Crowdsourcing is proving to be the belle of the ball for attracting the attention of investors and sharing potential funding opportunities. Peer to peer lending has reached $25 billion while equity funding raised $2.5 billion through crowdsourcing. In the last five years crowdsourcing has picked up significant steam as innovative startups, media ventures, creative projects and more seek financing in relatively small numbers from a large pool of investors.
One of the strengths of crowdsourcing is social media. The ability to connect to individuals around the globe, seamlessly and simultaneously, has opened up entirely new markets and a new, shared experience-economy that transcends time, location and culture. Social media has become so woven into the fabric of society, it is now seen as a primary channel for finding new customers and nurturing existing customer relationships.
With such possibilities presented from the use of social media and crowdsourcing, what other options might be possible by tapping into the collected wisdom and shared experience of the crowd? For individual investors, the answer lies within their own portfolio.
A new approach to investing
Technology has made it easier than ever to do things in real time, to track and share results and to connect with like-minded peers. All kinds of industries have turned to social platforms to help better connect to customers and help customers connect with each other. Finances, however, have largely been seen as private and deeply personal.
New generations are challenging this way of thinking. Pushing back on the idea that finances should be entirely secret and siloed. They recognize that the sharing economy has opened many doors, and are willing to consider its possibilities in new areas such as financial services.
Investing remains, perhaps, a final frontier for social disruption, connecting individuals across shared interests and helping inspire better insights, greater access and even a little friendly competition. In other words, more signal, less noise. Crowdsourcing is paving the way for a new investment experience, one that removes the individual from isolation and instead encourages a shared approach that offers everyone greater value.
More informed investing
It’s no secret that more is more when it comes to knowledge. Different people bring different perspectives, and taking advantage of group insights can deliver powerful information. In the investment arena, this results in more informed investment choices which, hopefully, results in better returns over the long run.
Crowd intelligence is very powerful – research has shown that groups of amateurs beat experts on average, across all subject matter areas. The key to finding new sources of high-quality information is to analyze the collective behaviors, opinions, predictions and sentiment of large groups of investors.
Consider this: when looking for ways to grow your money, would you prefer the advice of one individual or the collective wisdom of the many? While no one can accurately predict the future or guarantee returns on investments, it’s a safe bet that collective intelligence offers greater insights than any one person alone can. Even the best financial planners or money managers consult outside resources.
Young investors, novice investors or casual investors rarely get the opportunities afforded to those who invest large sums of money or do so for a living. Whether its having access to an inside scoop delivered via word of mouth, or taking part in shared knowledge about a particular growth industry or exciting new company on the rise, sometimes individual investors miss out due to lack of opportunity.
By taking advantage of the collective insights and experience of the crowd, investors can not only better track potential gains in the market but they can work together to buy into options previously not available as an individual.
When able to study group statistics from a large community of other investors, novice investors can learn more quickly and also have a more accurate sense of how they are doing, relative to both their peers as well as the universe of all investors.
If fantasy football is any indicator, people love a good friendly (if virtual) competition. Investing is the perfect forum for this, as it allows people to see results over time and compare and contrast with their own investment results.
The great thing about technology and data is that we can now share these insights at the level we choose. Rather than be fully transparent about every dollar or every move we make, we can share collective results with individuals of our choosing.
For example, perhaps you can connect with others who have a passion for medtech and rate your investment progress based on the stock performance of various medical technology companies. Or perhaps you join with others keeping a close eye on on FAANG stocks and share notes (Facebook, Apple, Amazon, Netflix, Google). This little bit of comparison spurs you to take on new challenges and diversify in different ways, leading to better returns.
The popular proverb “it takes a village” may have been referring to raising children, but it holds true for many other things as well. Collective wisdom offers great value, and social media has given us new ways to connect, share and learn. While the investment community has been slow to embrace the value of socially-based investing, technology is making it easier than ever to control our own information and share those elements that can enhance and improve our individual investment portfolios.
In 2020 and beyond, crowdsourcing will prove to be a crucial element for investors, especially as more millennials and younger generations – already comfortable with digital social experiences – seek out shared wisdom when choosing how best to invest their money.
How much of this rings true, how are you making financial investment decisions these days? We’d like to hear if you have some other tips, or maybe an example that shows this author’s ideas in action.