Almost anyone has a smartphone nowadays, and they have changed our lives for the better in many ways. Now, just by swiping the screen, we can keep up with the latest news, access a seemingly unlimited amount of information, and stay in touch with our loved ones no matter where they are. However, as more and more financial institutions are asking us to “download [their] Free app” While logged into their site, it’s important to note how this can affect our financial decisions.
Recent Research It discovers that the decisions we make about our smartphones are not the same as those we make on our personal computers. And as it turns out, we should probably all stick to using our smartphones for social media and video calling.
Investing in smartphones and trading behavior
A team of researchers investigated the trading behavior of individual investors to determine the differences in trades executed on a smartphone versus those on a PC. Specifically, they looked at each investor’s trading activity across the platforms on a monthly basis, controlling for the effects of selection on the investor and time level. The results indicate that the likelihood of buying higher-risk assets and chasing past returns is increased for smartphone versus PC trades. These results are consistent across asset classes and over a longer period of time (10 quarters).
In other words, investors were more inclined to buy riskier assets and “hot” securities when they place trades on their smartphones.
How can where a person trades affect their decisions? Well, it’s all about how our brains work.
Constant attention can backfire
The accessibility of investment platforms has highlighted investing, which can be a double-edged sword. On the other hand, bringing the power of investment to more people is a great achievement. but on the other hand, excessive attention Over investing without proper education can lead to investor mistakes and yield-chasing behavior (i.e., meme stocks).
The negative impact of excessive attention may be behind the risks of investing in smartphones. With our smartphones always close at hand, this level of interest in our portfolio and trades can cause us to take excessive risks and chase the latest news-important stocks.
Surprisingly, the easiest may not be the best
Smartphone apps make trading easier than ever. Anyone can see something online, think of a deal, open their app, and press “trade” in just a few minutes. However, this dismantling of trade barriers could make us more vulnerable to “System 1′ Think.
System 1 thinking is the “quick thinking” aspect of our mind that relies on rules of thumb and mental shortcuts, and as a result, can be more impulsive and get us into trouble when making financial decisions. How easy it is to trade our smartphones can lead us to make bold decisions, when investment decisions should be based more on careful consideration and fundamental analysis.
So, should we avoid our smartphones when trading?
Research shows that we don’t always make the best investment decisions when making deals with our smartphones. Instead, we tend to rely on System 1 thinking, which leads to more impulsive decisions that push us toward the pursuit of riskier returns and assets. Of course, everyone is different, and some of you may be able to curb the temptation to buy a new “hot” asset just by seeing it in the media, but I know I’m not disciplined. I, for example, will keep my trading decisions for my desktop computer.
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