The Wall Street Journal is reporting that, beginning today, Reuters Group
On its face, the software, which costs between $200,000 and $1 million, would appear to give those with the financial resources -- such as hedge funds and larger investment fund managers -- a distinct advantage over individual investors, because these programs can respond to news in mere milliseconds (or faster than a human brain can even begin processing the news).
And, undoubtedly, this is true in those instances when a company reports disappointing quarterly earnings or a CEO steps down in disgrace. It also might have proven useful in the recent Don Imus scandal by monitoring the growing negative reaction over his remarks and discerning ahead of the market that the furor would have a negative short-term impact on CBS
The flip side, however, is that news cycles often are not a reflection of fact. Instead, they are merely a reflection of emotion and popular opinion. And therein lays the opportunity for the patient investor, because neither emotion nor popular opinion provides a solid foundation for making prudent long-term investment decisions.
Last week, for instance, Toyota
Does this, however, mean that an investor should buy Toyota and sell General Motors?
Not necessarily, because if you took a closer look, you would have noted that some contrarians were actually suggesting that General Motors' drop to second place was actually good news for the company because it would be able to use this news as leverage to negotiate a better wage deal with its unions. Meanwhile, buried amid all the praise for Toyota were a few stories suggesting that its extraordinary growth was having an adverse impact on quality.
As always, there are multiple sides to every story, and it often takes time to get at the truth. My advice is this: Don't try to compete with the big boys on short-term market news. With new tools such as Reuters' software program, it is clear institutional investors have an upper hand. However, individual investors can compete on a long-term basis, but they need some contrarian thinking and a strong dose of patience.
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Fool contributor Jack Uldrich really does believe patience is a virtue, but he still wants to see the Minnesota Vikings' first-round draft pick develop quickly. He doesn't own stock in any of the companies mention in this article. The Fool has a strict disclosure policy.