Than the social networks of traders can be dangerous for private investors


Last week Sberbank announced plans for the development of the social network of eToro traders in Russia (venture Fund of Sberbank’s SBT Venture Capital has entered the capital of the company in 2014). And the President of Sberbank German Gref at a news conference said that finally the Bank’s customers will have the opportunity to trade on financial markets using the knowledge and experience of other traders from around the world. That is essentially the way the service copy trades of most successful speculators. And said that personally already invested $500, by choosing the strategy a four-member social network.

Honestly, I was very surprised. No, not the fact that the Bank invested in this project — it just may well be a good investment. And the fact that the management of large state-owned Bank in fact advertises extremely risky investments, is contraindicated in most of our citizens because of lack of proper level of financial literacy.

Believe me, I know what I’m talking about — we have since 2006 developed social network for traders WhoTrades, too, by the way, the international and the largest in Russia. And one of the key challenges we faced at the time, not about how to give customers the opportunity to join the most successful strategies of professional traders — this is a complex question, but more technical.

The same fundamental issue — how to protect private investors from gross errors, to make their choice was very deliberate that they have correctly assessed the risks and chose only those strategies that fit their interests.

And do not think, incidentally, that we are altruists, some are sitting, it is a matter of business. The broker earns a Commission from the client’s transactions on their account. Therefore, it is interested that the client successfully invested, remained on the market. Bankrupt due to their own ignorance of the customer is most likely to leave the market, if not forever, then for a long time, for us it is lost profit. Therefore, the question of financial security of investors was really for us a matter of principle.

And decision it took quite a lot of effort. In particular, traders working in the system and offering private investors their strategies, we are obliged to disclose in detail the essence of their strategies and the inherent risks associated with commonly used financial tools. In addition, we carry out explanatory work among investors, to offer their own strategies that have passed the examination. The most difficult moment, by the way, was to convince the client that the most profitable strategy isn’t always the best. For example, a strategy with a yield of 800% per annum may be at their maximums, that is acceded to, the investor risks being in the red. But the strategy with a “modest” 25% per annum at the moment may have the greatest potential for growth.

And here are two practical output. First — just to understand what strategies offer the traders to understand them, we need a basic level of financial literacy. This, of course, no guarantee that come to you the private investor did not buy the product, which he expected, but still significantly reduces the likelihood of such a development.

Second — as practice shows, those strategies work in the market that ensure sustainable profitability and at the same time belong to “conservative”, that is a safe-haven, giving a fairly high assurance that the investor will not suffer a significant loss, require pretty significant investments of at least 80-100 thousand rubles And even more risky speculative strategy, if they are based on investments in real assets, in securities of companies or other instruments of the stock market, too, require similar amounts minimum investment — otherwise you cannot build the portfolio of financial instruments.

This does not mean that you cannot work in the financial market with $100. Can. And surely you will be able to offer a strategy that even with this amount of investment theoretically can bring more or less a decent income. But with absolute confidence I can say: if we are really talking about high income, the possibility to copy an experienced trader, it will be not an investment, and vysokodekorativnye strategy. And, most likely, associated with the financial surrogates.

In the case of eToro is the so — called CFDs, contracts “for difference”, when not acquired real assets, and, roughly speaking, a bet is placed regarding the mutual rates of change of assets. The range of social networks also includes currency and “commodities” is a classic assortment of a Forex firm. While speculators are trading with huge shoulders — having conditionally $100, you can make a deal for $40 thousand In this market is very likely to lose all the money in the first days, if not hours.

The mediator, through which operations the dealer, often earn more than lose more customers. This is a purely mathematical law, it is understood by all who work professionally in the financial markets. And to bypass it it is impossible, even if such investments actually calls the head of the large state-owned Bank, well-deserved reputation of a reliable.

The state, by the way, understands this. That is why, by the way, this year Russia has banned the advertising of services in the Forex market by companies that are not licensed by the Bank of Russia, i.e. all companies operating in non-Russian and in a foreign jurisdiction (eToro homeland — Israel). But the personal example of the head of the state Bank is, of course, in the strict sense of the word, not advertising. Although only in a bad dream you can imagine what would happen if this example will be followed by millions of Russians who do not understand that such investments are much riskier roulette games. Which, by the way, in Russia almost everywhere, except for special zones is also prohibited.