Democratizing Investments: The Evolution of Investment Management Tools
Historically, investment management was primarily the domain of professional traders and large financial institutions, which would levy fees for their services, promising to outperform the market or, at the very least, deliver superior returns compared to their peers. However, the landscape of investment management has undergone a significant transformation. Today, investors themselves can manage their portfolios without the need for extensive knowledge or experience. A variety of online tools now facilitate portfolio tracking, risk management, and even offer partial consulting services through either automated systems or human advisors. It’s worth noting, albeit cautiously, that the prestige of professional advisors seems to be waning in light of technological advancements and increased access to information and services.
The rise in retail investors trading through self-managed accounts, either directly through investment houses or via bank-managed securities accounts, can be attributed to several key factors that have heightened financial awareness and literacy:
- The information revolution of the Internet age has made access to information more widespread, particularly the adoption of passive investment strategies, which advocate for diversified index investing.
- Technological advancements have simplified capital market trading, making it accessible from anywhere with internet connectivity.
- Soaring housing prices globally have made real estate investments less accessible, driving interest towards capital market investments.
- A zero-interest-rate environment has incentivized risk-taking and investments in tradable market assets.
- The coronavirus pandemic, by sidelining many from the workforce, temporarily provided people with time to learn and specialize in new areas, including investing.
The GameStop phenomenon and the Robinhood trading app are prime examples of this trend. GameStop’s surge, driven by a coordinated effort of small investors on Reddit, and Robinhood’s commission-free, fractional share trading model — encapsulated by its Super Bowl 2020 slogan, “We are all investors” — exemplify the growing influence of independent investors.
Empowering Investors with Data
TipRanks, an Israeli firm, has capitalized on the surge of retail investors and the ethos of universal investment. In its latest funding round in April 2021, the company secured $77 million, led by Prytek investment fund and including participation from Israeli investment house Mor. Founded in 2012 by Uri Greenbaum and Gilad Gat, TipRanks was inspired by a failed investment based on a financial analyst’s recommendation. This experience spurred the creation of a system to statistically safeguard investors from unreliable analyst advice, amidst the plethora of online recommendations.
TipRanks offers a suite of B2C tools designed from the perspective of the independent investor, providing a wide array of decision-support resources. These include analysis of non-traditional data like executive trading activities, web traffic trends, regulatory filings, crowd wisdom, and media sentiment. As the company’s B2B2C services gain traction, offering solutions to major banks and investment firms worldwide, the focus remains on benefiting the end-user investor.
The company notes that in the coming years, its information service will be expanded to cover passive and semi-passive investments (ETFs & Mutual Funds), which are popular among independent investors. Another significant initiative is to establish itself as a premier content provider, including launching a video news channel and a news portal. These endeavors will leverage TipRanks’ innovative technology to organize and illuminate previously disparate and underutilized non-traditional data.
To sum up, the investment world is continually evolving, influenced by the internet, social media, and the proliferation of misinformation. TipRanks aims to cut through the noise, offering a reliable guide amidst the chaos. However, the path forward is not without challenges, including technological demands, data accuracy, and rising competition, all while navigating an impending shift from a long period of low interest rates and inflation.
Conclusion
TipRanks is pioneering the democratization of investment information, bridging the gap between Wall Street and Main Street. By enhancing transparency in a traditionally opaque industry, the company is providing retail investors with tools to navigate the tumultuous market landscape confidently. As the financial world continues to evolve, the agility and depth of analysis provided by TipRanks’ products may well be the compass investors need to steer through the storm.
Note: I personally use TipRanks’ services and wish to clarify that this article is not sponsored content, nor have I received any compensation for its publication. The insights shared are based on an interview with Oren Greenman from TipRanks and my user-experience.
