Opportunity Investing is Changing the Stock Market

Stock picking isn’t dead. But for most investors it might as well be.

With the economy struggling, stock pickers have been forced to dig deep into their own pockets to buy shares.

More people than ever before are investing in the stock market through “opportunity investing,” the practice of buying shares that might come into view down the road.

“It’s a new era,” said Bruce Langer, president of research firm Langer Research. “Opportunity investing is very real now. It’s no longer an alternative to the old world that people had been living for. It’s a new world.”

While many economists blame the financial crisis for driving up the number of investors who buy shares of high-flying tech stocks, the real culprit has been opportunity investing.

Opportunity investing in the market, which has been around for more than a decade, was the biggest factor driving the stock market to new heights in 2011 and 2012. But its share has grown sharply to about 5% in the new year, according to Langer, thanks to a market that continues to be highly illiquid and the lack of big-name IPOs.

When stocks are moving, the market is highly liquid, meaning those with deep pockets can easily buy shares while those without are buying at snail’s pace.

“There’s not a whole lot of action. It’s very low-volume-driven,” said Langer, who once owned shares in Google but sold them in 2007 to avoid “chaos.” “People who don’t have a lot of time to sit and watch these stocks move are taking the chance. That’s a trend we’re seeing.”

In the second half of 2011, about 4.1 million people invested in the stock market through opportunity investing, up from about 2.2 million the previous year, according to the research firm.

This is an increase of nearly 20%, while the number of investors increasing their holdings through

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