The Occupy Wall Street movement was not the first time that economic inequality made the news. But he drew more attention to the disparities in the financial system. The Occupy movement also highlighted how the structure of that system is configured to benefit those who run it. Although more people make up the 99% or “Main Street”, it is the 1% that continues to advance.
Delphia, an investment startup founded in 2018, wants to change that system. Through her investment model, which is based on an algorithm that gets smarter the more data it consumes, Delphia hopes the stock market will work for the everyday investor.
Delphia’s goal, says CEO Andrew Peek, is to change the system so that it works for everyone.
“Change the system so it can work for everyone” is a statement that may sound too idealistic and too close to the noble goal that Occupy Wall Street failed to fully realize. But Delphia is betting on the combined power of its AI-powered algorithm and the voluntary involvement of frustrated Main Street investors. The investment firm hopes to return equity to the market through the concepts of quantitative investing and collective data.
Why Delphia is different: change the system
When most people want to invest, they put money in a 401 (k), a mutual fund, a money market fund, treasury bonds, or a CD. But Peek describes the world of investing as a simple decision tree. First, a prospective investor must decide who makes the investment decisions: himself or an investment manager.
Regardless of what the investor decides, Main Street investors have to place their trust in the data that is available to them or in the decisions of that manager. Those who do it alone trust that they understand how financial markets and investments work. In many cases, this understanding involves an analysis of the key performance indicators of a stock (or fund).
The performance profile of a stock or fund may or may not be aligned with an individual’s investment objectives and risk tolerance. Peek argues that investors who are content with average returns should pay as little as possible to obtain those returns through the use of index funds. But investors who want above-average returns have two investment styles to choose from.
Two investment styles
According to Peek, those two styles are fundamental and quantitative investments. Fundamental investing involves deep investigation of a handful of stocks while using machines to analyze terabytes of data. The data can be used to take small positions in hundreds or even thousands of stocks.
Use an algorithm
Delphia takes the latter approach using an algorithm developed by her CIO (Chief Investment Officer) Jonathan Briggs, and Head of Research, Emre Konukoglu.
Quantitative investment from a mobile application
Delphia believes this is the first time that retail investors have access to quantitative investments from a mobile app. The firm offers a portfolio of 200 shares, but does not charge fees to investors. Instead, it asks everyone to commit to sharing their data to make Delphia’s AI smarter.
The value of the stock market is a function of speculation by investors and the actual performance of the companies that comprise it. Since the return is only revealed every three months, big data has been introduced to the speculation side of the equation as investors estimate the actual return.
Consumer access to data
Much of the data used to estimate company performance belongs to consumers. It can be anything from your shopping behaviors and financial transactions, to the ways people engage with businesses on social media. All of this data can fuel speculation about whether a stock will go up or down.
However, much of the data that can help determine the value of a stock is not available to retail investors. They don’t see where that information comes from, who controls or sells it, or even how it’s used.
Purchase of consumer personal data
Despite increased investment in the stock market Down Main Street, institutional investors still have control over most of the market. And that means that the hedge funds, with whom these institutions invest, have deeper pockets that allow them to buy consumer data and use it to their advantage. “” Believe it or not, “says Peek,” Delphia’s model in It was actually inspired by the Cambridge Analytica scandal.
The company’s co-founders recognized the power of personal data, but were concerned about how the world was arming it against unsuspecting people. So Delphia’s investment model grew out of the idea of helping people use their personal data for their own benefit rather than for the benefit of WallStreet’s elite.
The co-founders wanted to create a product that would allow people to safely benefit from their data, so they created an investment strategy to improve consumer data over time.
You choose how your data is used
People who choose to make investments through Delphia’s model agree to share their data to help the company’s algorithm make better predictions.
This data comes from consumers’ social media accounts and credit cards, but investors can choose what information to share. Delphia’s algorithm uses terabytes of data to make its investment decisions.
By measuring things like changes in a company’s sales, the algorithm can predict increases or decreases in the value of a stock. The hope is that data voluntarily provided by Delphia’s own investor base will help the artificial intelligence behind the algorithm get an earlier reading of a company’s performance before it is publicly announced.
Peek says Delphia’s vision is to use voluntarily shared data to improve return on investments, thereby enabling more people to achieve financial prosperity.
Delphia’s future investment strategy
Over the past year, Delphia launched its first true quantitative investment strategy and, so far, 3,000 people have consented to contribute their data, while more than 4,000 investment accounts have been opened.
Currently, the strategy achieves its returns using commercially available data. However, as the number of people contributing data to Delphia continues to grow, the company will eventually rely on a combination of data that it buys and data that its investors freely contribute.
Improve individual returns
Looking at the immediate future, Peek envisions contributions that will allow Delphia to develop a proprietary data set to further improve people’s returns. One way the company plans to encourage those data contributions is through its Data Dividend Rewards Program. The DDRP rewards program rewards investors with the opportunity to earn cash each week in exchange for helping Delphia train her artificial intelligence.
If Delphia’s predictions are correct, the investing world will shift away from buying consumer data and the absence of informed consent from the consumer.
On her website, Delphia boldly predicts that hedge funds and corporations won’t be able to buy consumer data without their consent as early as 2024. Instead, Corporate America will need to reach out to consumers and apply directly. Sounds familiar? It’s exactly what Delphia is already doing.
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