The investment sector has experienced dramatic changes in recent years, primarily because of the application of new technology. Investments can now be done faster and with little amounts of money. Key aspects of new technology in the investment sector include the use of robo advisors, digital communication tools, and blockchain technology.
Robo advisors provide financial and investment advice using automated software and algorithms. The systems will allocate and optimize your assets as an investor, therefore reducing the need for a human financial expert. That being said, robo advisors such as Moneyfarm still require some human intervention since the machines are not very flexible. They solely rely on algorithms and mathematical approaches and, therefore, cannot accommodate all the changes in your financial situation.
One advantage of robo advisors is the fact that they are very cheap. They also can’t make any mistake when allocating your resources since they are automated. Making financial decisions on your own is likely to result in multiple human errors. Your decisions may be influenced by emotions, and this may prevent you from making the best investment moves.
Blockchain technology was initially developed for bitcoin transactions. It is now used as a digital ledger for cryptocurrencies and other valuable assets. All transactions made using these currencies are added to the ledger, meaning anyone at any place can view all the transactions that have ever been made using the cryptocurrency. This helps increase transparency in the investment firms.
It is practically impossible to corrupt the records since changing any part of the chain will require a very high amount of computer power. The ledger is also decentralized, meaning there are no central points of vulnerability for hackers to target. Instead of using the usual password and username protection system, blockchain technology uses public and private keys. The public key is the address that is associated with your account while the private key gives you access to your digital assets.
Another advantage of blockchain technology is the fact that sending or receiving money on the blockchain costs almost nothing. You only need to pay a small miner’s fee.
Quick access to information is vital in the investment sector. Technology has played a major role in improving the speed of communication; investors are now able to get crucial information within seconds. In this way, financial managers are able to make timely decisions.
Financial managers are also able to communicate with their clients and team members instantly on multiple platforms. This allows members of a team to collaborate seamlessly and also stay on the same page with regard to the investments. Improvements in cyber security have also made it easier for investment firms to store the information without risking a leak to competitors. Unauthorized access to private information would make a firm lose its competitive advantage.
Technology has improved many aspects of our daily lives. The investment sector has particularly experienced significant transformations over the years. These changes have made transactions seamless, fast and highly secure. Access to financial management services is also no longer limited to the wealthy. You can invest little money and pay next to nothing as management and transaction fees.