Technology and Investing

There’s got to be a way to leverage technology to improve the individual investor’s abilities to invest intelligently.

The discount brokerages like E*Trade and ScottTrade have set us off in the right direction, with portfolio tools and lots of online data access.  But it’s not enough — I need to be able to access my data any way I want to access it, and I need to be able to build scripts that will monitor for events and let me know about them or take action on my behalf.

Let’s start simple:  Suppose I want to monitor the price of a particular stock, and buy it if it drops to a specific level.  E*Trade provides some functionality in this regard, but it’s only for the price level itself — I can set a trigger if the price hits X.  I want to be able to define the trigger itself, ie, send me an alert when ANY stock drops FURTHER than other stocks in its industry, or possibly relative to the S&P500.   And then I want to be able to limit it from ANY stock to just a set of stocks I want to monitor.

Next up, I want to set specific sell orders, again, not relative to the price.  Suppose I monitor a stock and I use some kind of value investing metric to determine whether the stock is still worth the price.  Maybe I look at Earnings to Cash Flow, and if the ratio gets too big I sell the stock.  I might not be monitoring this everyday, but a computer can.  I might build in a buffer that says something like “watch for 2 quarters in a row of high ratio and sell if you see it” or something like this.

Next, I’d really like to determine how my rate of return is calculated.  I want to account for inflation, the original purchase price (not just the yearly return), the dividends reinvested, etc.  Just giving me one number for this year is stupid and tells me nothing.  Similarly for the whole portfolio — I should be able to tell at a glance if it is worth more today than it was at any particular date, adjusting for inflation if I so choose.

Now, I want to create my own pricing metric.  Suppose I can come up with a way to measure what I think the price of a stock should be.  I should be able to track that in time series along with the actual market price of the stock, and use the difference between the two to make decisions.  This is what I was alluding to in yesterday’s post about Warren Buffett’s approach.

Finally, I could do all this myself on my own system if I could just have a really good external API for accessing my information from within E*Trade.  At least let me download my purchase information for every transaction I’ve made on E*Trade, so I can enter it into my own system.