How is Technology Transforming the Investment Landscape?

How is Technology Transforming the Investment Landscape?

Discover how technology is reshaping the financial landscape and unlocking new opportunities.

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. 

It was a time when the investment landscape was diverse, and stock markets had yet to take centre stage. 

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, pmpeople today know that inflation relentlessly erodes our money every minute, every second, 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.

Changes in Investing Landscape

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.

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.

Furthermore, this technological revolution has also attracted a younger generation of market investors. They are increasingly recognising the potential opportunities in the stock market and grabbing them with confidence. 

Indeed because of technology, the younger generation is actively learning to invest and create wealth. 

New Avenues of Investing in the Stock Market

Rapid technological advancements have pushed the boundaries of investing even further, 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. And many have experienced the potential of creating wealth from the stock market. Hence, this investment option has taken centre stage.  

Investing is full of challenges, but every challenge brings a new opportunity. When investors encounter obstacles, technology and brilliant minds come together to create innovative investment options that directly address these challenges and obstacles. Let’s look at one such evolution.

When investors enter the market, they often face difficulties and see losses, and hence don’t mind paying extra fees to someone who would invest their money and share profits. This is when mutual funds come into the picture, allowing retail investors to contribute funds with others who share similar investment approaches, which are then actively managed by expert teams at Asset Management Companies. 

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. 

Now the issue was such that investors who used to invest in mutual funds had no control over the portfolio of stocks because the investor would only receive the proceeds in terms of profits. They would not receive the actual holding of the stock in their Demat account. 

Moreover, mutual funds have a NAV structure which is not updated in real-time. Whatever happens in the markets, the NAV will get updated at the end of the day. So, if an investor wants to buy or sell his portfolio, it would be sold at the end NAV of the day. 

Yes, there is a way through which investors could eliminate all of these problems, known as Portfolio Management Services (PMS), where skilled portfolio managers and their research teams use expert tools specifically for an investor’s portfolio. As premium as it sounds, the premium is its requirements. It requires a minimum portfolio of Rs 50 lakhs to opt for PMS. 

But, technology has evolved to a point where even retail investors can access 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. So, it is like a mini PMS. 

As the world of investing continues to evolve, one remarkable advancement capturing attention is the rise of RoboAdvisory. This virtual financial advisor, driven by the power of Artificial Intelligence (AI), utilises algorithms to offer automated financial advisory services. 

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 article is for information purposes only. This is not an investment advice. 


Note: This article was originally written by Teji Mandi for Deccan Herald.

Read the article here.

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