Tech is making investing easier, but be careful with that click
Technology is fundamentally changing our relationship with money. What we do for entertainment, how we get from point A to B, and even the most mundane routines such as grocery shopping are changing by the day. We are seeing substantial changes in our relationship with money, specifically in the way we manage our money.
Technology and innovation have advanced in leaps and bounds, to the point where it truly is hard to ignore. Advanced technology has turned the business and finance world on its head. One of the key areas where we are seeing such change is in the investment and trading landscape. With revolutionary changes in the way people buy and sell assets on the financial market, as well as the way brokers conduct their business, technology has become intrinsically woven into the financial lives of most investors and traders.
Anyone can trade and invest online because of the increased levels of transparency; with a click of a mouse people can get a clear and extremely in-depth view of what they are investing in. We are also seeing a definite trend towards managed funds and automated trading systems, as well as a shift towards global investing. No longer are people confined to the borders of their own country when it comes to their investment choices.
These technological advancements are fundamentally changing the way we are managing our money. The internet has without a doubt been one of the most disruptive technologies in history. This information highway has broken down all borders; now people can invest in international markets and, more importantly, international companies such as Amazon and Coca-Cola. With a literal smorgasbord of information right at our fingertips, investors can compare companies and products and have access to information such as quarterly results, all information traditional brokers would have had to advise them on historically.
Because of this, online trading has now also taken on a life force of its own. We have smartphones, web and desktop platforms, online stock screens, market research sites; with a few clicks of a mouse or a few taps on your smartphone you can open a trading account. Investors can now fully enjoy the benefits of technology and the effect it has on their decisions.
While headlines have been dominated by the rise of cryptocurrencies, high-frequency trading and artificial intelligence (AI), these advancements are just a handful of the technologies changing the investment landscape. Those new to investing can take advantage of copycat trading. This is when the trades of more experienced and successful traders are copied, making it easier for those not as savvy to make investment choices by eliminating the need for any research.
There are charting materials too, which provide online signals to follow, and then also automated botware, which offers automated software people can use to trade.
Social media is an extremely powerful tool, a treasure trove of data for technologically savvy investors. It plays a significant role in determining trading strategies and analysing trends and behaviours. Online connectivity and the ease with which potential investors from all corners of the globe can interact is allowing individual traders the opportunity to follow and get advice from investors who boast similar portfolios, all with a view to collaborative success.
One does need to demonstrate a degree of caution though, because as the old adage goes all that glitters is not always gold. There are a lot of online choices that promise the world and more with a few quick clicks, and investors need to make sure they are doing their research before committing to anything that seems too good to be true. Read what other people are saying about companies or schemes, and take responsibility for your own trading decisions.
Central to the development of many financially based technologies has been the rise of algorithmic trading. Algorithms use program rules to analyse key investment criteria such as volatility, timing and trading volume, giving investors the edge to execute quicker and with less bias than human operators.
Going hand-in-hand with algorithm-driven financial planning are robo-advisers, a class of financial adviser that provides investment advice online with little or no human intervention. Both of these technologies, while easy and convenient, really only work for as long as they work. If an algorithm is really that good it will soon become so big that it will affect the markets. At a certain point it will attract too many investors and its original reason for success will become null and void. Technological advancements can continue to become more innovative, but at the end of the day the human elements is what is critical when it comes to making any investment choice.
As technology makes investing that much more accessible to the average investor, tools have been developed to allow the smallest of investments to be made. These passive or low-touch investments can bring in a tidy sum if traders don’t overleverage.
• Kibel is founder and director of CM Trading.