In the past ten years social media has become so all pervading that it seems to have seeped into every area of work and personal life.
Dating, socialising, parenting and politics have all undergone the Facebook and Twitter revolutions and now so have finance and investing.
A new app has been developed, christened the ‘Facebook of investing’, which allows investors to share their experience, expertise and knowledge online in much the same way that the social networking site works do.
Risk and Reward
The new app, called Invstr, has been created for investors who play the markets, share views and have access to financial trends and information.
The app allows investors to predict the opening and closing prices of shares and to follow them and other investments for several weeks to see how accurate their predictions are.
The function allows investors, who are testing their investment skills, to share information with one another and to share predictions. It gives first time investors a chance to experience the movements of the stock exchange without risking real money.
Investing Money for the First Time
All savvy investors are looking to minimise risk and maximise reward and one of the first and most essential lessons that any cautious investor can learn is prudence and caution.
Being able to see how shares perform over a period of time before committing any real finance to them is a new way of enabling investors to make educated choices. You should not use past performance as a reliable indicator of future performance. It should not be the main or sole reason for making an investment decision.
The Wisdom of the Crowd
Human beings are social creatures; we have developed from the level of primitive tribes to complex societies by working and learning together.
Investing might seem like it is a world away from hunting mastodons in groups, but in reality there are clear similarities.
In our fast paced, digitally connected 21st Century world, we still approach problem solving with stone age brains.
The thought processes we have evolved over millennia, based on our need to cooperate, the thrill of risk and the fear of future scarcity.
We have evolved to learn a great deal from one another, to cooperate and to collaborate and, of course, to trade.
New technologies that enable human beings to interact in the way they have evolved might be the key to enhancing rewards and minimising risks.
Levelling the field
The first time investor is invariably a home investor, risking their own funds and relying on their own luck.
The knowledge, resources and capital in the marketplace of course are concentrated in the hands of professionals and investment firms, with whom the novice must indirectly compete.
Being able to share predictions with other investors might also enable novice investors to level the playing field with major investors and give their investments (when they involve real money), a fighting chance.
Research is the key
It goes without saying (but we have a legal duty to say it anyway), that all investments involve a degree of risk, even when handy new online tools are created to manage it.
Investors who use Invstr to help them research the market should be mindful that no website in the world can offer a risk free investment opportunity and the value of an investment can go down as well as up.
However, any tool that can help to increase the amount of market knowledge an investor has access to will help to inform decisions to purchase, or to pass on investment opportunities.
Investment is often about intuition, judgement, best guesses and hunches.
Many of the world’s most seasoned investors, in their memoirs, have written that their successes have rested on being able to limit the amount of guessing they do.
Invstr might be a useful way of using the wisdom of crowds in order to prevent the panic of the herd from crowding out astute investment decisions.
THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.