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The New Age of the Common Man?

Image source: Charles Schwab, Schwab Stock SlicesTM

Back in 2014, three leading psychologists joined with the CIA to experiment on the ability of regular people to estimate the probabilities of potential geopolitical events coming to pass.

It was called the Good Judgment Project and tasked some 3,000 novice forecasters to predict events ranging from whether North Korea would launch a new multistage missile to when Russian armed forces would invade Ukraine. It turned out that these amateur prognosticators did surprisingly well. In fact, the top 1%, the aptly named Superforecasters of the group, beat professional CIA analysts’ estimates by 30% on average. And they did it without the benefit of classified information, with most relying largely on Google searches for guidance.

Fast forward to today as the movement to broaden the access to and appeal of self-directed investing intensifies. Moving beyond no trading fees or minimums, leading DIY brokerages have taken steps further lowering barriers for small and novice investors, inviting more to join the party. For example, in a recent national TV campaign, Schwab introduces “Schwab Stock SlicesTM,” a fractional share program with the tagline, “Now anyone can own any of America’s leading companies in the S&P 500 for as little as $5, even if their shares cost more.” This follows closely on the heels of Fidelity’s also nationally advertised program, “Stocks by the SliceSM,” which has an even lower $1.00 minimum investment on the fractional shares of over 7,000 stocks.

As this new cohort of retail investors grows, it will be interesting to see how well they perform relative to the professionals and whether the increasingly accessible and sophisticated tools of the information age in the hands of a tech-savvy user base can even the playing field with the pros.