16th July 2013
Investors are to gain access to a new way to invest in stocks through eToro, a website which describes itself a social investment network. Prior to this it has offered investment in various market indices and commodities.
The network will allow investors to invest any amount in their stock of choice without, for example, having to buy a full share described as fractional stock investment.
Here is what the founder has to say.
Yoni Assia, CEO of eToro says: “eToro breaks down the barriers to the world of finance for those who don’t have access to the traditional way of investing. By adding stocks from major household names to our social network, we are encouraging our users to engage with well-known brands in a different way – a way not deemed possible before – through the buying and selling of stocks on our platform. We are basically empowering consumers, allowing them to become truly engaged with the brands that touch their lives.”
Assia continues: “The power of the everyday investor is not to be underestimated – their sentiment holds the key to the future of these brands and we are helping crystallise the bond between the everyday consumer and some of the world’s biggest companies. In doing so we are unlocking the markets, providing even first time investors with easy access to a world previously inaccessible to them.”
Actually arguably more interesting than fractional investing is the fact eToro lets you follow the trades of others and debate their strategy and yours on its social pages. It lists the users who are followed by most people so you can follow them too though you can also set your own limits so you don’t follow them slavishly. It is an interesting approach to buying some or all of 60 stocks which are listed here.
eToro says this allows you to benefit from the wisdom of crowds. It is certainly an interesting cross between doing your own research and placing your investment fortunes in the hands of an expert.
As the site says eToro allows “its investors to benefit from the wisdom of crowds, reflected through the aggregated experience and knowledge of almost 3 million users. By enabling users to see, follow and copy other users within the community, eToro has introduced the concept of the people-based portfolio. Users can choose to automatically copy any other user from within the eToro social network, while setting certain limits to keep investment within specific thresholds. Results have shown that copy trading delivers returns 30 per cent greater than standard manual trading”.
We are not quite sure what to make of the wisdom of crowds when it comes to investing. Even in the last few weeks, big crowds fled all sorts of assets due to concerns about QE tapering actually providing investment opportunities for some fund managers. There is a well-known tendency to oversell and overbuy and crowds are not always wise on a day to day basis. Brave contrarians can do very well but Mindful Money isn’t quite sure what this makes you if you decide to follow one.
Yet perhaps we are over-analysing. This site may offer a fun way to invest and to see if you can follow a winner. But if you are new to the subject, we suggest definitely using money you can afford to lose. And this is, as yet, a relatively limited universe.