More Speed Bumps For High Frequency Traders-- Good!

"Another stock exchange wants to slow down trading, saying some rapid-fire firms have found a way to exploit slower orders, scaring investors away from its market."

This is a good thing for long-term investors and average Joe's...

According to the Wall Street Journal:

The Chicago Stock Exchange has proposed to implement a speed bump, mimicking an earlier move by IEX Group Inc., the upstart stock exchange made famous by Michael Lewis in the book “Flash Boys.” In June, IEX won approval to impose a speed bump of 350 microseconds, or millionths of a second, a delay that it said is just long enough to protect investors from predatory high-speed trading that can front-run the orders of slower investors.

Also interesting to note:

The Nasdaq Stock Market sought approval this month for a new function that would slow the market for some investors. Nasdaq wants to allow traders who agree not to cancel their quotes for at least one second to have their orders prioritized over similarly priced orders. Approximately 42% of orders that are fully canceled are removed from exchanges within one second of being entered, according to SEC data.

You can read the full article here.

At Blue Harbinger, we believe trading costs are one of the biggest "silent killers" for many investors. Whether it be high-frequency traders front-running your orders (essentially skimming away some of your money) or it be full-service brokers charging you exorbitant sales fees-- unsuspecting investors lose. And what seems like only small amounts, can really add up over time, especially when you factor in the compounding and investment growth it causes you to miss out on.

Besides picking good investments and holding them for the long-term, protecting yourself from "hidden" expenses is one of the best ways to help maximize your long-term returns. One great way to avoid hidden fees is to trade less. Besides helping you avoid costly mistakes, investing for the long-term helps you avoid unnecessary and expensive hidden trading costs.

For your reference, here are a few more of Blue Harbinger's Core Beliefs:

Invest for the Long-Term. Investing for the long-term is the best option for most investors because it allows the value of your investments to compound each year, and because it protects you from many of the expensive hidden transaction costs that are prevalent throughout the industry.

Diversify. Through the use of individual stocks and a few ETFs, Blue Harbinger helps you achieve an appropriate level of diversification.  Too little diversification exposes you to too much risk, and too much diversification is totally unnecessary and often very expensive.

Minimize Costs.  One of the core tenets of Blue Harbinger is to help investors avoid the high costs, hidden fees and conflicts of interest that are prevalent throughout the industry.  For example, not everyone needs a full-service financial advisor (aka stock broker), especially considering all of the transparent and non-transparent fees that exist (e.g. 5% sales charges, management fees, 12b-1 fees, and unnecessary trading costs, to name a few).  Also, most investors would be better off avoiding mutual funds because they tend to charge very high fees.  For example, they often take 1-2% percent of your money each year (for management fees), and most of them underperform over the long-term because they are over-diversified (i.e. they are "closet index funds" with inappropriately high fees and hidden trading costs).  Additionally, many investment advisors are simply not able to act in your best interest because of inherent conflicts of interest.  For example, their arms are often being twisted by special interest groups to invest your money in a certain way.  Also, many of them are simply acting in their own best interest, not yours.

Understand your Investments.  At Blue Harbinger, our rule of thumb is that if we don't understand the investment, we don't invest.  Regarding stocks, we need to understand how the company makes money, and we need to believe in the business going forward before we invest.  This same rigorous analysis applies to ETFs.  We need to understand what the ETF actually holds (all securities in a market or just a sample, derivatives), does it trade at a daily premium or discount to its net asset value, and what fees are being assessed, to name a few.  Blue Harbinger subscribers have access to all of our research reports and updates.

Valuation Matters.  Understanding valuation is critical when actively selecting stocks.  Just because we like a business doesn’t mean it is a good investment.  Discounted cash flow analysis, earnings growth forecasts, and peer benchmarking are examples of important valuation inputs to help us identify attractively priced investments.

You can access additional information on Blue Harbinger's membership benefits here.

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