Last Updated on December 2, 2024

Overview – Technology and Investing

A century ago, it would’ve been crazy to imagine that billions of people around the world would have a device that allows them to talk to anyone, can take pictures in just a few seconds, and can access almost all of humanity’s collective knowledge, all with a few taps of our fingers.

Today, technology is so interconnected with our daily lives that it almost seems unthinkable to live without it. Imagine what our lives would be like without the things we take for granted such as phones, computers, or the internet.

Of course, technology and its rapid development have also influenced how investors carry out their work. Whether it’s checking the price of a given investment, performing trades, getting the information they want, or performing analysis, so much of what investors do relies heavily on the technology they have at their disposal.

It’s no mystery that technology and modern investing are closely related, but to what extent, and which technologies will investors find themselves using? Let’s find out.

What Purpose Does Technology Serve for Investors?

In the Merriam-Webster dictionary, technology is defined as “the practical application of knowledge, especially in a particular area”.

Because technology’s definition is so broad, it includes things as complex as the space shuttle all the way to something as simple as a water bottle.

In both of these examples, both objects came into existence because of the application of knowledge. Humanity’s collective knowledge of science and engineering led to the space shuttle, and the knowledge that water takes the shape of its container led to the water bottle.

Investment knowledge doesn’t produce any technology per se. Rather, investors have used the technology of their time to help advance their goals and interests. Investment knowledge didn’t lead to the creation of the Internet, but investors certainly use it on a regular basis.

So how exactly has technology served the interests of investors?

One of the ways is that it has helped streamline several tasks investors perform on a regular basis, allowing them to save more time and complete their work more efficiently.

Today, it would be considered old-fashioned for an investor to perform their personal study by going to the local library, checking changes in market indices by grabbing a copy of the daily newspaper, or executing all their trades by calling their broker.

Of course, nothing is stopping an investor from doing these things, but these would prove to be more time-consuming and cumbersome than if they had chosen to leverage the power of modern technology instead.

Technology and investing
Most investment tasks we perform on a regular basis would’ve been very difficult to perform in the past due to the lack of technology at the time. Now, these tasks can be performed much easier and faster.

In Charles Schwab’s book “Invested“, he talks about how, in the past, investing was an activity reserved for those who were already wealthy.

Part of the reason for that was because the technology was so limited at the time, only those who had extensive connections and ample capital could invest. It’s hard to be an investor if you don’t have a brokerage account and don’t have access to high-quality information – in the past, these things we now take for granted would’ve cost the average person a lot.

Charles Schwab talked about how his eponymous company, the Charles Schwab Corporation, was able to grow into the giant it is today because of its extensive use of technology. Their aggressive use of technology helped them bring investing to the masses, fuelling their success.

So, another way technology has helped investors, or more broadly the general public, is how it has “democratized” investing. An activity that was once reserved for a select few is now accessible to the everyday person.

Technology and investing
Technology has helped bring investing to more people by making it easier to get the necessary resources needed to start.

The reduced barrier to entry can arguably be attributed to the proliferation of the internet and its easy access.

Low-cost brokerages, online trading platforms, and an abundance of investment information are now just a few clicks away. The widespread use of mobile phones, and given the fact that phones nowadays are essentially hand-held computers, have further allowed more people to put their surplus funds to work.

It’s clear that technology has greatly benefited investors, and the argument can even be made that modern investing practices wouldn’t exist were it not for the technology we currently have.

What Sort of Technologies Do Investors Need to Be Familiar With?

One of the nice things about investing is that an investor can decide how technologically savvy they want to be. Some investors may gather and read all of their documents digitally, while others may prefer to get physical copies.

Regardless of how tech-savvy or simple an investor chooses to be, it’s important for an investor to remember that they will use at least one form of technology during their investment careers, especially in this day and age.

Therefore, it’s in an investor’s best interest to at least be aware of what sort of technology they may one day need to use.

The Internet

To be an investor in today’s world means having to use the internet in one way or another. As was discussed earlier, part of the reason that investing is so accessible now than at any other point in the history of society is largely due to how widespread and accessible the internet has become.

Asset prices, market index values, investment documents, news releases: an overwhelming amount of information an investor needs to perform their work can be obtained with minimal hassle.

Fortunately, an investor doesn’t need to have incredibly fast internet in order to access this treasure trove of information, nor do investors need to have a high degree of technical skill to use the internet for their purposes.

Most of the information that an investor will ever need is only a Google search away, followed by a few clicks. Interestingly, this abundance of information has required investors to develop a new skill: knowing how to find high-quality information amidst a vast ocean of mediocre sources.

Regardless of age or technical savviness, knowing how to effectively navigate the internet is a skill that all investors should at least have some proficiency in.

Databases

Finding information on the internet is a relatively easy task given how far-reaching it has become. The challenge this presents, however, is finding the relevant information you want in an efficient and timely manner. This challenge can be further compounded when looking for a specific document that dates several years back.

Thankfully, this need has given rise to another powerful form of technology: databases. Databases essentially gather and structure data/information in an organized manner, helping end users find what they’re looking for faster.

Publicly traded companies file all sorts of regulatory documents such as annual/quarterly reports, proxy statements, MD&A, and countless others. Investors can go to individual company websites and find these documents themselves, but this can get cumbersome very fast, especially when looking for specific and/or older documents.

We’ve previously gone over investment databases such as the U.S.’s EDGAR and Canada’s SEDAR. If you want any sort of publicly available investment document for companies that operate in these countries, chances are you will find it in these databases.

The interfaces for these databases are typically very user-friendly and operate much like a typical search engine. However, databases have several ways to help users make their searches more granular, and assuming they have the know-how, investors can find specific documents even faster.

Spreadsheet Software

Investors work with numbers all the time, and because numerical data directly influence an investor’s decisions, it comes as little surprise that they routinely use spreadsheet software to perform their work.

We know that investors use all sorts of ratios and metrics to help ascertain investment merit, but crunching the numbers by hand quickly becomes time-consuming, especially when performing these calculations using several years’ worth of data, or when analyzing multiple prospects side-by-side.

With spreadsheet software, investors can crunch vast quantities of numbers significantly faster. Assuming a spreadsheet is properly set up, when certain numbers are changed, so too are all of its related calculations. Imagine having to re-calculate P/E ratios over the past 10 years simply because you used the incorrect earnings figure.

Investors live or die by the insights they extract from the numbers they work with, and spreadsheets can help investors uncover those insights quickly and efficiently. Therefore it’s no exaggeration to say that being well-versed in using spreadsheet software is one of the most important technology-related skills an investor can have.

Things Technology Cannot Replace When it Comes to Investing

While the marvels of modern technology seem to be endless, there are some things that technology simply cannot hope to replace or compensate for.

For example, modern word processing software such as Microsoft Word and Apple’s Pages are filled to the brim with impressive features. In the hands of an experienced and highly-skilled writer, this technology can help them produce all sorts of masterful works in an efficient and timely manner. However, in the hands of someone who has lackluster writing skills, even the most impressive word processing software won’t save them.

When it comes to performing any sort of skilled task, technology serves as an amplifier. That is, technology is only as powerful as the skill of those who use it. If you don’t have the necessary skills, then technology won’t be able to amplify much.

As an investor, you can have access to all the technology you want, but none of that will be of much help to you if you don’t have the necessary level of skill needed to leverage all that tech to its fullest potential. That’s why we have so many articles that stress the importance of developing strong investment knowledge and skills.

Technology cannot replace investment skills and knowledge
No amount of technology can compensate for a lack of investment skill and knowledge.

Additionally, no amount of tech can ever replace your intuition and creative thinking.

As you may know from your own experience, not all investment scenarios you come across can easily be resolved with conventional means. There will be times when you’ll need to rely on all your accumulated knowledge/experience or to think well outside of the box to navigate these situations.

No form of technology can serve as a viable replacement for intuitive thinking and your ability to look at certain problems from unique angles. Your intuition and creative thinking are the results of your hard work and intellectual prowess, not technological advancement.

When used properly, technology can serve as a very powerful boost that can take investors to new heights. As powerful as it is, technology has its limits, and it’s important to know what those limits are, otherwise an investor may become overly reliant on technology when in reality it may not be of much use to them in certain situations.

Wrapping Up

Thanks to the rapid development and proliferation of technology, we can now perform all sorts of tasks far quicker and more efficiently than ever before. Naturally, the benefits of technological ingenuity have also made their way to the realm of investing, and nowadays investors use all sorts of technology in their work.

Whether it’s helping investors perform work faster, get the information they want easier, or even making investing possible for more people, technology has proven to be greatly beneficial to investors and investors-to-be.

As powerful as technology is, it does have its limits, and there are things in investing that technology cannot hope to replace such as an investor’s vast experience, intuition, and creative thinking. So, technology is certainly important in modern investing, but it’s important for investors to remember that it can’t do everything.