From Morgan Housel at Collaborative Fund: At some point in the past few years high-frequency traders began, using picoseconds to measure the time needed to execute their trades. That’s a trillionth of a second. Big numbers require context: there are as many picoseconds in one second as there are seconds in 31,709 years. Few things can be done faster than the time it takes to buy or sell hundreds of companies’ stock. It can be done in huge amounts, too. Most individual investors can turn their stock portfolio into cash at reasonable prices in seconds. It is a large benefit to investing in public stocks. But it doesn’t come free. You pay a lot for the service. And it’s a service many public investors overpay for, unaware of its downside. Here’s the problem. The more liquid an investment is, the lower return it will earn compared with similar investments that are less liquid. The upside is that you can sell a liquid investment in the next few picoseconds. But most financial advisers pr...
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