At the risk of sounding like Bob Dylan, the times are a changing, and we must try to keep up. The age of passive investment, investment managers and large scale investment funds making decisions for the people is slowly coming to an end. With the international
reach of private brokers, such as
Hargreaves Lansdown, allowing people to have incredible control over the type of investments they are trying to make. This kind of investment freedom has to lead to some interesting results in the modern investment world, with the Foreign exchange markets,
Cryptocurrency markets and now, company stock markets, becoming saturated with these new retail traders. The trends are causing some interesting changes to the world of investment and the world of trade.
Trading vs Investing
In the past, when you got close to the stock markets, your intention was to create a portfolio. You intended to build up a large number of stocks and shares you could trust to grow at high rates for a long time and, someday in the future, make you richer than
your wildest dreams would allow. But, with the advent of the internet, and with the increasing number of licensed brokers around the world, more and more investors are
starting to invest independently. These people are ones who know what they are doing and have had experience playing with the stock markets. And yet, as they find themselves flung into the markets, they also figure out that there is something else they
could be doing: trading. Many have been aware of this ability and have stayed away, and some have burned themselves and turned back to investing, as they are rather risk-averse, but a large number has stayed with trading and the number of traders has been
increasing over the past few years.
The number keeps increasing because the markets have suddenly become open to people, who in the past would not have been able to enter the market because of the high capital bar. Now, retail brokers are making the entire process easy. As a result, the landscape
of the market is changing. Now, there are thousands of traders on the markets who have never invested in their life. And the result is that even the investors are feeling like they are missing out. All this, simply because there are traders who make insane
amounts of money because of skill or luck.
And with the introduction of retail markets, the world is seeing fewer of the traditional investors and traders. Now, the average Joe can be involved as well, and the decisions he is making may turn out just as important as those of large investment companies.
If, of course, enough Joes make that decision. And with the rise of the retail trader, fewer and fewer professional traders are seen acting the way they used to.
Not just retail
It is not just retail traders who are pushing the traditional investors and traders out of the market.
Innovative software is being produced to analyze and trade the marketsin a way, that will be most efficient and most beneficial to people who own these programs. Soon, the traders won’t even have to be making decisions, as long as they have software. Soon,
people will simply buy a program and it will do the trading for them.
The trading world is thus changing and we are today, in the golden age of the retail trader. Soon, he too will be outcompeted by the computer. So what does this bode for the markets of the future? Probably a more homogenous investment pattern across the board.
More people will invest in the same things and more people will be able to receive benefits from them. The larger companies will receive more capital (if the software works so) and the smaller companies will have less attention paid to them (unless the software
decides otherwise). In the end, a feedback loop will be created, bloating some companies and starving others.
Yet all of this “Future investment software” does not lead us to discuss one of the more important developments of the modern age: changing values. While over the years, the main interest of investors and traders has been to trade with mainstream stocks such
as large hardware companies, clothing brands, and energy manufacturers, the priorities are changing. Slowly, the mainstream is becoming something else, and the charge is being led by some of the greatest
minds of this generation.
Investing in a better world
In the past, the better world was thought to be energy and resource abundant. Today, one more quality has been added to that - environmentally friendly. And the richest investors of today are looking for ways to make this into an investment strategy. One of
such new developments,
Impact investing, is a new kind of platform, seeking to set up channels between retail ivnestors and companies and causes they might be interested in. A channel that will interested retail traders to trade with shares of companies ocncnentrating on being
cause driven: whether it is an environmental cause or something else, thos who seek, shall have a chance to invest.
And brokers and platforms such as this are becoming more and more popular. These brokers are allowing users to build their portfolio from companies that they trust, respect and appreacite for what they do. How will this compound with the software traders of
the future? We are not sure, but we are pretty confident that optimizing for cause driven company investment and trading will result in a positive change for the world and the markets as a whole.