Investing is no longer what it used to be decades ago. While the underlying principle of investing, “Buy when low and sell when high” still holds true, modern-day scenario presents new challenges that require investors to look at investing from a different angle. Let’s look at these challenges here:
Overload of information
The most intimidating challenge that today’s investors have to face is the volume and speed of information. As we step into the digital age, investors have to go beyond quarterly and annual reports for getting information on publicly traded companies.
There is a range of financial publications that gather significant news from all over the globe, write them up, print and deliver them to the greater public. This is the power of print, and it’s all the more increasing as digital devices make information available at people’s fingertips.
Every company now produces a continuous flow of information—from daily stock prices to event announcements on digital boards. This overload of information can boggle the best of investors as they have to filter out what matters and what doesn’t.
Changing political and legal scenario
U.K.’s epoch-making decision to leave the European Union is likely to have a rippling effect on businesses. BREXIT will undoubtedly have a significant implication on international trading laws and regulations and labour and employment requirements in the country.
Investors are also not far from BREXIT’s changing effects. Many financial experts in the U.K, including citizensadvice.org.uk (an advisory firm helping people overcome their woes), believe that there will be bouts of volatility after Article 50 triggers in.
Valuation anomalies in stocks become highly opportunistic when such political situations occur. Investors might have to adopt the bottom-up stockpiling strategy to exploit these situations as and when they crop up.
Advertising and investment
Advertising plays a crucial role in investment, proving both an advantage and a disadvantage to investors. While it generates awareness amongst investors about bonds, stock and schemes, advertising also tends to push information that may not be a good choice for investors.
For example, an investor can opt for the investment that has low fee mutual funds as compared to the professionally managed ones. Advertising can alter this simple math by promoting the latter without a single mention of the fee involved. Investors have to winnow out advertising information that perhaps don’t suit their investment criteria.
The plethora of choices
The human brain can process only a few, probably three to eight, choices at a time. The realm of finance is mainly a large one, where there are a plethora of investment options available. Much of these choices are created by advertising, as mentioned in the previous point.
When we are faced with multiple choices, we often look for short-cuts to “box” our investment options. This is certainly useful, but sometimes at the price of the best option. As such, investors have to keep a close check on the nitty-gritty of investment schemes and choose the one that gives them higher returns on investment.
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