Investment firms have long figured out that assembling a team yields superior investment returns than trusting the investment or trading decisions of a single, isolated individual. Until recently, it has not been possible for self-directed retail investors to easily collaborate with one another and exchange idea freely. Even with the advent of online trading, the model of one trader, alone versus the market was the unshakeable standard.
What most retail traders don’t realize is that this isolation puts them at a considerable disadvantage. In trading alone at home, without contact with other investors, traders have to rely solely on their own skill and experience. While traders and portfolio managers at investment firms routinely share knowledge, ideas and successes and thereby capitalize on a much larger number of opinions, ideas and wider pool of knowledge, the lone retail trader at home would have to figure out how and what to invest or trade all by him or herself. Trading and investing isn’t easy. That’s why assembling a team or being part of a like minded community can help you achieve better results or at least provide you a forum to air your ideas and receive help and support.
Professional investment firms always have their use. However, for self directed traders, who want to learn and empower themselves by actively managing their own money, the power of being part of a community of traders should not be overlooked.
This is all changing now, thanks to the invention of the online investment network. Trading platforms such as eToro have decided to give traders who are investing online a peer group just like institutional traders can refer to their industry colleagues. The online investment network connects people, enables them to share online trading information and even gives them tools to implement collective knowledge into their own online investing portfolio. This concept has given rise to a new way of investing online: social trading.
Social trading and investment networks are literally changing the financial trading industry in radical ways. It opens the doors to online investing to people who never dared enter the markets before, and gives experienced investors new and exciting opportunities. For example, the aforementioned eToro social trading network enables traders to follow each other’s online trading activity and even copy each other’s trades automatically. This kind of pragmatic application of online trading information means that whenever any one trader figures out how to invest money successfully, his/her success can then ripple through the social investment network thereby benefiting countless other individual investors.
Traders all over the world are realizing the benefits of investing online within the framework of a social trading network. Looking at the eToro investment network alone, we see that it is already 1.75 million traders strong and growing by thousands every day. What’s more, the benefits of social trading are clear. Since the launch of their OpenBook investment network, eToro has seen a significant rise of 20% in overall average trader performance.
As a result, online investment networks are popping up all over the world wide web, and soon we predict the lone online trader will be a rarity. As social trading becomes the norm with the concept being more widely accepted and understood, more and more people will realize the benefits of social trading.