The Impact of Technology on Investing
Technology’s impact on our lives is far-reaching — from how we complete household chores to the way we learn and communicate, access to technology has altered the way we live. Perhaps one of the areas that has changed the most is how we spend and manage money, including the logistics of investing. Here are four ways technology has changed, and continues to change, investing — for better or worse, richer or poorer.
1. Removed Barriers to Beginning Investors
Thanks to the rise of investing apps and online tools, it’s easier than ever to dip your toe in the investing waters. Participating in the stock market requires less time and money than ever before — you can start investing as little or as much as you want and watch the performance of your investments from anywhere.
These technological changes have also reduced trading transaction costs and made it possible to invest in small increments. For example, the Acorns app rounds your purchases to the next dollar and invests the difference. Robinhood enables you to make trades at no cost. While no substitute for the knowledge of experienced wealth advisors, these technological resources make it easy for anyone to begin investing with lower amounts of capital and little experience.
2. Gave Greater Access to Information
With news and information at our fingertips, anyone can follow investment companies or market analysts on social media sites, receive breaking news and track market performance minute-by-minute. Investors also have access to a wealth of information about companies, making pre-investment research faster and easier than ever.
Technology has also made analyzing investment information faster and easier. Dashboards on apps and investment sites can track performance metrics that inform decision-making. Artificial intelligence is reaching a point where it can make investment suggestions based on historical choices, much like the way Netflix makes personalized suggestions.
Technology also enables investors to communicate with their advisor at any time to take immediate advantage of opportunities or share concerns regarding market performance.
3. Increased Market Volatility
These days, technology also impacts how quickly markets move. Everything happens faster than in the past — people (and computers) can buy and sell at any time and from (essentially) anywhere, which has made high-frequency trading and day trading possible.
Markets react quickly to news and social media posts. New innovations like cryptocurrencies take the world by storm. An increased number of novice investors follow daily and weekly trends, oftentimes without a long-term investment strategy. These factors have increased market volatility and make having clear goals, timelines and quality advice from a trusted professional more important than ever before.
4. Changed What We Invest In
Because technology impacts everything, it has not only changed how we invest but also what we invest in. Technology is the largest single segment of the market and is often seen as the hub of innovation. Advances in technology can reach across sectors, which makes the future potential of technology companies attractive to many investors. The rapid cycles of innovation and the unknown future of regulations surrounding groundbreaking technologies contribute to the volatility of the market but also present possibilities for a savvy investor.
Technology has opened the door to new forms of investing and a new audience of investors. However, it is ultimately a tool best used by an experienced advisor who can understand your unique situation, cater to your goals and provide reassurance in times of change. Farm Bureau Wealth Management Advisors are there for you, helping protect your future. Connect with an advisor to discuss your investment questions or customize your investment strategy.