May 31st, 2016 | David Simpson

The changing face of technology & its investing implications

It is amazing how far computers have come in the last thirty years. I have thought about this recently since I bought a new laptop that has mid-range capabilities. It would have been a top of the line computer two or three years ago. I then compared my new laptop to my previous one (midrange in 2007) and was amazed at the capability difference (triple the speed and five times the memory)

Compare a computer available from 1986 or 1996 (near the start of the tech run-up) to one available now and this highlights the difference even further. A computer available in 1986 was 5,000 times slower with 5,000 times less memory. A mid-range computer available in 1996 was 250 times slower with one-tenth the memory.

How does this relate to investing? I was at the BlackRock Investment Forum in early May and one presentation described the use of computers and programming for investment analysis. Many firms use algorithms to analyze many applicable websites to read the comments by employees and other analysts to supplement rigorous analysis of the company’s financial statements. This capability allows companies to read comments on such websites as Glassdoor.com, Monster.com, or Google News to gain insight to what is happening inside a company. The programs can scan these websites to look for and gather the relevant information in twenty to thirty minutes while it might take the average person six to eight weeks.

What implications does this have for your investing decisions? Twenty to thirty years ago, computer programs were not sophisticated and it was much more difficult to get investment information. Now, every investor can access the same basic company information as investment firms and institutions. To gain insight, an investor must be able to scan all websites or reports mentioning the company, attend industry conferences, and perform in-depth economic analysis.

To determine whether an investment firm’s process adds value, an investor is best served by collaborating with an investment professional. Together, they can move from analyzing all of these investment firms to select funds for a portfolio. When selecting funds, it is important to incorporate financial planning principles. Miller Advisors will incorporate your risk tolerance and your overall financial plan to make the most appropriate fund recommendations for your portfolio.

How have your investing expectations changed over the last twenty to thirty years? How has the change in technology affected your personal financial and investing life? How have you managed all of the information for your investments and financial plan?

 

Sources: Oldcomputers.net | Pctimeline

Image: Getty