Be Your Own Rocket Scientist
Let's face it: Investing involves some form of risk. There are no sure ways to beat the house or even the major indexes. Even so, there's no shortage of people who say a newsletter or Web site offers the keys to the kingdom.
Increasingly, there are also plenty of new technologies that investors can use in researching or making investments. They won't necessarily give you an edge, but these applications might furnish a new perspective on a portfolio or the data you use when doing your homework on a stock. Some technologies just make it easier to find out what's going on in the markets.
It can seem like there are as many ways to find out about stocks as there are stocks to pick. In the interest of trying to sort through it all, this Five for the Money highlights advanced technologies that might help you make decisions on when to buy or sell stocks, track their ups and downs, and analyze your portfolio, while you're at it. But don't forget, though they might give a bit of techie buzz to investing, there are limits to what rocket science can do to help investors.
1. Maplesoft's "hardcore math"
Waterloo (Ont.)-based Maplesoft sells a software application, Maple 10, that highly sophisticated funds and financial institutions might employ in making their investment choices. Also used by engineering and design outfits, the program is a way to inject "hard-core mathematical operations" such as differentiation, optimization, factorization, or sensitivity analysis into a firm's investing models, says Chief Executive Jim Cooper.
"Anything that can be done by a mathematician can be done by Maple, but much, much faster," Cooper says. In a very simple example, it could look at a stock over the past few decades in order to minutely gauge how the time of year has affected the price. "A model is always trying to predict the future in some way," Cooper adds. For single users, Maple 10 costs about $2,000 per copy. For a few rarefied investors, Maple's program might be sweet news indeed.
The software code eXtensible Business Reporting Language is a tagged or "interactive" format for pinpointing data within a company's financial reports. It's also a handy way to download it into financial software applications to compare the numbers reported by different outfits. While XBRL is used primarily by regulators -- the Federal Deposit Insurance Corp. requires member banks to publish their call reports in the language -- it has potential applications for investors.
The Securities & Exchange Commission is encouraging public companies to publish their numbers in XBRL. The agency says participants in the voluntary program include General Electric (GE) and PepsiCo (PEP). Kirkland (Wash.)-based UBmatrix has developed a downloadable open-source program called xBReeze that, should more companies come aboard, will give investors and analysts a tool for comparing what were once apples and oranges. It's not yet clear when this will occur, but UBmatrix CEO Sunir Kapoor suggests that some mid-cap outfits in search of analyst coverage have an incentive to adopt the more convenient format.
3. Panopticon's "treemaps"
Panopticon Software offers an application that it believes gives investors a new way to see many types of data, including stock portfolios. The system uses "treemaps," diagrams in which a rectangular space is filled with smaller rectangles, each representing a data point. Typically the bigger the piece, the more money it represents.
Users can synchronize their holdings' charts with stock information and the pieces will change colors based on where it's heading. It makes for a thrilling or disturbing collage on a monitor, but could help stock pickers decide on the optimal time to buy or sell. Panopticon offers the software in a free version that can be downloaded, and paid editions used by major financial firms.
AlphaTrade (APTD) provides subscribers with sophisticated market information on desktop computers and portable wireless devices. The company sends personalized "Level 2" trading information like market movers and real-time quotes unavailable on free Web portals like Yahoo! Finance (YHOO). For example, you can research market movers for a stock or get updates on the latest company news, all while attending your daughter's soccer game (just try not to make it too obvious).
AlphaTrade has plenty of competition. Still, CEO Penny Perfect cites the company's advantages as having very low lag time on transmitting real-time information to wireless devices and its multilingual capabilities.
5. E*Trade's Risk Tool
Online brokerage E*Trade Financial (ET) recently launched a stock risk analyzer that's available free to its customers. On its Web site, customers can enter stocks to see where they land on a graph of risk against returns, with risk measured by historical volatility. The tool is a quick way to check if that under-the-radar tech stock is worth holding or if your blue chips are pulling their weight.
The risk analyzer also includes some cool extras like a stress test and a mechanism to see how a portfolio would fare against historic drops. Plug in your stocks against September 11 or the Asian currency crisis. Fun might not be the right word, but mulling the possible permutations could be fascinating to many investors. New technologies may not make investing more profitable, but it certainly can make it more interesting.