I’ve heard a lot of talk lately about how the stock market is rigged. Michael Lewis, the author of the book, “Flash Boys,” says the market is rigged by high-speed traders and Wall Street firms. I’m still investing because I don’t think the market is ultimately stacked against the everyday investor as long as the average investor takes an intelligent and not impulsive approach. A recent article by The Daily Ticker interviewed Jim Cramer, the author of “Get Rich Carefully.” Cramer is still a believer in the average person getting wealthy with stocks. However, the key is to avoid taking a short-term approach. He recommends coming up with a long-term view.
Giving up day trading
One way I have found success in the stock market is by buying into a “long” stock position with several purchases spread out over time. I avoid trading stocks on a daily basis because of the extreme volatility. Even if elite traders can buy access to a high-speed network that gives them insight into which stocks I just purchased, they can’t force me to sell before I am in a profitable position. My patience pays off because I’m willing to wait days, weeks, months and even years to come out ahead in my portfolio.
Picking dividend-paying stocks
By owning dividend paying stocks and exchange-traded funds (ETFS), I can accumulate more shares of a stock over time. I reinvest the dividends. When I’m retired, I plan to stop reinvesting the dividends and simply take the dividends as income. In most cases, high-speed traders can’t really impact my dividends. I feel even more comfortable with the ETFS because I don’t have to worry that an individual stock will go bankrupt.
Considering the alternatives
I am sure there are safer options for my money, but I can’t keep up with inflation by locking my cash in a vault. I am not willing to invest in gold or gold funds because the economy is too unpredictable at this time. Gold has become more of a speculative play. The only other investment that makes financial sense to me is real estate. Paying down my mortgage saves me the interest I’d owe on the loan.
According to a recent article by Reuters, a more serious threat to investors is what’s called “dark markets” or trading outside of exchanges. The rise of off-exchange trading skews the pricing of stocks. Reuters reports that 40 percent of U.S. stock trades occur off exchange, which marks a 16 percent increase from 6 years ago. Without a doubt, the secrecy of trading and high speed trading has an impact. I just stay focused on the long-term picture so I can build wealth over time.
More from this contributor:
Without a Correction, I’m Expecting a Market Crash
Confronting Debt Before I Retire
I Got Caught up in the Gold Buying Frenzy