Start Investing with the Wisdom of the Crowds
As a beginner you may not have any idea about how to start investing. Who to ask, where to start reading or researching, who to trust? If you’ve tried doing a simple online search, you have probably discovered that the amount of information available can be very confusing. It’s hard to start investing all on your own. Wouldn’t it be great to have someone who lets you in on the insights they’ve acquired through experience? Who shares the ins and outs of their trading strategy? Who even lets you copy what they do? All these things are possible thanks to social investing.
The knowledge of an individual investor may be thorough, but no matter how impressive their expertise, at the end of the day they’re just one single person. Social investing, on the other hand, gives you a broader knowledge base by tapping into the wisdom of the crowds. Thanks to the eToro OpenBook platform you can watch over 3.5 million real investors trading in real time, making decisions and sharing information. You can follow the activities of many other investors like yourself, pick the one you like best and immediately copy all their actions with one click.
Instead of relying on abstract recommendations and perceptions on financial news sites, you can see what other market participants actually buy and sell. Not only that, but your fellow eToro investors will frequently explain their investments on their eToro walls, and you can always learn more about their investment strategies by analyzing their public portfolios.
Market Prices are Set by the Crowd
The price in any efficient market is set by supply and demand. Economists often cite the stock market as an example of an efficient market. So share prices are determined by how many people are willing to buy or sell a particular stock or financial product. No individual investor makes the price go up or down. It’s the aggregate supply or demand that influences prices. But what are the other market participants going to do? This is the basic question every investor is most interested in. No matter how well a company is doing, if nobody invests in their shares, the share price won’t move. Just like in any other market, people and their sometimes irrational decisions play an important role in the stock market. So the way in which other investors perceive the meaning of a news item will have a much bigger impact on market prices than the actual economic significance of said item.
But how can you know which way others are going to trade? With social trading you have access to this information by connecting with others and watching their trading actions on a live feed. With enough diverse social connections, you can get an indicative picture of the entire network’s sentiment and make more informed decisions. That’s what it means to tap into the wisdom of the crowds.