The Occupy Wall Street movement wasn’t the first time economic inequality made the news. But it did call more attention to the disparities in the financial system. The Occupy movement also highlighted how the structure of that system is set up to benefit those who run it. Even though more people make up the 99% or “Main Street,” it’s the 1% who continue to pull ahead.
Delphia, an investment startup founded in 2018, wants to change that system. Through its investment model, which is based on an algorithm that gets smarter the more data it consumes, Delphia hopes to make the stock market work for the everyday investor.
Delphia’s goal, says CEO Andrew Peek, is to change the system so it can work for everyone.
“To change the system so it can work for everyone” is a statement that may sound overly idealistic and too much like the lofty goal that Occupy Wall Street wasn’t able to fully realize. But Delphia is betting on the combined power of its AI-driven algorithm and the voluntary participation of frustrated Main Street investors. The investment firm hopes to bring fairness back to the market through the concepts of quantitative investing and collective data.
Why Delphia is Different — Changing the System
When most people want to invest, they put money in a 401(k), mutual fund, a money market fund, treasury bonds, or a CD. But Peek describes the world of investing as a simple decision tree. In the first place — a would-be investor needs to decide who is making the investment decisions — them or an investment manager.
No matter what the investor decides, Main Street investors have to place their trust in the data that’s available to them or to the decisions of that manager. Those who go it alone rely on an understanding of how financial markets and investments work. In a lot of cases, this understanding involves an analysis of a stock’s (or fund’s) key performance indicators.
The return profile of a stock or fund can either be in or out of alignment with a person’s investment goals and risk tolerance. Peek argues that investors who are content with average returns should pay the least amount possible to get those returns by using index funds. But investors who want above-average returns have two investment styles to choose from.
Two Styles of Investing
According to Peek, those two styles are fundamental and quantitative investing. Fundamental investing involves deep research on a handful of stocks while using machines to parse terabytes of data. The data can then 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 its CIO (Chief Investment Officer) Jonathan Briggs, and Head of Research, Emre Konukoglu.
Quantitative Investing from a Mobile App
Delphia believes that this is the first time retail investors have access to quantitative investing from a mobile app. The firm delivers a 200-stock portfolio yet doesn’t charge investors any fees. Instead, it asks everyone to commit to sharing their data to makeDelphia’ss AI smarter.
Voluntary Participation
The value of the stock market is a function of speculation on the part of investors, and the actual performance of the companies within it. Since performance is only revealed every three months, big data has made its way into the speculation side of the equation as investors estimate the actual performance.
Consumers Access to Data
A lot of the data used to estimate company performance belongs to consumers. It can be anything from their purchasing behaviors and financial transactions, to the ways people engage with companies 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 a stock’s value is not available to retail investors. They don’t see where that information is coming from, who controls or is selling it, or even how it’s being used.
Buying Consumer Personal Data
Despite increased stock market investing by Main Street, institutional investors still exercise control over the majority of the market. And that means hedge funds, whom these institutions invest with, have deeper pockets which allow them to buy consumer data and use it to their advantage.” “Believe it or not,” Peek says, “Delphia’s model was actually inspired by the Cambridge Analytica scandal.
The company’s co-founders recognized the power of personal data, but they were concerned about how the world was weaponizing it against unsuspecting people. So Delphia’s investment model came from the idea of helping people use their personal data to their own advantage instead of to the benefit of WallStreet’ss elite.
The co-founders wanted to build a product that would let people 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 companys’ algorithm make better predictions.
This data comes from consumers’ social media accounts and credit cards, but investors can choose which 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 a stock’s value. The hope is that data volunteered from Delphia’s own investor base, will help the artificial intelligence behind the algorithm get an earlier read on a company’s performance before it is publicly announced.
Peek saysDelphia’ss vision is to use voluntarily shared data to improve one’s investment returns, thus allowing more people to achieve financial prosperity.
The Future Delphia’s Investment Strategy
Over the past year, Delphia launched its first true quantitative investment strategy, and thus far, 3,000 people have consented to contribute their data, while over 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 firm will eventually rely on a blend of data it buys and data its investors freely contribute.
Enhance Individual Returns
As for the immediate future, Peek envisions contributions that will allow Delphia to develop a proprietary data set to enhance people’s returns further. One way the company plans to encourage those data contributions is through its Data Dividend Rewards Program. The DDRP Rewards Program rewards investors with a chance to win cash each week in exchange for helping Delphia train its AI.
If Delphia’s predictions are correct, the world of investing will shift away from the purchase of consumer data and the absence of informed consumer consent.
On its website, Delphia boldly predicts that hedge funds and corporations will not be able to buy consumer data without consent as soon as 2024. Instead, Corporate America will need to reach out to consumers and directly make the ask. Sound familiar? It’s exactly what Delphia is already busy doing.
To help you better understand our processes — please read our Terms of Service at https://delphia.com/legal
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