Blog – Page 7 – SparxTrading

Posted on June 7, 2013 by user — Leave a comment

Special Series: Dalbar Canada’s Direct Brokerage Service Award – Part 1

When searching for the right discount brokerage, a lot of information can be obtained online about the pricing of discount brokerage accounts, commissions and services. Some features, such as customer service, require more work to learn about.

After knowing what it costs to be a client of a discount brokerage many self-directed investors value knowing what they can expect by being a customer. Finding out this information often requires asking friends, relatives, or other clients about their experiences. Some individuals even go as far as searching through forum comments about the experiences of others with particular brokerages.

Unfortunately, the only sure-fire way for an individual to know which discount brokerage best suits their needs is to be a client. Given the time, expense and risk associated with “sampling” a brokerage, however, it is neither a popular nor pragmatic choice for many. Instead, self-directed investors turn to third-party ratings to help them approximate who the right discount brokerage may be.

As part of our continued look at the rankings and evaluations of Canadian discount brokerages, this two part series looks at Dalbar Canada and in particular their Direct Brokerage Service Award as a tool investors can use as part of their research.

A Quick Background on Dalbar Canada and the Direct Brokerage Service Award

Dalbar Canada is a financial services research company that has been in Canada since 1997. They are a subsidiary of the US headquartered Dalbar Incorporated which has been around for 37 years.

Since 1998, Dalbar Canada has been conducting evaluations of discount brokerages, with a particular focus on the client service experience. Their Direct Brokerage Service Evaluation (DBSE) program takes a structured and methodical approach to understanding how discount brokerages interact with clients on the phone.

Dalbar Canada is probably most well-known among self-directed investors for their Direct Brokerage Service Award (DBSA) which has often been a part of the marketing materials of RBC Direct Investing for many years, and more recently on HSBC Invest Direct’s advertisements. In addition to the recognition, the recipient of the award receives permission to display the official seal (pictured below) of the award on their marketing materials to let consumers know of their accomplishment.

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Posted on June 3, 2013 by user — Leave a comment

Outlook on the Junior Mining & Exploration Sectors from WRIC 2013

With speakers, analysts, exhibitors and investors all converging in the same space, the World Resource Investment Conference (WRIC) is a great opportunity to gauge the pulse of the Canadian junior mining and exploration sectors. Of course, with a year that has unfolded the way it has for the junior mining and exploration space, many attendees and speakers were content that there was a still pulse to be found at all.

Since January (the time of the last resource conference) the TSX Venture, where many Canadian exploration and mining stocks are listed, has declined about 24% and is drifting towards lows not seen since 2008.

Going into this year’s conference, it was a safe bet that was going to be a lot of doom and gloom to go around. The sentiment from several speakers and from attendees was that there weren’t as many investors through the door as has been previously observed. One blog post stated the following of the conference:

“The place was dead. I have never in my life seen this trade show so dead.”

Sobering statistics put forward by sector analyst John Kaiser also fanned the flames of negativity. According to Kaiser’s research the list of companies on the TSX Venture with less than $200,000 in the bank has climbed to over 700, a sign that many of these companies will simply not have the capital on hand to continue operating. Brent Cook, author of the Exploration Insights newsletter, echoed the same sentiment in his interview.

The consensus, it appears, is that things in the junior mining sector seem likely to get worse before they get better.

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Posted on April 24, 2013 by user — Leave a comment

Questrade vs Virtual Brokers – A Comprehensive Pricing Comparison of Their Lowest Commission Plans – Part 3

In the third part of our series comparing Questrade’s $0.95 trade commission plan to Virtual Brokers’ $0.99 trade commission plan we focus on how order types can impact the total cost associated with either trading commission plan. If you missed the beginning our series, you can read Part 1 here or Part 2 here. If you’d like to read the full report, you can access it here.

No Shoe-In

Self-directed investors have been bombarded with commercials comparing buying stocks to online shoe shopping or a thrill-filled ride. Without knowing about order types and routing, however, investors placing orders for stocks online can themselves sporting pair of uncomfortable fees – ECN & exchange fees to be exact.

One of the important distinctions between Questrade’s and Virtual Brokers’ lowest commission cost plans is whether or not electronic communications network (ECN) and/or exchange fees are added to the cost of a transaction. Indeed this is true of many Canadian discount brokerage commission plans currently on the market. Virtual Brokers’ $0.99/$9.99 commission plan commission doesn’t pass along any ECN or exchange fees whereas Questrade’s $0.95/$6.95 plan does.

What this means for investors using Questrade’s plan is that they have to be aware of what order types they’re using (e.g. limit vs market order) to ensure they do not incur added fees. It should be noted that Questrade does offer clients the option of having certain US market orders routed across different networks without having ECN or exchange fees.

Convenience vs Price

ECN and exchange fees can be thought of as a kind of ‘convenience’ fee. If a buyer wishes to get an order of stock at the current market price they must have that order filled by someone on the spot. This kind of order, known as a market order, allows the buyer to place getting the order filled immediately as a priority over execution price. Conversely, a limit order is when an investor sets the price that he or she wants to either buy or sell a stock at. If there is a buyer or seller that is willing to accept the price, the transaction happens and if not, the order goes unfilled. Thus, limit orders prioritize execution price over order fulfillment.

Stock exchanges and ECN’s like limit orders because they provide visible and ‘stable’ price levels that the marketplace can use to place their bids/asks around. Limit orders, therefore, improve “liquidity” as they create an identifiable pool of either buyers or sellers. To incentivize liquidity, stock exchanges and ECNs usually pass along cash credits to whoever places these types of orders. When market orders are placed, they remove liquidity by reducing the identifiable pool of buyers or sellers and so exchanges and ECNs pass along a small charge to those who place these types of orders. From a tactical perspective, however, limit orders are the equivalent of ‘tipping your hand’ and as a result can be exploited by other market participants (such as market makers) looking to uncover areas of strong support or resistance.

Most Canadian discount brokerages, unfortunately, do not pass these credits given to them by exchanges or ECNs when their clients place limit orders however they will readily pass along the ECN and exchange fees. Thus, plans in which ECN fees are included (i.e. ‘flat pricing’) might be more on a commission basis for certain types of orders but actually end up being cheaper for others.

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Posted on April 17, 2013 by user — Leave a comment

Questrade vs Virtual Brokers – A Comprehensive Pricing Comparison of Their Lowest Commission Plans – Part 2

In the second installment of our special series comparing Questrade’s and Virtual Brokers’ lowest stock trading commission plans, we take a look at what our study results showed us about the impact of market data to the overall cost of trading. If you missed the first part, you can check it out here or if you’d like to read the full report you can access it here.

The Cost of Data

Of the different categories of cost to consider when looking at either Questrade’s or Virtual Brokers’ lowest trading commission plans, market data costs should be one that self-directed investors pay careful attention to.

Stock market data packages come in various levels of detail providing investors with a window into the action between buyers and sellers as they “debate” over what a stock or asset is worth. Depending on the trading style, real-time streaming data may or may not be useful. For example, longer term investors or swing traders may find streaming real-time quotes not to make a difference as to how they make their trading decisions and instead could use end of day data or snap quotes. On the other hand, for highly active traders, real-time streaming data is essentially a must-have in order to accurately place orders based on current market prices and to closely monitor trades. Given the need for market data by active traders, discount brokerages use data packages as a way to generate revenue and incentivize the highly valuable active trading clients into certain types of trading packages.

While market data packages for Questrade and Virtual Brokers are not exactly identical in composition each discount brokerage does offer essentially the same market data access. In our pricing analysis we were able to create comparable sets of data packages between Questrade and Virtual Brokers in order to measure how market data costs impact the overall cost of trading. We tested slightly tweaked versions of the “Package 2” from Virtual Brokers and Questrade’s Advanced Canadian plan (see table). To ensure the data package for Virtual Brokers was equipped with streaming quotes, we added in the $35 per month fee for VB WebStreamer (their streaming data add on). Snap quotes on the VB Webtrader are standard (and free), however for our tests we assumed that the user would want/need streaming data.

As the table above shows, Virtual Brokers’ data plan in our model works out to be slightly more expensive on a monthly basis than does Questrade’s data plan. For self-directed investors, these data packages demonstrate that in order to qualify for the lowest commission plan, they have to be willing to spend at least $1300 at Questrade and $1400 at Virtual Brokers annually on data (in the case of our model). Even for modest portfolio sizes (e.g. <$25, 000) these are pretty hefty hurdles to overcome.

Rebate or Re”bait”

While both Questrade and Virtual Brokers offer rebates on data, these rebates require investors to trade certain minimum amounts per month to qualify. For Questrade, there are two tiers of rebate, one for individuals who trade between 10 and 99 times per month, and another for those who trade 100+ times. By comparison, Virtual Brokers offers its data rebate only after clients have made 150+ trades in the prior quarter (or 50+ times per month on average for 3 months).

Arguably, the amount of trading that has to be done in order to get a meaningful reduction in data is substantial at both discount brokerages. In Questrade’s case, trading up to 99 times in a month gets the same amount of rebate as trading 10 times per month – a rebate of $19.95. In order to qualify for the best rebate, $89.95 per month, at least 100 trades or more have to be made in a month. Similarly, in order to qualify for Virtual Brokers’ best commission rebate, clients have to make 150 trades or more in a quarter before they are eligible for a $60.75 per month rebate. If an individual is trading at the activity levels that qualify them for rebates, they can expect to be spending thousands of dollars per year on equity commissions.

The Bottom Line

The take home lesson for self-directed investors considering these plans is that they should be mindful of the impact that data costs can have on the total cost of trading. Even though low starting balances can be used to access these products, smaller portfolios have to work much, much harder to overcome the high cost burden the data fees introduce. Perhaps the most important point for those considering these plans is that the advertised commission rates mask the actual cost of a trade substantially because of the high data cost. In a future article we will outline the actual cost of a trade using these data plans to show the big difference that exists between actual costs and the advertised low commission rates. Ultimately, whether or not these low commission plans are the most economical choices will depend heavily on portfolio size and trading activity.

Our next piece in the series covers the impact that order types can have on the cost of these two plans.

Correction Notice: April 22, 2013

This post has been revised to reflect the following corrections:

Table 1 has been revised to include MX level 2, ATS Level 1 and ARCA level 1 data. It was previously reported that Questrade’s data plan was $116.85 and Virtual Brokers’ data plan was $95.75. Questrade’s streaming index quotes was reported at $6.95 per month but has been amended to $0 and thus the total for Questrade’s monthly plan as stated in the table is $109.90. Virtual Brokers’ data package required the above mentioned add ons (plus a $1 for Dow Jones Index data) requiring an upward adjustment of $21.40.

Posted on April 15, 2013 by user — Leave a comment

Questrade vs Virtual Brokers – A Comprehensive Pricing Comparison of Their Lowest Commission Plans

Canadian Discount Brokerages Cut Commissions

Canadian discount brokerages are in the midst of a price war. The newer entrants to the Canadian discount brokerage market, such as Questrade and Virtual Brokers, have driven prices for equity trade commissions to below the $1 per trade mark. With Questrade’s recently announced $0.95 commission per trade offering, they now rival Virtual Brokers’ $0.99 commission rate launched at the end of 2011.

While the sub $1 equity commission pricing sounds alluring, especially in a landscape where standard commission rates at large bank-owned discount brokerages can still exceed $29 per trade, there are important details that consumers need to be vigilant about to truly understand whether the low advertised prices are a good deal or simply just clever marketing.

To determine which plan was actually a better deal, we undertook a comprehensive study of Questrade’s and Virtual Brokers’ lowest equity commission pricing packages, looking at both the fixed and variable costs of trading each plan.

In the first of a special series of posts based on this research, we provide analysis of the lowest cost pricing between Questrade and Virtual Brokers, and offer some of the important lessons and tips from our research.

For those interested in reading the full report, it is available for purchase here.

Commission Price vs Total Cost of Ownership

While advertising and marketing efforts are being deployed full force to let consumers know about the sub $1 equity trades at Questrade and Virtual Brokers, there is a strange silence when it comes to talking about total cost of each trading plan.

Providing such low cost trading certainly appeals to one of the biggest decision factors consumers use when choosing a discount brokerage: price. But commission price, the feature most widely advertised, is only a small part of the cost story consumers need to consider when looking at Questrade’s Advantage plan or Virtual Brokers “The 99” plan.

One of the biggest lessons our research into both these offers showed us was that consumers need to be aware of the difference between equity trade commissions and total cost of trading. Fees such as data subscription costs, streaming data fees, Electronic Communication Network (ECN) or exchange fees as well as commission fees factor into the total cost. In our model we did not include the cost of SEC fees, taxes or margin interest. With so many different types of costs to consider, a good strategy to make sense of them is to compare each plan in terms of their fixed or variable costs.

A major fixed cost to consider when comparing either plan is the monthly data charge. Variable costs, such as commission fees are common to both Questrade and Virtual Brokers, however other variable costs such as ECN or exchange fees apply only in certain cases to Questrade. An interesting feature of both of these plans is that they offer rebates based on trading activity levels. In the case of Questrade, they offer rebates in different tiers of activity, with the lowest ($19.95) being offered to those who trade between 10 and 99 trades per month, and the highest ($89.95) offered to those who trade 100 times or more in a month. Virtual Brokers, by comparison offers a $60.75 rebate for clients who trade 150 or more times in a quarter (or 50 times per month for three months on average).

In our analysis, we looked at the main fixed and variable costs as well as rebates to figure out, on a total cost of ownership basis, which plan actually came out ahead. While there was no clear ‘winner’ that in and of itself was a very interesting finding because it shows that despite having lower equity commissions, Questrade’s Advantage plan was not cheaper than Virtual Brokers’ “The 99” plan under several tested scenarios.

In our next part, we cover some of the findings from the cost of data and its impact on both plans.

Posted on April 1, 2013 by user — Leave a comment

Social Media and Investing – LinkedIn

Introduction

As part of our special series on social media and investing, we take a look at the professional social network, LinkedIn.

What is LinkedIn

LinkedIn (NYSE:LNKD) was launched in 2003 and is a social networking website for professionals. As of January 2013 the site boasts more than 200 million users in more than 200 countries and territories.

LinkedIn is an excellent tool for fostering business relationships and allows you to find jobs, people and business opportunities. The network allows you to build a profile, upload your resume, keep a list of people you are connected to (called “connections”) and follow companies for updates.

LinkedIn also allows you to join groups. The majority of the largest groups on LinkedIn are employment related with career and professional issues being the range of topics discussed. There are also academic and corporate alumni groups, small-business groups, and area of expertise-related groups such as groups that focus on social media, or print production.

It is in the “groups” section of LinkedIn that our experiment begins.

The Experiment

We started this experiment in the search field of LinkedIn and changed the filter from “people” to “groups”. We then started using investing related keywords to see what we could find.

LinkedIn’s search function returns results in all of the filters that have results for the keyword including “groups”, “companies” and “people”. We limited our search to just groups because we are looking for investing information and education.

We conducted several searches. They were:

Stock trading
Invest
Investing
Trading
Stock market
Forex
ETF

Don’t feel limited by the keywords we chose above. Treat the search function on LinkedIn the same way you would use Google.

The shortlist of search results below are just the tip of the iceberg. There are thousands of groups on LinkedIn related to trading, stock markets and investments and hundreds of conversations that are taking place at any given time that you can participate in.

Here are some of the groups we discovered:

We decided to examine one of the groups in more detail and so analyzed the Commodity Trading Network. This group was established on March 24, 2008 and at time of this writing had 30,029 members. It is self-described as “a group for professionals in the Commodities Trading markets: Business Areas: Oil & Gas, Power Trading, Energy Trading, Metals Trading, Emissions, Coal Trading, Freight Trading, Risk Management, ETRM.

To maintain a pool of relevant industry professionals, requests to join will only be accepted from LinkedIn members who possess a genuine interest and/or background in Commodity markets.”

My request to join took 3 days to process before I was approved. Upon entering the group for the first time as a member, I quickly realized that the discussions were not only about commodity stock trading. In fact the discussions in the group can be organized into three general categories:

Commodities investing and trading
Buying and selling of the commodities themselves
Job opportunities and listings

Discussions include opinions, links to outside sources such as company web pages, as well as news articles. Members also have the ability to comment or “like” other member’s postings.

One cool thing that LinkedIn allows users to do is find statistics about a group. For example these are the stats for Commodities Trading Network.

There are some things you should keep in mind as you explore trading and investing related groups on LinkedIn.

First, many groups require that you join before you can see their discussions and some groups require the group administrator (often the person who started the group) to approve your membership before participating. As was the case in our experiment, approval can take some time or, for whatever reason, it may not come at all.

The second, and most important thing to keep in mind, is that like all discussions around investing and trading, the discussions taking place on LinkedIn are just opinions and they should be consumed with caution. Be careful of promotional postings on LinkedIn related to investing in a certain stock or commodity and take everything you hear with a grain of salt.

Conclusion

LinkedIn is a fantastic resource for making professional connections and exploring topics around professional and career related issues. Surprisingly, it is also a great resource for participating in conversations around trading and investing. Be careful whose opinions you take into consideration and contribute your insights and opinions back into the community to make it stronger.

Sources

http://en.wikipedia.org/wiki/LinkedIn
http://www.linkedin.com

Posted on March 20, 2013 by user — Leave a comment

Contrarian Investing and Junior Mining Stocks: An Interview with Benj Gallander and Ben Stadelmann – Part 2

Contrarian Investing Duo Benj & Ben — Benj Gallander and Ben Stadelmann showing the lighter side of being contrarians at the Vancouver Resource Investment Conference

A familiar saying among investment circles is that “everyone is a genius in a bull market”. Even though a bull market is reflective of significant optimism about stocks, in the stock market for every up, there is usually a down and it is fascinating to look at investor behaviour whenever markets go to extremes in one direction or another. For that reason, contrarian investing interesting in that it is an approach that relies on the idea that more money can be made selling to the crowd instead of trying to chase it. In the second part of our Vancouver Resource Investment Conference interview with Ben Stadelmann and Benj Gallander of ContraTheHeard.com, we got their perspective on how beginner investors can think about getting started in the markets and how they can navigate investor conferences (to read part 1 of our interview click here).

Know what type of investor you are

Both Ben and Benj have been investing for quite some time and as a result they’ve learned what approaches suit them best. In their case, value investing is the approach they are most comfortable with and in particular contrarian investing is what they enjoy and are good at. As Ben Stadelmann pointed out, “there are lots of ways to make money in the market”. Each investor needs to figure out where their own comfort zone is and what type of investing is right for them. The key, therefore, is to be willing to experiment, to make some mistakes and most importantly to learn from those mistakes.

With so many options to choose from, exploring all of them can not only seem overwhelming, it could also get very expensive. According to Benj Gallander, the best approach is to take it slow, especially when you’re stepping into the markets for the first time. Since the odds favor beginner investors making more mistakes at the outset, if you “go in whole hog, you’re much more likely to get hurt”.

These days, taking it slow may be a challenge especially for beginner investors or those stepping into the stock markets for the first time. Technology has drastically changed how individual investors can find out about market information but also how fast they can act on it. Mobile trading, for example, now allows investors and traders alike to place trades from virtually anywhere their smartphone gets reception. The hazard, according to Benj, is that with all of this instant access, investors might forgo patience and instead expect that stocks go up in price quickly or they might be inclined to risk
too much too soon.

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Posted on March 8, 2013 by user — Leave a comment

Canadian Securities Regulators’ Resources for Canadian Investors

Whether you are a beginner investor or a seasoned pro, staying on top of the mountains of investment information available online is a constant challenge. The sheer quantity of information often makes it difficult to find quality, reliable sources to turn to. With so many opinions to wade through investors have to constantly be cautious about where their information is coming from, and what the intent is of the person/organization providing it.

The issue of making quality investment information available to Canadian investors has not gone unnoticed by the regulatory agencies that oversee the Canadian securities markets. While collectively the different provincial securities regulators have embraced the cause of providing quality and timely educational materials and resources to investors, there are some who are more proactively trying to connect with investors than are others. As such, the reality of the Canadian investor is that what information you get and how you get it may be impacted by where you live.

Know the Rules of the Investing Road

Just as drivers on the road need to understand and follow the rules of the road, being a participant in the securities market (such as the stock market) comes with the responsibility of following the rules and regulations of the marketplace. Regardless of portfolio size, investors in the securities markets are all considered participants and are all bound to play by the same set of rules. As such, the resources and information provided by securities regulators are in-line with securities rules and regulations set forth within each agency’s region.

For retail investors, knowing the rules is beneficial not just to avoid overstepping the lines, but also to recognize when investment ‘opportunities’ and the people peddling them might be offside or unscrupulous. Canadian securities regulators constantly monitor the marketplace as a whole, including the conduct of the companies and people participating in it. If or when securities learn of suspicious or fraudulent activity, are able to investigate it and provide reliable news regarding the status of any investigations or disciplinary decisions. In other words, they are a valuable resource to learn and stay current on the rules of the securities marketplace as well as the possible types of fraudulent activities targeted towards investors.

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Posted on February 28, 2013 by user — Leave a comment

Contrarian Investing and Junior Mining Stocks: An Interview with Benj Gallander and Ben Stadelmann

Contrarian investing is no easy feat. You have to be willing to disagree with popular opinion and be willing to jump into a company or market that others have either shunned or abandoned outright. Yet value investors as famous as Benjamin Graham and his star student Warren Buffet have both taken contrarian approaches, being ‘greedy when others are fearful, and fearful when others are greedy’.

At the 2013 Vancouver Resource Investment Conference, we had the opportunity to interview two notable Canadian contrarian value investors, founders of ContraTheHeard.com and authors on the subject of contrarian investing, Benj Gallander and Ben Stadelmann. In our interview, they shared with us their perspective on the recent performance of junior mining sector, an area that has fallen out of favour with many investors. They also shared a number of helpful tips for investors stepping into the market for the first time, including how to avoid some investing pitfalls as well as how to navigate investment conferences.

In part one of this interview, we asked Ben and Benj for their views on why junior mining companies haven’t done as well as larger cap companies. Here are their insightful (and sometimes contrarian) answers.

A tale of two markets

As the Dickens reference suggests, stock markets are experiencing the best of times and the worst of times. The fortunes for junior mining stocks have been very different than that of their larger cap counterparts as the chart (see below) showing respective performances suggests.

For the juniors, it’s been a tough year with the TSX Venture (largely composed of junior mining and exploration stocks) struggling to gain any real traction. On the other hand, indices that track larger and more global companies, such as the S&P 500 have done very well, even inching closer towards all-time highs.

When we asked Ben and Benj what their thoughts were on the disparity in performance they offered two interesting points to consider.

First, some degree of disparity in performance between an index of junior mining company stocks and an index of 500 large cap stocks, such as the stocks in the S&P 500, is to be expected. After all, they each represent opposing sides of the market cap spectrum.

In June of 2012, for example, the range in market cap of the 500 companies in the S&P 500 was between .89 billion dollars and 546 billion dollars, with a median market cap of 11.29 billion. Conversely, the combined market cap of all 2256 companies listed in the TSX Venture as of January 2013 totaled 41.7 billion dollars.

Aside from being at opposing ends of the size spectrum, the S&P 500 and TSX Venture also represent opposing sides of the risk spectrum. Large cap companies with stable or established earnings, multinational footprints and well-recognized brands and products are very different from junior exploration companies who often have no revenues and who are drilling holes in deserts and mountainsides across the globe.

According to Ben and Benj, both the macroeconomic forecast and some investor psychology may help to account for differing fortunes of large and junior companies.

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Posted on February 28, 2013 by user — Leave a comment

Social Media and Investing – StumbleUpon

Introduction

As part of our special series on social media and investing, we take a look at the discovery engine and social network, StumbleUpon.

What is StumbleUpon?

StumbleUpon, founded in 2001, is primarily a discovery engine. Unlike search-based engines (such as Google), discovery engines are useful for when you don’t know exactly what you’re looking for. In a typical web search users provide terms that describe the topic they’re interested in and the search engine will do the rest. But what happens if you can’t put into words exactly what it is you’re looking for? You can use a discovery engine.

A discovery engine, such as StumbleUpon, will learn your preferences based on the kinds of content you deem relevant and serve related content to you. StumbleUpon uses a process known as “collaborative filtering” to combine your personal preferences with preferences and opinions of others when looking at the same content.

The idea behind collaborative filtering is that if two people have the same opinion on one issue, they are more likely to have the same opinion on a different issue compared to having the same opinion as a person chosen at random. For example, if you “like” something StumbleUpon serves you and it happens to be investor-oriented, StumbleUpon will then start serving you content that others have identified as being investor-oriented. The more the engine learns about what you kind of content you like, the better it can predict what other content you might find interesting and relevant.

Where does StumbleUpon get these human opinions from? The data the discovery engine uses to make content suggestions comes from fellow users of StumbleUpon. Users of StumbleUpon (known as “stumblers”) can rate content by giving it a “thumbs up” or “thumbs down”, they can assign keyword tags they believe are relevant to the content and they can provide additional commentary if they want to describe it in more detail. The pages other StumbleUpon users have liked and any commentary they’ve left will show up on their profile. Similar to Tumblr or Pinterest (click to learn about Tumblr or here for Pinterest), users can follow the profiles of one another making StumbleUpon a social network. You can see what other people have liked and check those pages out as well.

Another way that you can view content through StumbleUpon is by putting in a key term or category in the search field called “Explore an interest”. This is where our experiment began.

The Experiment

There are many keywords and tags used in StumbleUpon to organize information. In this social media and investing experiment we wanted to see what kind of content we could find on StumbleUpon under the search term “investing”. We started with “investing” because it is a main topic on StumbleUpon. If you like a page that doesn’t already exist on StumbleUpon the engine asks you to assign a main topic to it before assigning tags you feel are relevant to the content. It’s important to note, however, that there are various sub topics related to investing that are suggested by the discovery engine during your exploration such as “investment, “socially responsible investing” and “value investing” just to name a few.

We also tried the keyword “trading” and found other suggestions such as “online trading” and “share trading”. These subtopics and suggestions give different results helping you discover more content online.

This is what we found for the keyword “investing”:

This is what we found for the keyword “trading”:

This is what we found for the phrase “stock market index”:

Each search brought back a variety of investing related content. Under “investing”, with the exception of a couple artistic photographs of trees, most of the results were related to investing and contained opinions from all over the web including major news networks like CNN, the Wall Street Journal and Fox Business. The more you scroll down the results page the more results get presented. Some providers can have a number of posts in StumbleUpon when users like their material. For example, we noticed that Mint.com has many posts on StumbleUpon meaning that many stumblers find their content helpful and so give it a thumbs up helping to spread it further.

This brings to mind some limitations when using a discovery engine such as StumbleUpon.

The first is that different people have different ideas on what constitutes investing. You may disagree with how some of the content you come across has been classified (for example the tree pictures above belonging to the investment category). If, however, the ‘majority’ decides something is related to investing, that is what the discovery engine will also associate with the word “investing”.

The second limitation is that some of the content is sponsored meaning a user or company has paid StumbleUpon to serve that content to you when you’re exploring a topic. The probability that this type of content is promoting something is high so be aware of what you’re reading, who the author is and what the intent is behind the article.

Finally as with any other source of information on trading and investing, remember that what you’re reading is simply someone’s opinion and therefore should be taken with a grain of salt.

Conclusion

StumbleUpon is a great way to discover content around a topic of interest like investing if you have no particular query in mind. It allows you to view content on the web that other users have found to be relevant and have liked. In other words, by using StumbleUpon you are consuming content that has been filtered specifically for you based on your preferences and has been approved by members of a community who share a common interest. Keep its limitations in mind when surfing to get the most out of the system. Stumbling is an adventure. See what you can discover.

Sources for Social Media and Investing – StumbleUpon

http://www.stumbleupon.com/about
http://en.wikipedia.org/wiki/Collaborative_filtering
http://www.makeuseof.com/tag/discovery-engines-search-similar-pages/
http://en.wikipedia.org/wiki/StumbleUpon