24-Hour Trading is a Bad Idea

I'm on record regarding my misgivings about the Robinhood app, which in addition to 'gamifying' investing, has for some time has offered investors extended-hours trading. Now Charles Schwab has made the same decision, allowing its clients the ability to trade securities pretty much any time. 

Sounds like a great idea, right? Why be limited by the hours the exchanges are open? Buy and sell whenever you want! 

But the problem is two-fold. First, off-hours trades have pricing issues because most trading volume takes place during exchange hours, and highly active real-time supply/demand ensures accurate to-the-second pricing data. At moments when not enough shares are changing hands, an investor cannot have confidence that the price they pay at 9pm or 2am is in fact a fair price. 

Secondly, no one makes their best decisions during the night. You're tired from a full day. Maybe you had a big dinner, or an edible or a couple of drinks. Your circadian rhythm slows your thinking, and slows your metabolism. Executive brain function, critical thinking, logic, mental math, are all operating on a skeleton crew. Which makes it not really a great moment to place a bet with hundreds or thousands of your hard-won dollars. 

If you primarily use one of these securities trading platforms, and you're the sort who scrolls stock news or 'fintech' while half-watching Netflix after work, I would sincerely urge you to set yourself limits. You get an idea? Sleep on it. You see a story or a post which scares you? Sleep on it. Markets move fast but not that fast. The losses you save by not making a compromised decision in the late evening will speak for themselves. Remember what Charlie Munger said: "It's not brilliance. It's just avoiding stupidity."  

Morningstar's Samantha Lamas's column, below. Happy Valentine's Day all!

Why Schwab’s 24-Hour Trading Might Be a Bad Idea for Investors

Robin

The Art of Not Panicking - Ben Carlson

The world is full of unknowns and uncertainties. Right now is a delicate time in global finance, as the President of the United States, one of the largest consumer and financial markets on earth, is rolling the dice. The new administration is conducting a massive high-stakes economic experiment in which investors are among the lab rats: What happens when a huge market employs tariffs not only on particular goods or on imports from particular trading partners but on nearly everyone? What happens, further, when those tariffs materialize overnight and evaporate just as fast— when they are in fact merely threats? How can businesses who buy materials overseas or consumers who purchase goods overseas predict costs, or plan spending?

Now add in the effect of those tariff countries placing their own tit-for-tat tariffs on American goods and materials? Will buying continue at higher prices for all? Will it drop off a cliff? How can businesses and consumers manage the uncertainty?

And underlying all of this for investors: What will happen to the revenue of the businesses we own? To profits? How can we plan for that? What do we do with our portfolios in the meantime?  

My investing colleague Ben Carlson just dropped a column every investor should read: 

A Wealth of Common Sense - Don’t Panic