Technology undergoes some interesting and powerful changes, and it has shaped our lives in nearly every significant area. Our communications, our work, our research, and our entertainment have all been improved (or at least facilitated) through advancements in Internet availability, programs, and apps, but our money—through the availability and processes of investing—is similarly being affected.
Following the Technology Curve
When we first entered the digital age, technology only changed the investing world in simple ways; it took what we were doing anyway and gave us better tools with which to do it. For example, rather than using a broker or mediums like phones or mail to trade stocks, we could simply do it through an online transaction. Once the Internet became sophisticated enough, it began to support this process in a more immediate, convenient transaction.
Now, rather than simply making existing practices easier, our technology is making new practices available, and encouraging investors to maximize potential returns in new ways. The future of investing is diverse and exciting, and it’s the growth of technology that’s responsible.
Areas of Change
There are five main trends, or areas of change, shaping the future of our investing world. This is what technology is doing to shape our future.
- Enabling people to pool their resources. The first new trend is the ability for people to quickly and easily share their resources. The obvious example here is crowdfunding, where individuals can use platforms like Kickstarter to invest small amounts of money to fund big projects. Equity crowdfunding is under development, though currently only available to specific accredited investors. Other platforms, such as crowdsourced personal and private loan sites, are also developing to follow this trend. This enables a greater number of people to participate in investing, and simultaneously attracts more potential projects for investment.
- Using complicated algorithms to make better decisions. A number of investment platforms are developing based on impressive, complex algorithms that can theoretically make better decisions than humans. Wealthfront and Betterment are two perfect examples of this; both rely on the power of algorithmic trading to make better stock and mutual fund picks for their clientele. These “robo-advisors” operate independently from humans, and control investments on their own, making more objective decisions. Though there have been some scares about algorithmic trading—such as “flash crashes” that occur when too many algorithms trigger a selloff—so far, modern algorithms have been relatively successful.
- Hedging bets through multiple investment options. The sheer number of new investment modes, apps, and possibilities has made hedging your bets easier than ever. Thanks to the many dozens of alternative investments that have arisen over the past several years, you can diversify your investment portfolio with relative ease, drawing on older, traditional strategies like investing in stocks and bonds, and newer strategies, like equity crowdfunding or algorithmic trading, with balance.
- Connecting more people to funding sources. Let’s not forget the other side of investing—many new investing options and connections are available to average people in need of funding. You may have a startup idea but not enough capital to fund it, you may be in need of a personal loan, or you may even be a plaintiff with a promising payoff in need of legal funding through a company like Thrivest. In any of these cases, modern technology will allow you to gain access to resources easier, whether that’s finding an organization to support you or relying on the collaborative power of group contributions. This means more people will seek technology to fund themselves, which in turn means more investment opportunities for the average investors.
- Giving investors more information. Finally, there’s the obvious ability for new technology to give investors more information in the first place. On one level, there are thousands of news sites and publications dedicated to providing users with the latest and greatest in tech, giving investors intimate knowledge of new tech platforms before they choose to invest. On another level, all these new apps and programs have access to a wealth of user data, which they can use to achieve greater transparency and report more accurately on the potential gains and risks of different investment types. This enables investors to make better decisions.
It’s hard to say exactly how or when new tech will develop, especially in the investing world, where new legal regulations must be created to accommodate new modes of investment, and where user adoption is generally slow as new methods gain trust and a history of reliable returns.
Still, by noting the key areas of development underway, we can sketch a vague course of the future of our investments, with more collaboration, more diversity, more information, and more availability.
