In this article well look at some of the unique challenges modern investors face.

When writing about investing, people often make grand statements to the effect that investment basics havent changed in hundreds of years. This is true in the sense of buy low and sell high, but in every other sense, investing has changed. In this article well look at some of the unique challenges modern investors face.

The Volume and Speed of Information

Perhaps the most daunting challenge that modern investors struggle with is the sheer speed and volume of information. In the past, solid information about publicly traded companies was hard to come by outside of the annual and quarterly reports. The Wall Street Journal and a limited number of finance related publications attempted to collect business news and spread it to others, but this news moved to the greater public at the speed of print – if at all. In order to be reported, a story had to be significant; and even then, it had to be written up, printed and delivered.

Now, even obscure companies produce a constant stream of information, from the daily price fluctuations in the stock to announcements and posts on dedicated message boards. When information floods in, it can be difficult to pick out what is important. Several challenges follow from this main source, and well look at each in turn.

The difficulty of finding the right resource is tied to the challenge of too much information. As an investor, how do you find the good resources in the crowd? To be clear, having a large amount of choice and easy access to some truly excellent free resources is an overall win for the modern investor, but it can sometimes make research more daunting because of all the choices. Investing does deal in facts – such as the definition of a bond or the proper calculation of ROI — but opinion colors many areas, such as whether technicals matter more than fundamentals. With time, many investors learn to filter out information and create a select pool of reliable sources that match their investing tastes. Until then, however, it is hard to avoid being overwhelmed by the range and variety of opinion out there.

The Reactionary Market

Even if you have a good handle on quality information, you can still get burned when inaccurate information or basic uncertainty hits the market. Inaccurate information still hits the market, even though the time to correction/exposure is often shorter. Inaccuracies can be honest mistakes, malicious rumors or even financial fraud on the part of corporations. More importantly, the financial markets are so addicted to the constant information flow, that often an interruption in the flow or genuine moments of uncertainty can be worse than bad news.

Market reactions have always been extreme, but the increasingly global reach of information has given investors more reasons to overreact per hour than at any other time. It doesnt take a great leap of imagination to see good or bad consequences with every headline that pops up in the feed.