Has having technology readily available caused problems for you? Do your parents badger you for being on your phone all the time? Sometimes having technology can have a negative impact on our lives. The same can be said for investing.
You learned that having more technology can have positives for investing, but there are negatives as well. Click on the rows below to learn more details about how technology can have a negative effect on an investor's decisions.
The biggest change is in how fast news moves today. You now know how companies are performing, and you have their stock information available instantly. In the past, information was printed and delivered by way of newspapers and quarterly reports through the mail. Now, information is delivered through online news agencies, financial websites, blogs, and podcasts. The disadvantage is there can be too much information to sift through, and you must make sure the sources you use are reliable.
Social media platforms make it easy to circulate stock ideas and observations. Social media can influence your judgement and can lead to rapid and excessive investment trading. The disadvantage is that information shared through social media may be misleading or unreliable, so be cautious.
Investors' tendency to follow what other investors are doing instead of doing their own analysis is called herding. With access to so much technology, you can see what others are investing in; but following the crowd can lead to reactions such as selling stocks with lack of justification. Following what others are doing without reasoning goes against the best principles of investing. Always be careful how you react to others' behavior.
It is important to learn how to filter out information, utilize reliable sources, and evaluate the information in front of you before making investment decisions. Use your knowledge of how technology can affect investors to answer the question below.
Chloe is a young investor who relies on social media and blogs to help with her investing decisions. What advice would you give Chloe about using these methods for investing?
Relying just on social media and blogs can lead to making quick investments that could be based on the wrong information. It is best to research investments using multiple news sites and don't react too fast.
