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Social Trading Offers New Way to Copy Money Managers

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In recent years, the amount of money put into managed investment funds has been shrinking, as more people favor mutual and exchange-traded funds as well as other passive modes of investing.

This trend is only expected to continue, with index funds in general being three times more likely to reap returns at least equal the benchmark level. Other benefits of passive funds include lower fees, and the ability to oversee and control your account yourself, rather than relying on an intermediary.

Another game-changer in the field of money management is the growth of social investing, in which online and mobile platforms allow consumers to track and copy the trading and investments decisions of others. This gives average people the opportunity to copy money managers without giving up control over or access to their accounts.

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The idea of looking to other investors for tips and strategies is not new; for decades people have been putting their money in the same places as Warren Buffett and other well-known investors, hoping for similar success.  Social trading platforms allow full-access to investors’ moves in real time, rather than having to wait for quarterly-reports or shareholder meetings to discover such information.

The systems can usually also be automated, with users setting portions of their profiles to automatically copy other specific investors. The platforms also offer a number of options, include stop-loss measures, and ranking of top traders and investors, giving users the information and tools they need to oversee their money and investments.

This way, users get the benefit of following the investment guidance of others without having to give up control over their accounts or pay high fees.

It is not only the average person, who benefits from this ability to copy other trader and investors on these platforms, those who are copied also earn commissions.  This allows successful investors and traders to essentially become money managers, influencing the decisions of those who follow them. So while the idea to copy money managers is not new to the world of investing, social trading platforms have made this strategy easier to implement and more accessible to millions of investors.