Technology is fast pervading all facets of our lives, be it the way we commute, socialise, spend, travel and in some way also how we invest. However, in investing technology has been limited to robo advisors advising investors on which funds to invest, algos that help traders trade faster than others, apps that are available to each investor and make information transmission much easier and widespread and various other ways where investors get access to information and data faster, quicker and on the go and some more.
However, does technology help get better returns from the stock markets? The answer to that possibly is both a yes and a no. In my opinion, for the non-institutional and long-term investors, technology helps in the following ways:
1) Faster Access to Data: Earlier corporate announcements and results were announced either on television selectively and the print media on the day following the announcement. However, now with tech, there are a host of apps that provide instant data as soon as any result or any corporate announcement is released without any lag and information is disseminated to large and small investors without any bias.
2) Access to more Comprehensive Data: Nowadays there are several websites and apps that help investors analyse companies, their growth patterns, their cash flows and multiple other facts with a few clicks. Earlier for a retail or even an individual investor to access such information, they would have had to download or get access to the annual reports, stock exchange websites and then calculate such numbers on spreadsheets. Today with such data points readily accessibly it helps them do basic check on companies they invest into.
3) Trading Apps/ Discount Brokers: Earlier in the days where investors were resigned to speaking to humans for executing their trades, there were priorities given to large investors and traders both in terms of access and better brokerage rates. Now with discount brokers and even traditional brokers having cutting edge apps, this bias has been eradicated/ reduced.
There are other benefits of technology as well that I might have missed. However, the one thing tech cannot still do is identify the next best sector or next best stock. Investing involves understanding human psychology and human behaviour and we should consider ourselves lucky that tech hasn’t pervaded that.
Investors should use technology to get access to better comprehensive data and then they should stick to their investment philosophies, long-term goals and good companies which in itself shall keep them in good stead to make good returns.
Technology surely acts as lubricant to investors for helping them get better returns. However, fortunately, the old school tenets of investing still remain the same.
(By Vivek Banka, Founder, Altiore Capital)