The past few years have brought a number of changes to what could be considered the traditional investing landscape. The rise of commission-free trading, meme stocks, cryptocurrencies and the COVID-19 pandemic have made the stock market both glamorous and volatile.
In this interview clip from Motley Fool Live, recorded on March 21, Motley Fool contributor Rachel Warren asks Dan Egan, Vice President of Behavioral Finance and Investing at Betterment, whether he believes we've entered into a new era of investing.
Rachel Warren: There's been a lot of speculation about whether some of the recent shifts that we've been seeing in the market, for example, this draw-down in pandemic stock favorites and growth stocks, whether or not that could signal a more permanent transition in the markets or whether maybe it's just part of the normal cyclical nature of the stock market. I'm curious, in your view, do you think investors could be entering a new era in the stock market, or do you think we're still going to be seeing a lot of investors trending toward those traditional growth stocks in the long term?
Dan Egan: I think you touched on the good point, which is we are attracted to unusual things. It's the whole dog bites man, is it news? But man bites dog, that's news. When there is unusual movements, when stocks are very volatile, this was actually a big part of the attraction for crypto and other things. If something moves 200%, that's news. That's interesting, that's something that you could have engaged with. Whenever there is volatility that allow some specific things to stand out as being very dramatic, that's going to drive attention. I'm not a macro economist strategy person, but in as much as things returning to normal means that overall dispersion between stocks is going to be dampened in the degree of volatility that you're to be able to see is there but, I think this is coming true in mature cryptocurrencies where if you're going from zero to 100, that's a very volatile ride. Going from 30,000-40,000 is nowhere near as volatile ride. Do you think that if the macroeconomic conditions are changing such that there's less dispersion between growth or internet stocks versus other stocks or there's just a lower level of amplified volatility because money isn't cheap. You are going to see that dying down. Stock market is going to become less sensation, less attention-grabbing and that will bring us back to an environment in which it's boring. It's still good to invest, but it's not like going to Vegas. You don't get that sense of excitement. It's more like, yeah, I'm going to the gym, I'm doing my weights. It's good for me, but it's not like it's fun.
