
2-second trade guarantees are a bit silly; and you're right on in pointing out that crap like this encourages over-trading. Still, I find it a little more silly than harmful. It's clearly just an example of E-Trade trying to cook up bogus ways to stand out in the competitive online brokerage market.
Too bad last I checked their commissions were nearly twice as much as Scottrade's and that's a LOT more important to me than whether or not the trade is done in 2 seconds.
I agree with Robert. Most orders that are at the market will be executed in just a few seconds at any online broker. This is so redicolous, it just shows what people E-Trade is targeting: beginners, that don't know better.
There is nothing wrong with "Timing the market"
So long as your always right.
This is a blog on personal finance (banking, saving, budgeting, and investing) and personal entrepreneurship.
It's for students, recent graduates, and other young people.
I'm a recent graduate of Stanford, where I studied technology and psychology. Now I'm the co-founder & VP of Marketing for PBwiki, a wiki startup in Silicon Valley.
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