The way we create wealth has undergone phenomenal changes – from the options available to park our savings, to the channels we use to pay for our investments, from the regulations that govern these investment vehicles to the various entities that are a part of the investment fraternity. These changes have brought investors a lot of convenience and transparency while also offering a multitude of investment opportunities for every kind of investor. However, investors of today also face a unique set of challenges. Here we share some of the major concerns and our view on what makes Modern Day investors a very special audience.
TMI (Too Much Information)
Information is Great… the accompanying Noise isn’t!
Today there is a constant stream of news, price fluctuations, social media posts, media stories, reviews, and real-time updates. This overflow of information makes investing a far more pressurized experience than ever before.
Staying updated with news feeds from various sources while being able to detect and filter out the accompanying noise such as false information, rumours, and even attempts at fraud is a huge challenge for today’s investors. This is in stark contrast to previous times when you just had the financial pages in the daily newspaper and quarterly company results to consult for your source of information.
While easy access to information is an overall win for the investor, the problem with being surrounded by so much of it all the time is that it makes it very difficult to pick out the important parts from the rest of the noise and you could end up missing important information or actually making an investment decision based on inaccurate data.
Markets react to investor sentiment, which in turn is influenced by information that is circulated. Due to the overflow of information in current times, market swings are more frequent and erratic. However, the time taken for consequent corrective action is also relatively shorter than before. Also, since financial markets are now addicted to the constant information flow, any interruption in the same can worsen the situation.
Too Many Choices
As compared to before, investors today have a lot more choices while looking to make an investment. While it’s common to assume that having more choices is better, in reality, investors may get overwhelmed when presented with various options to invest.
Due to this, investors may either – 1) give up and do nothing, 2) choose whichever option grabs their immediate attention, or 3) may divide their investment evenly across all options instead of choosing an optimal diversification strategy
Growth of Technology
Technology has transformed the world of investing. The rapid rise of online trading has encouraged new investors to explore stock markets. Now, anyone with a computer/laptop or smartphone and an internet connection can register with an online broker and start trading. Artificial intelligence and machine learning have also been introduced to the investment world thanks to advances in technologies. However, investors today also face the risk of over-dependence on such new-age technologies.
Rise of Advertising, Social Media & Influencers
Rise of advertising has helped to spread awareness about various investment products among new investors. Due to this, the modern investor is aware of the available investments beyond stocks, bonds, and term deposits; such as mutual funds, ETFs, and commodities as well. Thanks to social media, everyone today has a platform to share their opinions, learnings, advice – and a lot of it is actually helpful, especially when entering a new space like investing.
However, advertising, social media, and influencers can sometimes create an exaggerated hype for a product and push an investor towards an investment that isn’t necessarily the best fit. Advertising is usually a company-sponsored effort, where it can be designed to highlight certain strengths and downplay certain disadvantages of the product. Influencer opinions too sometimes tend to be biased or sponsored.
Modern-day changes such as the availability of information help us feel more confident in our decisions. However, the key is to find the right balance when taking in information, choosing the right investment option, or getting influenced by a new advertisement. Hence, take the time to evaluate the information in front of you before making any investment decisions.
This blog is exclusively for educational purposes and does not provide any advice/tips on Investment or recommend buying and selling any stock.