The Ignorant Investor

E-trade appears to have a preferred client in mind judging by the company's new TV ads.

As the screen shows shots of a series of well-trimmed men and women in various settings- some white, some black, some asian, and each of them is sitting in front of, or striding about, a computer screen surrounded by the trappings of the modern office or well-appointed home. As they consider whether to buy stocks on E-Trade, a man's deep voice triumphs the spirit of investing, E-trade style:

Be more bold, he intones. Be more powerful . . . Be . . . More!*

Now there's no doubt that investing in equities requires a certain amount of boldness. And claiming that buying 100 or so shares of IBM will turn one into a rutting reservoir of power is seems like a reach. But would it have hurt the company's message to suggest its customers also be . . . more prudent . . be more careful . . . be . . . Skeptical!

Why, yes. Yes, it would. Because although research has indicated that frequent trading and the resulting turnover is hell on returns (it's like riding a bike and trailing a big, fat parachute behind you), E-Trade makes its money by making trades for its clients. Less trading=Less Profits, and what company is going to use advertising to hurt its bottom line?

Whether or not trading a lot eats away at hard-won gains in a customer's portfolio isn't a problem that concerns them. For E-trade and other brokers, they're never going to see a trade they don't like, and their advertising reflects that.

So you can be sure they like bold investors. Ignorant ones, too.

*The quote may not be exact- I'm working off memory here.