Long gone are the days when investing and personal finances used to involve piles of paperwork, from brokers' statements to check stubs or books on strategy. Face-to-face meetings and phone calls with financial advisors are also not in trend anymore.
Today, we have the Internet and technology, which pretty much have the answer to all the questions we have regarding investment options or personal finances. The 21st-century investor can go entirely paperless, and may not even have to talk to a human being for a long time. They have all the tools and information they need to manage investments on their own.
Technology has become a key component of asset management, which is integral to most aspects of the investment process, including trading and risk management. In fact, data shows that nearly 63% of smartphone users have at least one financial app on their phone, including finance-related apps from both traditional banks and new fintech players.
Given today's information-rich digital environment, and the growing importance of technology, traditional wealth management services might be falling behind back-end technology. Yet, if they learn to adapt quickly to today's data-driven era, by using artificial intelligence, big data, and blockchain technologies, they might stand a chance in attracting and retaining their customers.
So, how can tech-savvy investors use technology to succeed on their own?
Personal finance apps
No matter the type of investment option you choose, it all starts with having a healthy and efficient money management strategy. To be more precise, the better your personal finances are doing, the more capital you can invest.
Today, modern investors can choose between thousands of budgeting apps such as Mint, YNAB, Everydollar, or PocketGuard. These apps include features and tools that allow investors to customize and track their monthly budgets. From adding their monthly income to every spending they have, arranged by categories, any budgeting app can help investors have a clear idea of where they stand about their earning and spending habits. These apps can sync with their account and track their spending by automatically updating and categorizing transactions. Plus, most budgeting apps can do several other things, from letting investors know when they are overspending or running the account balance low to automating savings.
But how exactly does this help investors manage their money smarter? Simply watching your available account balance helps you avoid overspending by keeping you aware of the current financial state. And, data from Think with Google shows that 82% of smartphone users who perform financial activities on their phones claim that they have checked their account status or purchase history at least one time in the last 30 days.
Automated trading
Wouldn't it be amazing to have a robot managing trades on your behalf while you earn guaranteed profits? Well, today, it is no longer only a dream of every investor, it is a reality.
Automated trading systems use computer algorithms and automated trading applications to execute investment decisions. Now, automated trading requires very little input from the traders. For example, forex traders and investors only have to "program" the system by turning exact entry, exit, and money management rules into the automated trading system. Once the investor programs the system, their computer will automatically carry out trades on their behalf based on those rules.
Automated trading provides a number of benefits, including more efficient trading, often lower transaction costs, and greater access to market liquidity. Plus, it is a great investing technology for those busy investors who don't have the time to watch every move of the market.
Similarly, many traders and investors use the PAMM investment model in Forex. This software application allows traders to attach their money to a specific trader who can trade on behalf of others through their account. This, too, is an innovative solution for both busy investors and beginner traders who don't trust their skills enough to trade on their own.
Robo-advisors
We could say that Robo-advisors are financial consulters' worst enemies. Robo-advisors are those software products that can help investors manage their investments without the need to consult a financial advisor or self-manage their portfolio. For example, Wealthfront, the first robo-advisor to provide free financial planning personalized for every client, now manages more than $2 billion in client assets.
How do Robo-advisors work? By opening a robo-managed account, you then supply basic information about your investment goals. Next, using the data you provide, these Robo-advisors use an asset allocation approach to create a diversified portfolio of investments that can help you achieve your goals.
Once you start investing your funds, the robo-advisor software automatically rebalances your portfolio by making changes to the investments needed to sync your portfolio back to a target allocation.
Robo-advisors are an innovative technology that can benefit beginner investors the most. If you are a novice, you most likely don't have the financial knowledge to make informed investment decisions on your own. Also, even for busy professionals who lack time to manage their funds actively, Robo-advisors can help them.
Financial news apps
No matter the type of investment, only well-informed decisions can make investors succeed. But making informed financial decisions can be challenging when you are on the go and lack time to watch the market 24/7.
There are several factors that can influence all types of investment options, from political instability and economic factors to climate change or speculations. All these can have a strong influence on different markets, from changing exchange rates to lowering or increasing demand for one specific asset. Thus, it is crucial to stay up-to-date to be able to read the market and make the best decision about your investments.
How can you stay informed all the time? The answer: download financial news apps on your phone. These apps gather all important financial news, global market stories, as well as prices in real-time, and daily analysis of the market. Some of these apps also feature investment articles, video interviews, or panel discussions, which can all be excellent sources of information to improve your investing skills.
