Are you sitting on the sidelines of financial markets because you feel that you lack the confidence and expertise to invest your money? Such sentiment is very common, especially among the younger generation.
In fact, 93 percent of those born between 1980 and 2000 say that both distrust of markets and lack of investing knowledge make them less confident, according to a Capital One ShareBuilder survey.
These feelings of inadequacy are not surprising given that many in this generation experienced the Great Recession during their formative years and continue to be bombarded with constant news coverage of market volatility in relation to the United Kingdom’s Brexit vote, the calamity that is the current U.S. election and other events beyond their control.
Many people are scared of financial markets for these reasons, and many of those who do enter the markets do so only after paying fees to asset managers and financial advisors, thinking this will prevent them from losing money on their investments.
As we have seen in recent years, through various scandals, financial institutions do not always have the customer’s best interest at heart. So managed accounts also come with their own worries, and the feeling that your money is not really under your control.
Now there is a new way and a sort of middle ground between going out on your own and paying for a managed account: the copy trading app, which harnesses the powers of social media, crowdsourcing and big data to allow people to take back control of their finances and enter the markets empowered with knowledge and confidence.
Online trading platforms that offer copy trading allow users to view and follow the investment moves of others, similar to how one follows others’ social and professional lives on apps like Facebook and LinkedIn.
Not only can you see others’ gains and losses, and connect with them to discuss their trading techniques, but you can also set your account to automatically copy the moves of selected investors.
Aside from being user-friendly and available on mobile devices, copy trading platforms are increasingly designed with built-in safeguards, such as stop-loss options and risk scores for each trader, which provide a way to make a quick assessment about which traders should be copied and at what risk.
Although all copy trader apps are based on the buying and selling of contracts for difference, or CFDS, they are not all built equally as far as their ability to harness the wisdom of the crowd and help investors spread out risk.
One company that has been seen as the leader in this rapidly growing industry is eToro, which was not only the first to enter the field, but has recently attracted investments from such mainstream players as Germany’s Commerzbank and Russia’s Sperbank.
The rise of eToro shows that traditional banks and other financial players are beginning to pay more attention to copy trading apps, which have great potential to not only change your personal financial management but also the investing sector in general. There has been much hype around the term “fintech,” but copy trading apps, like other developments such as Bitcoin, are changing the investing and financial landscape in real ways for real people. Such apps make the market more accessible to all.