CHAPTER 8

Online Trading in Emerging and Frontier Markets and Why It's a Bad Idea

The most appropriate and least appropriate venues for taking advantage of any investment should form an integral part of any detailed discussion of that investment. Online trading by novice or sophomore investors in emerging market or frontier market investments easily falls into the inappropriate category.

THE DANGEROUS APPEAL OF GOING IT ALONE

Online trading has several appealing aspects, many of them similar to the advantages of online shopping, whether for preliminary research when buying a home, as a means of cost-saving, booking travel, or buying books, clothes or furniture. It also has emotional appeal in terms of independence and self-determination.

“Going it alone” has a certain cachet for some individuals, whether in life, business or investing. Some television commercials show well-known television actors evoking investors' rugged individualism, independence of spirit and self-determination.

Other commercials appeal to the simplicity of online trading, belying its actual complexity. A familiar television commercial shows a very young child sitting at a computer keyboard and executing a trade through an online trading site. The child recounts how “a lot of people,” presumably nervous adults, question whether he should trade stocks. He then presses a few keys on the keyboard and exclaims, “I bought a stock. You just saw me buy a stock.”

He goes on to the main message in this series of commercials: ...

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