One of the biggest problems with alternative investment opportunities is that they are often seen as being somewhat elitist and as such, only really a viable option for those already very much in-the-know. With the rise of social trading however, that could all be set to change, making this seemingly impenetrable world suddenly a much more appealing place for many.
What is social trading?
On a site like eToro, social trading is at the heart of investment, with an attitude of collaboration actively encouraged. With more than 6 million registered users across 140 countries, their aim is to make the trading experience more transparent and interactive, and therefore less daunting to newcomers.
Social Trading itself allows users to ‘follow’, ‘communicate’ and even ‘copy’ more experienced traders. Following them works much like any other social media platform, in that doing so will allow you to track their activity in your feed, seeing their highs and lows play out and learning from them as you do so. The ability to communicate breaks down barriers, giving people the chance to ask clarifying questions about investments or simply for advice about what their own next steps should be.
The Popular Investor Program goes one step further. Under this scheme, the actions of the community’s most successful investors, like jaynemesis, a professional gamer whose analytical approach and swift decision making abilities have transferred well to investing, can be automatically copied outright. Because these users have a proven track record of wise decisions and have been approved by eToro, piggybacking on their investments helps to minimise risk for less experienced users until they feel comfortable enough to go it alone. You benefit directly from their success, whilst they get the satisfaction of guiding others; it really is win-win.
What investments are hot amongst social traders right now?
There is currently a huge amount of buzz surrounding cryptocurrencies; a type of digital currency that is operated independently, outside of regulation from a body such as a bank. It is typically generated, verified and transferred using computer encryption techniques and monitored via something known as a blockchain, which is in essence a digital ledger that documents global transactions publicly and in chronological order.
The main conversation currently centres around two main issues: first is the fact that Bitcoins (one of the most popular digital currencies) has been growing in both popularity and value, hitting record highs recently. Second however is the rejection by the Securities and Exchange Commission (SEC) to allow a new Bitcoin tracking product to be brought to market, citing ‘unregulated’ markets as too high a risk.
What does this tell us about social trading itself?
What these two factors combined show us is that the attitude towards investments amongst those actually investing is indeed changing, with alternative routes gaining real traction, but regulatory bodies are still reluctant to fully trust the future stability of the market. Ultimately, this highlights the benefit and importance of social trading, serving as something of a support system to allow people to bolster each other’s success until such time that investing in cryptocurrencies and other alternatives is as commonplace as buying gold jewellery and vintage cars.