It’s difficult to find an area of society completely unaffected by technological advancements. Investment markets, for example, have gone through substantial changes due to technology.
Technology Increases Access to the Stock Market
Technology has significantly decreased the barrier to entry for people who want to get involved in stock trading. So-called micro-investing apps encourage people to sign up by offering perks like fee-free trades and the opportunity to get started with a minimum deposit of $5. Most of them are free to use or only charge small fees for account management purposes.
Also, the ability to get involved with stock trading on a smartphone means it’s virtually effortless to do without investing in additional equipment. Many people in their 20s who use these apps mention stock market obstacles once prohibited their involvement, but these apps make it possible for them to get involved without hassles.
Technology Increases the Pace of Stock Trading
Technology also minimizes the delays stock traders face. They use computer systems that display and record transaction data within seconds. Technological advances have also brought about the phenomenon of high-frequency trading.
People who take part in it buy and sell stocks on the same day and often complete an entire buy-and-sell cycle within a matter of minutes. This efficiency would not be possible without technology.
Technology-Based on Artificial Intelligence Makes Humans Less Necessary in Investment Activity
Artificial intelligence (AI) has sparked new achievements in industries ranging from health care to marketing. AI can often reach conclusions with more speed and accuracy than humans. That’s why some companies focus on AI technology that can positively influence the investment market. A company called Aidyia has a hedge fund that makes all trades with AI and does so without human intervention.
The AI algorithms come up with several courses of action and use a vote-based system to figure out the best one to take. But, the AI doesn’t decide anything before analyzing massive amounts of data. One of the primary advantages of using AI for investments or anything else is that it can handle substantial amounts of data much faster than humans.
A company called I Know First is another brand offering stock predictions through AI algorithms. It claims up to 97% accuracy when analyzing the Nasdaq and the S&P 500.
AI is not perfect, but it could help people avoid costly errors. It may also assist them in predicting adverse activity, such as stock market crashes.
Technology Stocks Are Dominating the Market
Even if some of today’s most experienced investors have never invested in tech stocks, trends strongly suggest it’s time for them to start. At the very least, they need to determine which companies have technologies that could eventually disrupt the investment world. But analysts say U.S. tech stocks are going through a surge in 2019.
This suggests it pays off for people with even a casual interest in the investment market or how technology affects it to study the tech companies that have the most success regarding their stocks. Then, they could assess what characteristics they share and evaluate how those might influence market activity. AI could also come into play if people want to start dealing with a different category of stocks.
For example, the micro-cap market has companies with capitalization sizes ranging from $30 million to $1.5 billion. It’s a common and advisable strategy for people to depend on asset management companies to help them figure out which companies are worth their attention. AI could also become part of the decision-making process, such as in conjunction with getting professional advice.
Technology Associated With Social Media Affects Investment Market Activity
Social media is arguably one of the most disruptive technologies in recent years. It allows people to share pictures of their pets, meals and vacation destinations in a few clicks. More notably regarding investments, though, is how people use social media platforms as megaphones through which to broadcast their opinions.
One researcher found that although household investors do not blindly trust social media regarding their investment decisions, the news headlines they see on social media factor into what they decide. In addition to scientific studies about social media’s impact on the stock market, several recent examples exist of how one tweet can make waves.
For example, a hoax where a Twitter user claimed a business was under investigation by the Department of Justice caused the company’s stocks to plunge by 25% before the perpetrators of the rumor confirmed the lie.
Conversely, if a stock market or economy-related post gets an extraordinarily high number of likes and shares, some people could assume the post’s content is accurate without researching to check.
Moreover, when investors choose to participate in social media for investment purposes, they tap into the power of the crowd.
By tuning into what other traders say on social media and sharing relevant experiences, novice and professional investors alike can continually learn, grow and avoid potential mistakes.
Tech Will Continue to Have a Tremendous Impact
Both people who are already frequent investors and those who are interested in giving investing a try should keep the above developments and others in mind.
Technology has forever changed the investment market, and evidence indicates it will continue to do so for the foreseeable future.
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Last Updated on February 3, 2021.