Money Management & Retirement Planning Advice by Barry Unterbrink, Chartered Retirement Planning Counselor

Friday, March 07, 2014

Wall Street Hurts Investor Confidence

WALL STREET IS COMING UNGLUED AT THE SEAMS
What you can do to protect your money from the mayhem


The stock exchanges, by allowing link-ups with many outside systems that they cannot monitor or regulate effectively poses a real and damaging threat to investor confidence – and their pocketbooks.

The media has covered these exceptional and unusual - and more frequent - shocks to our markets, but without much resultant blame-placing or penalties by those at fault. Here are a few of the most recent fiascoes, in case you missed them.

The May 6th, 2010 Flash Crash
In a short time span, the Dow Jones Industrials fell 1,010 points, over 9%, then snapped back to close down 347 points on the day. As Bloomberg and Forbes later reported, a sole hedge fund in Texas started the barrage of selling futures contracts that overwhelmed the market, then the high frequency traders stepped in to crater the prices still further. No big deal, you say? Perhaps you were a seller of stock that day, or your 401k plan or retirement plan manager was selling - then you got hurt.

The August, 2013 Trading Halts
The Nasdaq stock market pricing engine for quotations failed, causing huge uncertainty over stock prices. After almost 3 hours, prices were back up and running. As Bob Pissani of CNBC reported that day, "The New York Stock Exchange and NASDAQ have legacy trading systems. These are software systems built on prior software systems that interact with each other, and frequently have glitches. This is a bit of a blow to investor confidence". Let me understand this: a crucial part of the American economic and business financing system – the stock exchanges – do not have up to date and functioning software systems! Not acceptable!!

The initial public offering of Facebook was an embarrassing mess for the New York Stock Exchange and the Facebook underwriters, resulting in cancelled orders and lawsuits.

So how do you protect yourself from such mayhem? For one, try avoiding individual stocks, opting for mutual funds and exchange-traded funds (baskets of stocks traded as a single security). Next, learn the best way to place your order for funds or stock-based investments. For a free review of your financial plans and goals, give me a call at (954) 719-1151.





 

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