The investment landscape is undergoing a profound transformation with technological advancements such AI, blockchain, machine learning and trading apps reshaping the traditional ways in which assets are bought, sold and managed. Just two years ago ChatGPT emerged, whereby thrusting artificial intelligence (AI) into daily life. Innovations such as robo-advisors and tokenisation have democratised access to asset classes such as private equity funds and commodities - assets that historically had been unavailable to smaller investors. And we all know that mobile apps provide real-time data, removing intermediaries and allowing 24/7 dealing to a global audience. But whilst technology offers unprecedented opportunities, it also demands careful risk management. Furthermore, these developments empower a new generation of investors, highlighting the exciting potential for continued evolution in the way we build and manage wealth.
In the past, before digital tools became available, the process of making investment choices was very different from what can be accessed today. Retail investors typically depended on financial advisors, wealth managers and brokers for advice and portfolio strategies (with the lack of accessible market data allowing brokerage firms such as Merrill Lynch to thrive) so offering bespoke guidance and personalised stock selections. For years, these professionals served as intermediaries, steering the financial decisions for many. In addition, diversification tools were few, leading investors to seek the perceived stability of reputable companies. Meanwhile, the logistics of buying and selling many assets were dominated by slow, paper-based systems that created bottlenecks throughout the process. Stock certificates were issued and physically stored to prove ownership - a practice that now feels almost outdated. In the 1960s, Wall Street experienced a “paperwork crisis”, where the manual processes struggled to handle the growing volume of trades. This challenge underscored the system's inefficiencies and set the stage for the digital advancements that followed. The traditional era of investing was a slower, more cautious time, but its reliance on trust, safety and processes laid the foundation for modern financial systems. The 1990s and early 2000s further marked a transformative shift in the investing world, driven by technological advancements that made financial markets more accessible. Online trading platforms such as ETRADE, Interactive Investor and Charles Schwab disrupted traditional brokerage services, offering retail investors direct market access. Gone was the reliance on brokers, as people could now execute trades in market hours (08.00 to 16.00, typically five days a week) and at much lower fees. In 1992, ETRADE revolutionised the space by offering trades for just $14.95 compared to the $50-$200 that traditional brokers charged - undoubtedly this change made investing more inclusive and opened up the market to millions of buyers.
Meanwhile, index funds and ETFs revolutionised investing by offering a cost-efficient means of diversification. The Vanguard 500 Index Fund (launched by Vanguard in 1976) played a key role in shaping passive investing. By the time the 2000s arrived, Vanguard managed over $800 billion, attracting those looking for more affordable options than traditional active funds. And as has been reported by online investment platform, AJ Bell, interest in index funds has been further fuelled: “Passive funds are “eating the lunch” of their active counterparts, with just a third of active funds beating their passive counterparts across the past decade, and only 31% outperforming in 2024.” Certainly, ETFs, with their ability to function similar to individual stocks whilst providing diversification, have become a favourite amongst investors. Access to real-time market data has further enhanced decision-making. For instance, Bloomberg terminals, have become essential tools for institutional investors, offering advanced analytics and up-to-the-minute data. This digital transformation has marked the beginning of an era where technology has empowered investors with unprecedented autonomy and insight, reshaping the investment landscape forever.
Undoubtedly, the investment landscape has experienced dramatic shifts over the past decade, fuelled by technological advancements, social media influence and evolving ethical and sustainability considerations; and one of the standout trends in recent investment history is the growth of robo-advisors. Introduced in 2010, an example of this is Betterment, which has democratised investing by automating the management of portfolios based on personal risk and goals. Managing approximately $50 billion in assets, Betterment caters to both beginner and experienced investors and its integration of AI and data-driven algorithms enables a new generation of investors to effortlessly oversee their portfolios.
Moreover, the impact of social media on investing has been especially evident among younger generations. Reddit-enabled groups, such as WallStreetBets, have had a major influence on the stock market, demonstrating the strength of collective action - a prime example of this occurred in 2021 when GameStop’s stock soared by more than 1,600% because of coordinated efforts from Reddit users. This phenomenon showcased how online platforms can shape stock prices and challenge conventional market trends. Lastly, the demand for ethical and sustainable investments has surged, with environmental, social and governance (ESG) considerations becoming essential in investment decisions. BlackRock’s ESG Aware Fund, which attracted $5.6 billion in 2023, illustrates the growing focus on sustainable and responsible investing. And Larry Fink, CEO of BlackRock, is offering a forward-thinking vision for the entire financial industry, showcasing how the future of investing is rapidly being shaped by the revolutionary concept of tokenisation. Fink himself has stated that, “if we could tokenize Bitcoin, imagine what we could do with all financial instruments. Tokenization is the next big step forward, where every stock, every bond will have its own unique identifier on a general ledger.” According to Fink, this transformation will lead to instantaneous settlement of transactions, drastically reducing costs associated with traditional trading and in turn enable mass customisation.
Comparison of a traditional mutual fund v a tokenized mutual fund
Source: TeamBlockchain
In addition, the concept of fractional ownership through tokenisation is making private assets such real estate and art available to retail investors. Platforms such as RealT are at the forefront of this change, offering individuals the ability to own a piece of real estate for as little as $50 and blockchain-powered tokenisation creates greater liquidity and transparency, offering opportunities that were traditionally reserved for the wealthy minority. Simultaneously, technologies such as AI and big data are revolutionising investment decisions - for example, US brokerage firm, Robinhood, uses AI to send personalised alerts that empower retail investors to make timely decisions. This combination of AI with trading platforms showcases how technology is making investing more accessible. Correspondingly, Robinhood has experimented with 24-hour trading, executing in just one year $10 billion in trades during overnight hours, reinforcing its commitment to providing investors with flexible, around-the-clock options. Moreover, gamification has made investing much more engaging for younger generations. Platforms such as Acorns and Stash incorporate interactive and enjoyable features to help millennials and Gen Z learn about and begin investing, making it easier than ever for them to become part of the financial markets. Without doubt, this shift from traditional models signals a future that is both more inclusive and efficient for investors of all sizes. Meanwhile, social media platforms such as TikTok, Instagram and YouTube are increasingly influencing investment behaviour, particularly among younger generations. However, a concerning trend has emerged in the UK, where a study by the Financial Conduct Authority (FCA) revealed that two-thirds of young investors finalise investment decisions in less than 24 hours, with 14% making choices in under an hour. Many fail to distinguish between impulsive consumer purchases (e.g. an air fryer) and serious investments such as Bitcoin.
Of note, however, is that this rushed decision-making often stems from social media where 85% of young investors admit that platforms such as TikTok and Instagram significantly impact their investment choices. - but slightly concerningly is that 43% rely on these platforms as their primary research tool. And the emergence of “finfluencers”, or financial influencers, has amplified this trend even further. According to a Barclays study, nearly half of UK investors rely on social media for financial advice but unsurprisingly this comes with significant risks, as many fail to verify the credibility of these influencers. Moreover, the fear of missing out (FOMO) on trending investments such as cryptocurrencies prompts 51% of younger investors to increase their spending - though many later regret their hasty decisions, with 40% expressing regret about their investment choices. According to a 2023 study by the Financial Industry Regulatory Authority (FINRA) Investor Education Foundation and the CFA Institute, 37% of US Gen-Z investors aged 18 and older attribute social media influencers as a key factor in their decision to begin investing. This influence is even more pronounced in China, where more than half of respondents shared the same sentiment; social media platforms are not only shaping financial decisions but also becoming key sources of financial education. Pursuant to the Influencer Marketing Benchmark Report, influencer marketing is projected to grow to $24 billion by the end of 2024, with platforms such as TikTok leading the way. Yet, whilst they provide for their subscribers a more relatable and accessible avenue for financial guidance, the risks associated with relying on unverified advice are significant; the sums these younger investors are estimated to be going to inherit are huge with Merrill Lynch stating in a report that: “$84 trillion in assets is set to change hands over the next 20 years”
Meanwhile, emerging trends are set to revolutionise the future of investment decision-making with decentralised finance (DeFi) standing at the forefront; DeFi enables users to engage in lending and borrowing activities without relying on traditional banks and intermediaries. Aave and Compound, key players in the DeFi space, offer decentralised lending platforms that give users greater control over their financial transactions whilst removing intermediaries from the process. In addition, this shift could unlock financial services to underserved communities, making them more accessible and inclusive. Virtual reality (VR) and augmented reality (AR) are already making a noticeable impact in the investment world - VR-based trading simulations are being introduced to promote financial literacy, giving investors the chance to immerse themselves in realistic scenarios where they can practice their strategies. These technologies undoubtedly offer an exciting way to bridge the education divide, particularly for younger investors who are more tech-savvy. Moreover, the development of AI-powered risk assessment tools is advancing investment predictability, with firms such as Palantir building sophisticated AI models that assess market risks, helping investors gain better foresight into potential outcomes. These tools also allow investors to make more confident decisions whilst navigating market uncertainty, so enhancing the accuracy of real-time investment choices. With these advancements, the future of investing seems poised for greater accessibility, personalisation and new risk management education tools, making the future an exciting time for both seasoned and new investors alike.
Essentially, the way in which we invest has undergone a seismic shift, moving from traditional, paper-based systems to a dynamic, tech-driven landscape powered by AI, blockchain and digital platforms. Gone are the days when investors relied solely on brokers and financial advisors for access and advice; now, democratised tools such as robo-advisors and trading apps empower individuals to take control of their financial futures. The rise of tokenisation is breaking down barriers to once-exclusive asset classes such as real estate and private equity, allowing retail investors to participate with as little as $50. Simultaneously, technologies such as AI provide hyper-personalised recommendations and real-time insights whilst gamified platforms engage younger generations in investing like never before. But the dark side of this transformation cannot be ignored, with the influence of social media on investment decisions (particularly among Gen Z) leading to impulsive, high-risk behaviours. And platforms such as TikTok and Instagram have created a generation of “finfluencers” whose often unverified advice drives FOMO-fuelled decisions, sadly leaving many investors regretting their choices. The future of investing is undoubtedly at a crossroads: will technology continue to empower inclusivity and innovation, or will it widen the gap between informed and impulsive investors? The challenge lies in balancing accessibility with responsibility, ensuring that this revolution benefits all without compromising financial stability. Ultimately, this presents regulators and the financial industry an ongoing challenge as to how to keep up and protect investors from potential pitfalls.
This article first appeared in Digital Bytes (21st of January, 2025), a weekly newsletter by Jonny Fry of Team Blockchain.