Twitter Hack and Flash Crash – Should You Care?

You might find the AP hacking story interesting and curious, but as a long term investor, you probably shouldn’t care. Yes, the Dow fell 140 points (temporarily), but who cares? Day traders and floor traders may care, but many of them would have been just fine if they were taking a nap during all the confusion. Long term investors really should not care.

Same goes for the “Flash Crash” in 2010. Some people were outraged to find out how the markets work, and while the event may expose some questionable practices, it really shouldn’t matter to long term investors.

It’s Good to be the Long Term Investor

Why shouldn’t you care about these intra-day shenanigans? Because they don’t affect your goals or your progress toward your goals. If they do, it’s not by much. The people who are hurt the most in these events are people who react in the heat of the moment. They’re not dumb people, and they certainly deserve some sympathy for hitting a speed bump, but they don’t have to trade the way they do.

Being a long term investor is much more enjoyable than being a reactionary trader. You don’t have to worry about the daily ups and downs, so you can spend your life on more enjoyable things. Who wants to spend their days staring at a screen with red and green numbers, and who wants to have to be on top of it whenever some joker makes the wrong trade or when Twitter has “breaking news”?

As a long term investor, you’d probably invest in mutual funds, which you couldn’t trade during all of the mayhem even if you wanted to (they trade only at the end of the day). It’s conceivable that some active mutual fund managers reacted to the tweet about explosions at the White House, but many funds were probably unaffected. Some funds stay invested in the market regardless of whether “it’s a good time” or “things are getting crazy” – as do many long term investors (assuming they’ve placed themselves in the appropriate spot on the risk/return spectrum).

So why bother with all the news and frantic back-and-forth? Life’s too short, and it’s not clear that you’ll do any better financially if you’re a reactionary trader. Turn off the TV, avoid the Refresh button on your browser, and save yourself the anxiety and transaction costs that come with reacting to what are sometimes mistakes.