Investing your hard earned money is time-consuming and hard work, the fintech revolution is here to your rescue. This technology revolution in financial tools is creating the tools to help the savvy but set it and forget it, investor, to automate his investments while enjoying a broader mix of investment tools and investment diversification. The fintech revolution is the new and sexy gadgets in the investment world. Just as Samsung and Apple phone took over from the old bulky Nokia phones, fintech will little by little take over the archaic investment methods such as mutuals funds, traditional banking and possibly even money as we know it.
The old investment models still have (some) relevance, but once the savvy investor is bitten by the fintech bug and understands the benefits, they will never look back. I admit I am getting ahead of myself, maybe the fintech is not a one shot cure all for every investment ailments, but it does offer genuine innovative tools which offer real value to the retail investor.
Financial technology is not one blob of evolving technology which is nipping away at the heels old bankers while they stare at their golden pocket watches. There are various “blobs” or pockets of fintech evolving in different departments of the investment world.
There are three main sectors of fintech :
- New technologies transforming old ideas for the retail investor.
- Blockchain technology. (such as Bitcoin)
- Back office technological services for the corporate clients.
In this article,I will cover tools which the retail investor can use.
The following are a general overview of the pros and cons of fintech and do not apply equally to all the fintech applications.
What are the main advantages of the fintech revolution for you, the retail investor?
- Lower fees
- Access to untapped markets, thus better diversification
- Reduction of trading errors
- Reduce the likelihood of emotional decisions
- Run 24 hours a day
- Do not get tired or distracted
- Robots/Algorithms can handle more information. For example processing, potential borrowers credit card information and bank transaction information are more efficiently done by bots.
What are the hidden perils of the fintech revolution?
- New and untested models.
- Sometimes regulation is unclear.
- The reactions of both the fintech platforms and their customers have not been tested in a severe market downturn.
- Algorithms lack creativity. (which is probably a good thing when it comes to investing)
- Algorithms lack critical thinking when evaluating data “reading between the lines does not come naturally to computer programs”
Robo advisors are platforms which in a nutshell first ask you a set of questions and then according to your preferences create a portfolio of ETFs and/or stocks. On a regular basis you can buy stocks in this personalised portfolio in order to dollar cost average as you build your wealth. The robo advisor periodically and automatically rebalances your portfolio as parts of it shrink and others increase periodically.
Some Examples include:
- EU Wide: Scalable Capital
- UK: Nutmeg, True Potential Investor, Wealth Horizon, Wealth Wizards, Wealthify
- US: Wealthfront, Personal capital
- Coming Soon: Swanest.com
#2 Idea investing (Motif)
On Motif investors can create investment motifs by grouping a number of individual stocks according to a specific theme. These themes range from robotics to companies to Marijuana related firms and everything else you can imagine. If you cannot find a particular theme you can always create one. The fees on motif are as low as $9.95 per purchase of motif.
#3 Social Trading
Social Trading enables you to copy trades of particular investors you choose to automatically follow. A crowd of investors can copy the trades of a particular investor they choose. This investor would act as the piped piper and drive the crowd of investors following him either into to the heavens or into to the abyss.
Some examples include:
#4 p2p Lending
p2p lending allows investors to buy many small shares from individual loans. This creates diversification and if one borrower fails then the profits from the other loans will compensate for it. A lot of p2p platforms also offer buy-back guarantees.
The p2p market now covers many different loan types.
#5 p2p Property Investing
p2p property investing is creating an army of armchair landlords. These platforms allow anyone with an internet connection, a bank account and a $10 to buy shares in an SPV (Special purpose vehicle). This SPV in turn would own a property which is rented out to tenants. The rent minus the expenses are paid as dividends to investors. Some firms pay it monthly other pay it yearly. A word of warning, not all promised returns have materialised in this space, do your research.
There are two three main companies offering this, all in the UK
See Also P2P vs Landlording vs Property funds
#6 p2p Equity Based Investing
IPOs (Initial public offerings) are not easy to get access to. Investing in startups has been tough due to restrictions on who can do so. Two platforms offer quick and easy access to fund pre-IPO ideas. Some companies on these platforms
#7 Your comments … is there any other group, you would like to be mentioned?