Ride with the tide

More and more seasoned, successful, and well-respected money managers are vocal about their frustrations on how the stock market trades today compared to a few years back. True, value investors feast on volatility to add and start positions in stable, predictable companies or mispriced stocks. They have a buy-and-hold strategy that allows them to weather downturns. However, other asset managers with a shorter time horizon don't have the luxury of time and can incur massive losse

Over the past 30 years, brokerage firms like Charles Schwab, Toronto Dominion, and the likes have upended traditional institutional investing by offering services to retail investors. It didn't take long for investment managers and traditional banks to follow suit.

The velocity of user adoption didn't take off until this decade when the Millennials and Gen Z generation preferred to manage their own money. Many flocked to mobile apps such as Robinhood (HOOD: Nasdaq) to trade fractional shares. The company's success preached 'investing for all' which resonated well with young people distrustful of traditional institutions.

The young generation of market participants has changed the stock market forever. Look at Gamestop, AMC, and other meme stocks that jump around like a ball on a roulette table. These stocks are most talked about on Reddit which Alexis Ohanian, himself, admits does not have the capability of restricting and fact-checking posts. In a big way, day trading has had a profound influence on price gyrations. Professional investing will need to adjust to the new reality. The dislocation between intrinsic value and market stock price will be more apparent and long-lasting in high beta names. Asset managers with over $100 million in assets under management (AUM) need to be registered with the SEC and file a quarterly report of all assets holdings. Depending on the portfolio mandate, holding high-beta stocks is a must.

A culture of control has had to give up some control to survive the changing tide. 20 years ago buying and selling stocks can take minutes. Now, it happens in nanoseconds. But being a successful investor doesn't mean being a trader. You just have to take what the market gives you. And that could mean riding with the tide.