Students can control financial futures by embracing technology

Edwin Wang, Staff Writer

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Students can use technology to plant financial seeds now which will, over time, grow into prosperous financial portfolios.

Naomi Smith | Staff Artist

As Tulanians enter a critical era when we must budget and cultivate an awareness of economic and political developments, it is equally important that we embrace personal investing and put our savings to work. Personal investing can initially seem incredibly intimidating, but it is less daunting with a little background knowledge of the subject at hand.

Given the recent shift towards passive investing, a practice in which computers and algorithms determine investing decisions, people are even more wary of directly managing their personal wealth. Indeed, technology plays such a significant role in trading nowadays that machines account for as much as 80% of trading, according to a CNBC report this year.

Although automated trading has significant ramifications for personal investors, as millenials we should not fear technology, but embrace it. Instead of feeling intimidated by innovation, we ought to recognize the vast investing opportunities computers have created and make use of them.

One misconception when it comes to investing is that much of it occurs like scenes in the Stratton Oakmont offices from “The Wolf of Wall Street.” As technology has developed and become more sophisticated, the demand for humans to physically place individual orders for stocks, bonds or commodities has waned dramatically, eliminating many jobs that employed previous generations.

Indeed, a 2013 report found that over 79% of U.S. stock trades were automated, which does not bode well for traditional Wall Street brokers but is wonderful news for Tulanians who want to begin investing.

Specifically, automated trading has led to the popularity of exchange-traded funds, which offer a low risk and inexpensive option for amatuer investors. ETFs trade identically to well-known stocks like Apple, and they are attractive to millennials since they are tailored to individuals with little investing experience.

ETFs can simply be thought of as a basket of similar stocks that are grouped together and traded as one stock. Since many Tulanians do not have the experience or resources to conduct in-depth financial analyses of individual firms, ETFs are attractive to amateurs since they mitigate much of the risk that is associated with investing in a single company’s stock.

According to a Wall Street Journal investing guide, ETFs offer investors unique advantages which include “the ability to invest in products about which they might not have been previously aware.” 

An example of the benefits that ETFs offer are highlighted by opportunities like the Standard & Poor’s Depositary Receipts Gold Shares Trust and the Ishares Gold Trust. Investors can invest in gold by purchasing shares of either gold ETF, which is a significant opportunity since commodities like gold have historically been illiquid, physical assets that were highly impractical for ordinary people to invest in.

With so many new investing opportunities available, we as Tulane students must utilize our familiarity with technology to join the investing fray. Thanks to an intense pricing war that has slashed trading fees across the financial services industry, many traditional brokers like Fidelity Investments, E-Trade Financial Corporation and Interactive Brokers offer easily accessible mobile and online trading services at little to no cost to investors.

Although many millennials have embraced Robinhood’s platform because of their promise of no fees for stock trading, Robinhood has faced backlash over controversies related to their profit motives. Luckily for Tulanians, established brokers like Charles Schwab and TD Ameritrade eliminated trading fees this past week, and it is extremely convenient to open trading accounts with firms like TD Ameritrade since they do not have a minimum balance requirement.

For all millenials, cultivating an awareness for investing will go a long way in ensuring we are ready for the challenges of the 21st century. As a generation, we have witnessed technology’s revolutionary impact on everyday life. It is crucial that we make use of technology’s contributions to personal finance so we can reap the rewards of tomorrow’s opportunities.