Social Trading as an alternative to fund managers

Commerzbank has just invested millions in the Fintech Etoro stock market – a fashionable investment.
Viktor Dellos could fill an entire football stadium with his fans: More than 53,000 users follow his trading strategy on the social trading portal Etoro, a kind of Facebook for private investors. Around 2,000 investors copy his trading operations.
The Etoro platform, on which Dellos trades, is the world leader in social trading with 3.5 million users. However, there are many other copy trading platforms with advantages as well, find information on the top online brokers on . It allows private investors to have their assets managed by people who share the same interests. Since bankers have been discredited all over the world, social trading is seen as the next big thing on the scene. The Internet has revolutionized media, telecommunications and commerce, so why not also the investment of money? Especially since a Viktor Dellos with its fabulous returns seems to be an alternative to conventional providers.

According to Etoro, Dellos has made a profit of 1,243,220% in the last two years. Who exactly is behind this phenomenal performance is a big secret. In his trader profile, Viktor Dellos only reveals that he lives in Germany, has worked as an insurance broker and believes in Jesus Christ. Dellos has “such an incredible return that one can suspect divine help”, writes the blogger Forexchef, who has invested 10% of his capital in Dellos.

Robot or Human

Another named Weiforex wonders why Dellos “never talks about human words”. On his trading page, you’ll find mainly Bible quotes, which can also be scrolled by a robot powered by a text file. Many people suspect that Dellos is a computer program, writes blogger Weiforex. He sometimes suspects it too. But: “Who cares? As long as he keeps making money for us!

Platforms such as Etoro, IqOption or Option24 retain profit rankings that fund managers dare not dream of. Students as well as former bankers, entrepreneurs or executives speculate on them. They all disclose their securities accounts and allow others to copy their transactions. In return, they receive money from the platform operators. Popular traders thus earn several thousand euros per month. The operators in turn collect fees from investors or earn money as brokers in transactions. More and more savers with a desire to develop their capital are turning to Social Trading platforms to invest. These platforms promote the exchange of information and investment ideas through discussion forums and, above all, through cosy trading.

Social Trading explanation

“Social Trading is the phenomenon by which savers transform the knowledge of the greatest number into cash. On websites such as Sharewise, Moneymeets or Wikifolio, investors can publish and compare their strategies, make recommendations and invest in the strategies of others. In Europe, the first platforms have been in existence since 2006, and in Germany they have been at the centre of investor attention since last year. «
The interest is great,” says Adrian Englschalk, investment consultant for the Hessian Consumer Center. Many of his clients are now considering social trading because of the higher returns. “People want to fight inflation, and that’s where such platforms come in handy.”

If you want to use the knowledge of the crowd of internet users for yourself, you can just read and join the discussion. This is possible on Etoro IqOption, 24Option… for example. The websites look like a kind of financial facebook: Users register and create profiles. In a flow of information, they see what other investors recommend and can – just like professionals – give buying and selling advice themselves. If you click on a stock, for example “Sharp”, you can see how many users want to buy or sell the stock. Every second, new followers join the movement to try and make money by investing online, however, there are many offers and it can be difficult to find your way around. We suggest that you visit many sites such as …. , detailing offers from social trading sites on the market.

Sharewise and other trading platforms

With 155,000 registered users, Sharewise is one of the largest social trading platforms. Scientists at the Technical University of Darmstadt have studied the reliability of swarm intelligence in investment decisions. They compared more than 10,000 recommendations to buy and sell shares of the top 30 DAX companies of Sharewise users with those of 40 bank analysts. The result: over the same period, the swarms achieved an average 0.59% higher return. “Knowledge that is aggregated leads to a very good result,” concludes Oliver Hinz, Professor of Information Systems at the Technical University of Darmstadt. The masses score points thanks to insider knowledge and independence – after all, unlike banks and investment advisors, individual users are not under pressure to sell certain financial products because of the commission. However, the researcher points out that the value is only an average value. In some cases, the crowd can also be wrong. And: The motivation of users to make their decisions about money public is not always clear. “In the case of second-line actions, recommendations can drive up the price,” Hinz warns. It is not out of the question that the people making the recommendation may have the tip in their own portfolios. On the other hand, many users are also intrinsically motivated and want to help investors.

With platforms such as Wikifolio, Ayondo or Etoro, social trading goes beyond recommendations. The sites are copy trading portals. Investors can imitate the investment strategy of other users and invest in certificates that reflect a specific trading strategy.

Just like Wikifolio. Founded in 2012, the platform offers investors the opportunity to invest in the trading strategies of others. It works as follows: a user publishes his investment strategy, a “Wikifolio”. If the Wikifolio finds more than ten supporters, it is displayed as an index certificate at the Lang & Schwarz Aktiengesellschaft and listed on the Stuttgart stock exchange. Investors should benefit from the development of the values included in the certificate and the knowledge of the Wikifolio merchant.

The opinion of banks and investment consultants

Too complicated, finds Englschalk, consumer protectionist. “Social commerce sites are serious,” he says. “But the products are hardly tangible for the customers”. Investments in Wikifolio and Co. are not really sustainable. “The factory can be restructured as early as tomorrow,” says the consultant. Many savers are simply not close enough to the ball. In addition, the platforms are not subject to banking supervision, Englschalk criticises. The portals only have to comply with the rules of the trade supervisory authority. A consultation, as it is mandatory with banks, would avoid websites. And the users themselves are not responsible for their advice. “There is a great potential for losing money on the platforms,” says Englschalk.