Market Matters: Investing In The Smart Phone Age

Below is a weekly update from our Chief Investment Officer, Dr. Scott Lummer. He co-hosts an audio segment entitled “Market Matters.” In this week's show, Scott discusses how new technology, and in particular the use of smart phones, has affected the way people invest. Each week he covers a different piece of investment news focusing on recent events in the capital markets, and relates them to Savant Investment Group’s perspective on investing.

Episode Transcript:

Daphne: Welcome to Market Matters, a weekly discussion about investing in today’s capital markets. I’m Daphne Feng and, as always, I’m joined by the Chief Investment Officer of Savant Investment Group, Dr. Scott Lummer. Today we’re going to talk about investing in the age of smart phones.

Scott: Yes, but before we get started, I’m going to switch roles for a bit, and become the grand inquisitor. Recently, when I have met clients, a frequent question I get is who is Daphne and what is her background? So tell me about you – how long have you been working for Savant?

Daphne: I’ve been working as a research analyst at Savant for over a year.

Scott: And before that?

Daphne: I worked as an investment analyst for HSBC in New York.

Scott: Tell me more about your background.

Daphne: Born in Texas, received degree in Economics from U of C, anything else listeners might find interesting.

Scott: And right now you’re doing something unusual – aren’t you.

Daphne: Currently, I’m working half-time, because I’m in Taiwan in a full emersion Mandarin program. But enough about me – let’s talk about how smart phones have changed the way people invest. There are a lot of positives, correct?

Scott: Of course – new technology always opens some doors. The obvious ones are related to speed of information and execution. I’m able to continuously stay on top of economic and financial news, so when a big event happens that might require some action, I find out about it as soon as possible. Also, the other day I was out of the office but had a client who needed money immediately. I was able to execute a trade on my phone in between meetings. I couldn’t have done that 10 years ago.

Daphne: Any more subtle impacts?

Scott: Another positive – I think trading is actually more secure than it was in the past. The custodian we use requires verification from a smart phone before logging into the account. Again – that extra level of password protection wouldn’t have been possible before the iPhone creation. But there is a downside.

Daphne: What can be the downside of better technology?

Scott: Smart phones have created an expectation of continual and immediate access to information and responsiveness. But they also have created an expectation of frequent and immediate decision making. And that’s fine when deciding which restaurant to meet or should I buy that groupon. But with respect to long-term investing, decisions need not be made that often, and the ones that are made should be carefully thought out.

Daphne: But the capital markets have always had players who make fast decisions.

Scott: You’re right – there have always been two types of market participants – traders who make instantaneous decisions, and long-term investors who make carefully thought out decisions. My point is, when compared to the rest of society, the traders used to be considered unusual. But over the past decade, the rest of society has been moving more to a trading mentality. Making steady long-term decisions, in a world in which we’re bombarded with new information, seems less common.

Daphne: Do you see that impact our clients?

Scott: One example is last week. Many of our clients called or emailed us with questions about PIMCO. They heard the news, and immediately reacted. I don’t think they would have called us about the departure of a fund manager 10 years ago – at least not before the ink was dry on his resignation letter.

Daphne: What would you recommend to investors?

Scott: Breathe. Make a plan, stick to that plan, perhaps review it once or twice a year. But in investments, most often the best action is no action.

Daphne: That’s Market Matters for this week. Thanks to all of you for listening. Please join us next week Scott and I will talk about the economic outlook for the rest of the year.

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