Is social media providing a

28th February 2012

However, the blog Abnormal Returns argues that, in fact, technological advancements that made Web 2.0 like Facebook, Twitter and LinkedIn, possible have led to unprecedented opportunities for investor – allowing them to track the raw data in real time.

It argues that ignoring the negative news flow surrounding rock-bottom interest rates, the failure of MF Global and Eurozone dramas is wise given the potential for profit for savvy investors.

In addition, the book, Abnormal Returns: Winning Strategies from the Frontlines of the Investment Blogosphere, says that investing has never been "cheaper or easier." 

Sportsbiz comments on the post: "It no longer matters whether you're a trader or investor in equities, bonds or options! Or futures or currencies, for that matter – there has never been greater and cheaper access to information.

"Once you have digested the information, you can act on it more quickly, cheaply and easily than ever."

Never before have investors had such an array of analysis, opinion, data and social tools to hand to make swift decisions.

However, Psyfi blog reckons there's a danger in suggesting there has never been a better time to invest without a degree of caution.

It says in this post that a balanced approach is the only wise option: "…I think there's danger for anyone executing anything other than the suggested default option of a low cost, globally diversified, occasionally rebalanced portfolio."

The danger is human behavioural biases – our tendency to get swept up in the 'hype-cycle'. It's our tendency to behave irrationally when it comes to money and potential profit.

Using social media

Blogging and microblogging sites such as StockTwits & Twitter have opened up the world of idea generation to the masses. 

Abnormal Returns says: "Anyone with a computer these days can put his or her ideas out there for the world to see. 

"The blogosphere and Twittersphere is a meritocracy, albeit imperfect, where the smartest and most generous contributors rise to the top. The social model is pushing into things like earnings estimates with Estimize and institutional-grade services like SumZero

"Many bloggers these days make fun of the raft of ‘free' webinars that go on these days. But if you think about it the software and Internet speeds were not there to make mass online seminars possible not all that long ago."

Making investing easier, cheaper and more diverse

Investors willing to take matters into their own hands simply have to log on and set up their own dealing account. There are a range of asset classes to pick from these days, from cheap ETFs to individual stocks. There are a range of commission-free trading ETFs that can be tracked easily.

In the New York Times this past weekend there was an article talking about the many changes we are seeing through the analysis of "big data."

It says: "Welcome to the Age of Big Data. The new megarich of Silicon Valley, first at Google and now Facebook, are masters at harnessing the data of the Web – online searches, posts and messages – with Internet advertising. At the World Economic Forum last month in Davos, Switzerland, Big Data was a marquee topic. A report by the forum, "Big Data, Big Impact," declared data a new class of economic asset, like currency or gold."

Using social media and its ability to tap into data in the investment world opens up a new stream of information – which should aid portfolio management for the individual investor.

Do you use social media as an investment tool? 


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