When the internet is not your friend in investing
With the ever-expanding number of property apps for smartphones and other internet based research tools at our fingertips, making good investment decisions should, in theory, be much easier for the tech savvy investor. In this month's advice column, Ian Hosking Richards, looks at how technology and the internet is not always on our side.
The wonderful wide web
Over the past few years, we have witnessed a technological revolution of an unprecedented scale. Today we have an app for everything. I know the exact location of my car at any given time thanks to an app on my smartphone. Other apps allow me to make video calls to my father in the UK and tell me how much I have exercised in any given timeframe. Even a few years ago, this kind of access to technology would have seemed like science fiction.
So in theory the ability to access information at the touch of a button is definitely a good thing. But does it really level the playing field? Does it allow a totally inexperienced investor to create wealth just as easily as a highly experienced investor? Certainly, younger and more tech savvy investors seem to have great faith in their ability to use this technology to their best advantage. However, with property investing things are not always what they seem, and I believe that an over-reliance on the information highway can have the opposite effect and lead to poor decision making, or eternal procrastination. Let me explain.
When does the internet fail the investor?
For me, investing wisely is all about identifying the known drivers of capital growth, and buying at the right stage in the property cycle. Investing in undervalued areas with large, fast growing populations, diverse economies and a favourable supply/dynamic is the key. Yet much of the information that technology brings us is historical. In order to make good investment decisions we need to be projecting forward, not looking backward, because growth is not linear.
Apps for Investing?
I have spent the past few days road testing some apps to see if I could find some value in them. One app required me to input all the data prompted by questions, like ‘Is the property in a school zone?’ (Apparently it did not matter whether it was the best school in the country, or the worst). This particular app promised to give me ‘expert analysis’ on any property – all I had to do was type in the address and answer the questions. So I duly typed in the address of a property that would definitely not meet my investment criteria, and answered the questions as accurately as I could. The app highly recommended this property!
Making a good investment decision is all about getting the right amount of relevant information. It is about quality, not quantity. In the past, it was possible to make bad decisions because of a lack of information. But too much information can be equally debilitating. Many I have met, have given up on the process only due to being overwhelmed and scared.
Technology has made it so easy to collect information, but you still need the ability to process and filter this information in a meaningful way, and that is the critical skill that the beginner investor often lacks. So before you start relying on technology as your sole means of accessing information, make sure that it will provide the quality of information that you will need. Ask - is it even accurate? If companies like us pay hundreds of dollars for data market reports and outlook documents, would we be sprouting them for free on a chat forum behind an anonymous avatar?