Understanding the market: Investment research, advice and analysis

by Apoorva Pokharna | Sep 28th 2022

At the inaugural Investor-Tech Showcase, we got together with some of our leading technology partners to discuss current market conditions and how technology solutions, now more than ever, can assist investors in making more informed and strategic decisions on their portfolio.

In this first video of our series "Investment Technology Journey for Self-directed Investors", we ask our panel of financial experts what market trends they have noticed, how they’re seeing technology playing a role in bridging the gap in financial advice, and what investors can do to make more informed investment decisions.

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Leading the discussion on "Understanding the market: Investment research, advice and analysis", Sharesight’s Angela Thompson noted that the stock market has had one of its worst-performing years since the 1970s. Fortunately, there are some strategies investors can use to help brace for a volatile and uncertain market.

What can investors do in a volatile market?

  • Don’t panic

  • Focus on time in the market, not timing the market

  • Maintain a long-term view

  • Keep track of your portfolio (dividends, benchmarking)

  • Keep an eye on your costs

  • Leverage tech solutions that can help you navigate the market.

When asked about investor behavior during the market dip earlier in the year, David McEwen, Founder and Lead Analyst at Stockfox, shared that investors are now used to the ups and downs so much so that he doesn’t see a wave of panic selling. According to David, people have seen a significant decline in some of their shares but there is not a sign of complete capitulation.

Al Bentley, Founder and CEO at Simply Wall St, had quite a different view. According to Al, there is not just one single trend amongst investors; the way they react depends on the type of investor they are. He highlighted the fact that the stock market has seen many new investors in the past couple of years, and witnessing such a dip is quite new and not pleasing for them. He added that some people have paused investing for a while (casual or cautious investors) whereas others want to take on risk and are still investing (technical or busy investors).

When asked the same question, Nathan Isterling, CTO at Otivo, shared that everybody is finding ways to mitigate financial loss, with cash flow crunch being a major problem. However, this can be handled as long as people have a sound plan. Mark LaMonica, Director of Product Management at Morningstar Australia, noted that lots of investors are taking this hit in stride because they realise that long-term returns are a tradeoff for short term volatility. He also advised investors to stay in the market, but shift into asset classes like cash or bonds which have lower volatility.

"Shifting to asset classes like cash and bonds may help you sleep better today, but they are going to lower your overall long-term returns." – Mark LaMonica, Director of Product Management at Morningstar Australia

Later in the session, our panelists were asked how they see technology playing a role in bridging the gap in rising financial advice costs, with Australians currently paying over $3500 a year on average. David is of the opinion that investors should not restrain themselves and go forward with an online advisory service if it suits them. Al echoed this sentiment, stating that due to strict regulation, almost every financial adviser firm has similar services to offer, no matter what their price is. According to Al, if an adviser is just following a system or a flow chart, you don’t need a human to do that – you might as well get software to do it.

"Technology is eroding those financial advisers that basically are just following a system." – Al Bentley, Founder and CEO at Simply Wall St

Starting with statistics, Nathan pointed out that 80% of Australians are willing to spend up to $2500 on financial advisers. According to Nathan, this rules out human involvement, suggesting the answer is to make the machines do the manual human labour.

"If it’s a process flow then a computer is more consistent, less biased and more efficient to do that task." – Nathan Isterling, CTO at Otivo

Mark further clarified that although the financial advice system is broken in Australia, we cannot essentially replace it with a machine. According to Mark, a machine might carry out a process systematically but there are a lot of nuances around creating a financial plan. It is something that technology cannot do because it involves understanding the situation and keeping everybody’s unique goals in mind. Any technology can provide you with tools, data, and research but it only works if you are financially literate enough to analyse and comprehend them, and we need financial literacy to supplement any technology solution.

Overall, investors are becoming increasingly empowered to take greater control of their investments and make more informed decisions. Investment will always include some risk, but by employing the correct technologies, the risk may be reduced.

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