How technology is reshaping investment landscape

Guiding Intelligence

Technology has transformed the way people used to invest in the stock market. Just three decades ago, the world operated in a way that was distinctly different from the tech-driven society we know today. Just a simple process of buying and selling shares which we do today in a matter of minutes, used to require days! Back then, investors had to rely on brokers who physically visited the stock exchanges, and shares were sold by someone standing on the stock exchange floor shouting orders.

Fast forward to today, where we have entered a new era of investing where individuals are more financially focused and are aware of the importance of investing.

Yes, inflation and technology are why we have seen a shift in investors’ preferences. Firstly, people today know that inflation relentlessly erodes our money and to protect our wealth, we need to generate returns that beat inflation. Secondly, nobody has the time and patience to do things manually in this fast-paced world. That’s why technology deserves all the credit for making investing more accessible and convenient.

Changing scenario

In today’s technologically advanced world, we can access a wealth of resources that make investing enjoyable and convenient. From online trading platforms that allow us to buy and sell investments at our own pace to mobile applications that let us monitor our portfolios on the go. Apart from this, we get real-time market data, research tools, and algorithms, which further enhance our investment journey.

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This progress has empowered full-time retail investors to take control of their financial futures and earn additional income through the stock market. Others have strategically diversified their portfolios to achieve specific life goals, such as saving for retirement, purchasing a new home, or funding their children’s education.

Some individuals have even embraced a full-time role as an investor or trader. They rely on their portfolios and strategies to generate income regardless of location or vacation plans. Thanks to the tools and technology, these possibilities have become a reality.

The technological revolution has also attracted a younger generation of market investors.

New avenues to stock markets

Rapid technological advancements has pushed the boundaries of investing, opening up new possibilities for individuals. While traditional investment options like fixed deposits or post office savings schemes still exist, the allure of higher returns and ambitious dreams have drawn many towards the stock market.

Investing is full of challenges, but every challenge brings a new opportunity. Many a time obstacles faced by investors are countered with innovative investment options. For example, the risk of losses in stock markets have been addressed by the advent of mutual funds, wherein funds are actively managed by expert teams at asset management companies (AMCs).

Almost a decade back, mutual funds were booming. They made money for their investors and took a bite from their profits as an expense ratio. Eventually, investors realised that this expense ratio snowballed into a huge amount over the long term.

Simultaneously, the craze of passive investing boomed in the West. Hence, people started seeking passive investment options because they had lower charges than an active fund, and it gained traction.

In a passive fund, the capital would be invested in an investment option that tracks an index.

As Exchange-Traded Funds (ETFs) are passively managed, they became popular. Today, we know them as Nifty BeEs or Gold BeES, which track their respective benchmarks and provide identical returns as their benchmark. Eventually, AMCs also came up with passive funds, which were more cost-effective than active mutual funds.

However, mutual funds still presented certain challenges, with investors having no control over the portfolio of stocks being invested. Neither do they actually hold the stocks invested in. Their ability to buy or sell their portfolio hinged on the net asset value (NAV) that does not get updated in real time but at the end of day.

This brought to the fore Professional Management Services (PMS), where skilled portfolio managers and their research teams use expert tools specifically for an investor’s portfolio. But these services come at a premium and require a minimum portfolio of Rs 50 lakhs.

But, technology has evolved to give the retail investors access to such services at low cost, as SEBI-registered research analysts and Investment advisors (RIAs) curate high-quality stock portfolios that are managed and rebalanced periodically. So, you get the delivery of shares in your portfolio, the dividend is given or reinvested as you prefer, and you get full control of the shares in your demat account – working like a mini PMS.

Now we’re seeing the rise of RoboAdvisory. This virtual financial advisor, driven by the power of artificial intelligence (AI), utilises algorithms to offer automated financial advisory services. It represents an exciting frontier in investing, where technology will be used to make financial decisions.

In conclusion, with each new chapter, technology continues to shape the investment landscape, empowering individuals with more choices, convenience, and possibilities than ever before.

(The writer is head of research at Teji Mandi)