In a constantly changing financial landscape, technology is undoubtedly a powerful force, transforming the way investments are made. In the case of mutual fund investment, technology has become a substitute for traditional methods. Take, for instance,robo-advisors. These are digital platforms that employ algorithms to create and manage a diversified portfolio for investors. With a financial advisor like that at your fingertips, who’s there to support you round the clock, you can make tailored investment strategies without paying hefty fees.
Robo-advisors are only one of the several examples around you that show how technology and mutual fund investing integrate to simplify the otherwise daunting world of investments. By offering a highly personalized investment plan, they make mutual fund investing accessible to even those who are not the biggest fans of technology.
Here’s a look at how technology is transforming the mutual fund investment platforms:
Blockchain and smart contracts
Blockchain technology is the foundational piece of cryptocurrency and it is bringing a storm in the financial sector.
Say, you are investing in a mutual fund. Typically, this would involve speaking with several intermediaries such as brokers, custodians, and clearinghouses. Not only does this lead to additional paperwork, but it also makes the process cumbersome. From the time you subscribe till the date of the settlement, the process can take anywhere between three to four working days.
Here’s where blockchain can make a difference. It can streamline the subscription process to get rid of multiple intermediary steps. This reduces the processing time. Since the investors have a digital wallet where they can load money earmarked for investment in mutual funds. Blockchain-based digital identity can take care of the Know Your Customer (KYC) and Anti-Money Laundering (AML) laws without needing third-party agents. Once the subscribing investors clear the verification process, the subscription kicks in. All records are maintained securely and transparently. Not only does this make the process more efficient, but also cost-effective.
As soon as the investor submits a transaction request, whether it is for purchasing new units of a mutual fund or redeeming an existing investment, a smart contract gets generated. This enables the information exchange between the Registrar Transfer Agent and investor through a smart contract.
Data analytics and predictive insights
Information also plays a critical role when it comes to mutual funds. The more information an investor has, the better equipped they are to decide what’s right for them. In such a scenario, having access to real-time market data and predictive analytics can make a world of difference to everyone.
Technology has made it easy for investors to easily access the performance of the market to gauge the risk and identify trends. No one has to spend hours going through data to unearth historical fund performance or even social media sentiment to understand the potential investment opportunities. Predictive analytics can do it for you and you can make an informed choice. This eliminates the guesswork and builds a solid foundation even for a new investor.
Everything is right now and everyone
Thanks to technology, you can buy and sell any time you want.
This is leading to high-frequency trading and day trading. Novice investors are now able to closely monitor the market even when plunging in without a long-term strategy. The time spent on pre-investment research is almost negligible as all the relevant information is available at your fingertips.
In other words, mutual fund markets are now accessible to a wider group of the population. Long gone are the complexity and high entry barriers that made mutual fund investments the cup of tea of only a select few.
You no longer have to make a special effort to understand the market — technology has simplified it for you. You can take complete control of where and how you want to invest in mutual funds.
What the future holds
Of course, technology has opened up fresh avenues for investment in mutual funds, bringing in a diverse group of investors. But as technology advances, In an era of increasing it is equally important for investors to stay abreast of the latest advancements.
Needless to say, it has become even more critical to have a seasoned advisor by your side who can come up with a custom-made strategy catered to your unique needs and goals. At Moneyfront, we take this commitment seriously and want to protect your financial future. Reach out to us with your investment queries or get a customized investment strategy aligned to your financial profile.