Morningstar: Trading 24/7 at The Vanguard May Not Be Ideal for Investors

Morningstar believes that The Vanguard Group's recent announcement to expand overnight trading to all retail clients, allowing investors to trade a wider range of securities 24/7, five days a week, while typically a good thing, may be counterproductive in this case. Vanguard's round-the-clock trading may not be in the best interest of investors, as the convenience of trading around the clock may amplify common investor behavioral challenges, such as chasing returns and herding, and make investors more prone to impulsive trading and making decisions that are not in their best interest. The convenience of trading around the clock may also make investors less likely to take the time to buffer their reaction to recent events, and more likely to act on impulse, rather than carefully consider and analyze the fundamentals. Research has shown that time of day and fatigue, which typically sets in hours later, can negatively affect decision-making. Investors may be more likely to purchase riskier assets and hot investments after-hours trading. The extension of trading hours seems to be a continuing trend among trading platforms, with Vanguard following in the footsteps of companies such as Robinhood. While easier access to financial markets can benefit investors, allowing eager investors to quickly participate in market events may be akin to lowering the fence that prevents chasing returns, falling prey to overconfidence biases, or following the crowd.