A new way to invest

In the world today there are two major forms of investment: the long term and the short term. Both come with advantages and disadvantages, and lead to two different styles in which to determine a good invest. Short term investments require a high amount of computation and analytic data, crunched by computers. Usually, this data predicts stock prices based off usually a combination of: relations to other stocks, the historical trends, (in some cases) the news, quarter earnings and several others. The main point, is that short term investments usually do not have anything to do with whether or not a company has a “good idea.” Rather, the short term investments are made based on the analytic data projecting an upward trend. This makes sense because ideas take time and trends are fairly easy to predict, where ideas are not.

Due to the nature of short term investments, which can produce large sums of money off small changes in a stock price (predicted by analytic data) many firms can specialize in short term investments without having any knowledge (or little knowledge) of a particular field (aka there usually is not much need to have a PhD in Physics or Chemistry on staff).

In comparison long term investments are usually made by either buying a portion of stock in a company by either looking through all of the financial information after a company has been formed, or as a venture capitalist, investing in an idea. This form of investment is usually a higher risk investment because there aren’t thousands of short term trades a day, there is simply one investment, wait a few years and hopefully reap what you sowed. Unfortunately, it is much harder to determine a good idea and a profitable idea (both of which are required), this creates a situation where most firms interested in using large scale analytics will stay out of long term investments.

My solution is not a new one, but it is one that I think can be much broader than previously imagined. Take the hedge fund Derwent Capital which is currently using twitter to determine how to invest. I read several journal articles written about the subject and I believe they are really on to something. Therefore, I have decided to take a similar approach. I will not reveal all of the details as of yet, but I intend to use a similar method to determine solid long term investments.

Back story: I have been tinkering with the idea of creating a program to predict the stock market values for the past few years, but haven’t really had the knowledge, time, resources until now. Now that I am here, I believe there is probably more money to be made investing in budding company’s (in which a $200,000 investment can turn into a $100,000,000 over a couple years).

I should be releasing my first prototype of my program by early September 2013.

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