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We all know that good information is the requisite ingredient for effective analysis and investment decision-making. The ability to gather analytical inputs or tradable information about a company or security in advance of the market can enhance investment returns.

In the past, when information moved slowly and was difficult to come by, analysts who could find and incorporate relevant and usable data about companies, securities, or the capital markets had a distinct edge.

Mining Reputable Data in the Social Media Revolution

Today with the democratization of data and the social media revolution, access is no longer such an advantage. Countless information sources for investments are available online, and data can be easily accessed and shared across social networks with the click of a mouse.

According to a survey conducted by The Pew Research Center, 62% of U.S. adults now get their news from social media. The reasons are simple: By the time a news organization gets hold of a story for us to read on their traditional platforms, its already old news. And thanks to fancy algorithms, our social networks know what news we want and feed it to us in a more timely fashion.

For better or worse, social media can yield investment information just as it can disseminate the news. But harnessing the gathering power of social media is a daunting task. For most individual investors, even following a single social media platform, like Twitter, for a sense of user sentiment or to form an investment outlook can be like drinking from a fire hose.

When information is so readily found, access has little value. In fact, we have access to too much data. What has become more valuable today is being able to distinguish and differentiate usable and reputable signals from all the noise.

With new technologies that pair Big Data and Machine Learning, there may be ways to channel the deluge.

During the Super Bowl for example, LikeFolio used its social data technology to collect and process millions of tweets to measure the effectiveness of the ad campaigns and rate how well the sponsoring company leveraged its advertising spend, Forbes reported.

Similar technology can transform social data into analytical inputs or investment decisions, and create practical insights from massive amounts of social data. Though these tools are not yet readily accessible or available at a reasonable price point for individual investors, given the demand, it wont be long before they are.

Fake News vs. Trusted Networks

Sifting through social media data is only one factor.

What about the trust issue?

How do we know whether the data shared across social media is reputable? Unfortunately, fake news and other misinformation proliferate online, and people looking to influence the pricing of assets or securities may resort to it.

Social networks designed specifically for traders and investors have the potential to mitigate much of this trust problem.

Those interested in trading the market can join eToro, ZuluTrade, Collective2, and Scutify to access and emulate numerous traders and their trades. Members can follow individual traders and make investment decisions based on those transactions, and some of these networks even feature high performers or rate traders according to their investment track record. Although pricing varies by platform, these sites offer similar services and are organized along similar lines.

Other social networks -- TradingView, for example -- are forums where investors can exchange trading ideas, information and place live orders.

These platforms offer a variety of content articles, commentary, investment information, etc. that are developed and shared just like on other social networks, and can feature analytical input and education on investment topics.

There are two traditional ways that people learn the principles and best practices of investment management. One is to emulate the strategies and tactics of successful investors. The other is to identity common investor mistakes and avoid them.

The power of investor-focused social networks is that they help investors do both.

These platforms are moving in the right direction and already provide value for short-term traders. That said, they have yet to fully harness the power of social communities for all investors.

As more longer-term investors grow comfortable sharing their profiles, investment ideas, and performance histories, these networks will generate usable statistics not only about investors, but about what strategies and tactics work and dont work in various market scenarios.

Just as consumer products are evaluated today, new investment ideas will be discussed, tested over time, and then subjected to peer review through economic cycles. To all that, add new tools that can compile sentiment and other usable data from the output of other social networks. The combination of those inputs could be the catalyst for a comprehensive, expert, and market driven approach to investment analysis.

Read the original:
Investing in the Age of Social Networking - Huffington Post