Women with children should not trade stocks ... at least, not according to Paul Tudor Jones.
Last week, the billionaire founder of hedge fund management company Tudor Investment set the Internet rant-o-sphere on fire when a video of him speaking at an investment symposium at the University of Virginia leaked out.
Paul Tudor Jones (Getty Images)Among other impolitic statementscaught on tape, Jones was heard to have...
- Called children a "killer" of one's ability to focus on trading stocks.
- Declared, "You will never see as many great women investors or traders as men -- period, end of story."
- Regaled other members of his discussion panel with the story of two former colleagues at EF Hutton, and what happened to their skills as traders after they had children: "As soon as that baby's lips touched that girl's bosom, forget it. ... Every single investment idea ... every desire to understand what is going to make this go up or go down is going to be overwhelmed ..."
- Warned that "once you get past 30 ..." you've either learned how to trade or you haven't. The implication being that a woman's best child-bearing years can be spent rearing kids, or working -- but not both.
Then, in a moment of self-reflection, Jones added: "I've probably said too much and gotten myself in trouble."
Gee, Mr. Jones, Do You Think?!
Well, yes, Mr. Jones. In all honesty, you probably did get yourself in a bit of hot water with the PC crowd.
But that's OK. Because in the course of "opening mouth, inserting foot," you also opened the way for us to make another important observation: Maybe in the 1970s, when you first started trading stocks, people believed that women with children shouldn't trade stocks. Here in the 21st century, though, it's probably more accurate to say that no one should trade stocks. No humans, at least. Emphasis on the word "trade."
These days, a person -- man or woman, childless or parent -- who wants to trade in and out of stocks isn't just competing with his fellow man (etc.). He's competing with professional traders at multinational megafirms, armed with limitless manpower, servers full of historical data to draw upon, and ranks of Bloomberg terminals to crunch the data. Any lone individual who thinks he can compete with all that, and win, is just plain crazy -- and it gets worse.
You also have computers to worry about. Hedge-fund-run, turbocharged supercomputers, loaded with high-frequency trading algorithms that see a stock move and promptly execute 10,000 micro-trades on the Nasdaq at light speed ... all while you're still mousing over to the "buy it now" button.
Trying to beat those odds -- whether you're a young new mom or a rich, middle-aged white guy with no kids and a degree from Wharton -- isn't just egotistical. It's downright suicidal.
Play to Your Strengths
So what's the average investor to do when faced with such long odds? Give up, log off, and resign yourself to having your savings earn 0.01 percent interest in a checking account? Hardly. Even if you can't succeed by trading stocks, you can still beat the market bigwigs by investing in stocks for the long-term.
Remember: Research shows that despite all the manpower, data, and computers at their disposal, the average U.S. hedge fund still underperforms the S&P 500 over both three- and 10-year historical time periods. While the "professionals" are scrabbling for pennies on the NYSE trading floor, focused on their performance minute-to-minute, they're ignoring the bigger picture.
And that's where you have an advantage.
If stock traders have an edge over the small investor in the short term, then over longer periods of time they're as likely as not to give up their short-term gains. Simply bybuying and holding a basic S&P 500 index fund or ETF -- the SPDR S&P 500 (SPY), for example -- you can short-circuit the supercomputers' advantages, and outperform the majority of hedge funds.
When you get right down to it, Mr. Jones was more right than even he knew. Women with children shouldn't trade stocks. No one should trade stocks. But we can all do pretty well by investing in stocks.
Motley Fool contributor Rich Smith does have kids, and doesn't trade stocks. He does, however, invest in them.
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