With information constantly streaming right into investor hands, does that (or should that) expand their field of stock holdings or potential trades? Tracking stocks has gotten easier, right? Not necessarily.
[See Why Mutual Funds Make Sense in a Volatile Market.]
"I'm of the belief that you can realistically intensively follow up to six stocks at one time and no more," says Brian Gendreau, market strategist with Cetera Financial Group and a finance professor at the University of Florida.
"Now, that handful may expand or contract somewhat based on the individual, their schedule, and their dedication. But no matter the size of the investor's portfolio, if they're following more than, say, 30 stocks, they're essentially running a high-cost mutual fund for themselves and likely, the professionals can do it at a much lower cost," he says.
There's nothing wrong with investors using trusted blogs and social media sources as filtering mechanisms for the barrage of data and opinions on what may or may not make a particular company and its stock attractive, says Gendreau. There can be value in these efficient aggregators of information.
But what investors do with that information is the true test and caution is warranted to ensure that longer-term investment goals and risk tolerance aren't compromised by an emotional reaction to company information.
Reading, digesting, and reacting to short-term stock information is little like "trying to get a drink from a fire hose," he says.
But, for a crowd thirsty for information (or at least under the impression that they're thirsty), there's no turning back.
Twitter: @USNewsMoney
Reader Comments Read all comments (1)
David Putnam of CA 11:26PM January 31, 2012