Is Technology the Future of Finance

If identified correctly, there are numerous benefits that an investor can reap from investing in new technology. For one, it significantly boosts your portfolio returns, which is what every investors’ initial goal.

However, the success or failure of using new technology stocks depend on a variety of factors. Being able to accurately predict the direction a company’s stock is going to take is perhaps one of the most challenging processes for investors, both new and experts. For instance, a new company may start out with a solid and promising business plan; one that makes you believe that ‘here is where you make those big bucks.’ But then, there are other numerous factors at play that contribute to the success of the company in the long run. For one, the company needs the right employees, favorable economic and environmental climate, positive research outcomes, favorable competitive environment, the right merger partner, adequate financing – the list is long and varies from one company to another.

There are, however, numerous benefits of investing in new technology, especially when the technology seemingly has a good chance of being commercially viable and not another conceptual or speculative move. There was a time when traders at the NYSE yelled out orders to one another, creating a raucous din. Traders would gather in NYSE stock trading areas and shout matches, which sounded like brawls. But thanks to today’s high-tech, trading now goes on without any of the shouting. Atop that, new technology also offers investors more efficient ways to purchase stocks and research the topic.

 

Research

The best part about technology is that it enables you to connect with others. Today, there are numerous social media groups and blogs and other similar communities that share different ideas about the same financial goals and intentions as you. If, for example, you want to save money, then it only makes sense to join an online social group that uses coupons often and reaps the benefits of doing so. Similarly, technology helps you to improve and better understand your stocks and financial awareness.

The Securities and Exchange Commission states that there is an overabundance of information about different companies and their stocks online that investors can now access. Plus, the internet provides current, real-time stock prices, breaking news about stocks, company earnings reports, and the companies that issue those stocks. Technology also enables financial advisers to relay current stock developments to their clients. Companies are also better-placed to track their stock performances in real-time. The result is nearly instantaneous information to investors, advisors, and traders alike.

High-Frequency Trading

By now, you can probably tell that the statistical probability of consistently predicting the future when it comes to stocks is as gloomy as it gets. Also, it is crucial to note that most of the gloomy predictions are the ones more prone to fail. Ideally, this is because humans are engineered to and prepare for the worst possible outcomes, predictions of doom. People, tend to work on fixing problems even before their predicted arrival time, which, in some cases, offsets the problems entirely.

However, electronic trading encouraged high-frequency trading, where investors can now buy and sell their stocks within a day. In some instances, even executing full buy-and-sell cycles within minutes. Essentially, this is what gave rise to what we now know as ‘day trading’ for individuals. But the true factor of this technology impact comes from institutions and investors that initiate trades in hundreds of thousands and millions of shares that are now possible in a matter of moments. This trading type was unavailable when trading used to be much slower.

Execution of Trades

The evolution of computers and computer systems enable faster execution of stock trading today than ever before. Computer systems can now record buy and sell orders so fast that investors know the price and other relevant details of stocks within seconds. Atop that, as electronic trading eliminates handling of transactions by other humans, the chances of human error occurring have become infrequent. Perhaps the only process that hasn’t changed is the long-established standard of waiting three days to verify that money has changed hands and relevant shares recorded in the buyer’s account. Electronic trades help to accomplish all these processes in seconds.

Program Trading and Glitches

Most institutional investors, like hedge funds, pension funds, and mutual funds, use programs when buying and selling stocks. Essentially, this can result in abrupt sell-off or purchase of stocks. This is because most of these programs have specific dates and times to make trades. Sometimes, investors can be fooled when looking at the sudden volume of their stocks from the actions of these programs. There are also instances where some institutional investors experience glitches in their programs. This can also trigger sudden buy or sell decisions, which can put traders in panic, especially when there isn’t news that justifies those trades.

Low-Cost Investment Advice

Technology has significantly transformed the realm of investment management, as many companies look to bring high-quality and personalized investment advice. Before, this kind of information was only available to affluent investors. However, companies like Jemstep, Betterment, and Personal Capital have taken the approach to allow their users to monitor all their investments and other personal finances from their online platforms. Ultimately, all these companies and services are to help reduce the intimidation and complexity factor that’s often associated with traditional financial advisors. This is made possible by providing such services to investors at a lower price point.

Conclusion

From the above information, it is evident that technology has significantly made the lives of investors, both newbies and experienced, easier. But even so, you must always be mindful of your own preferences and work out how to use what you have at your disposal to maximize your profits and boost your portfolio. Much of effective financial and stock decision-making involves being comfortable with the method you choose in reaching such decisions and doing it in a low-cost and efficient way. Technology has certainly helped many investors to achieve these goals comfortably. You only need to be comfortable with a service or product before integrating it into your financial planning.

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