In March 2009, the Dow Jones Industrial Average -- the standard measurement of the market's overall strength -- dipped below 7,000 points, the lowest since 1997. All told, the Dow Jones has lost 53 percent of its value since the United States stock market peaked in October 2007, dropping a whopping 7,200 points [source: Shell].
Across the U.S., many people are responding to the global financial crisis by banding together in smaller, supportive communities. Stock traders are no different. Many investors have lost faith in the worldwide financial system. When huge investment firms like Merrill Lynch and Goldman Sachs -- longtime Wall Street power brokers -- go down in flames, perhaps it's time for an alternative to impersonal brokerage houses or lonely e-trading.
Since the market began its downward plummet in 2007, there has been a sharp rise in subscriptions to online social networks focused on investing [source: Bogoslaw]. The logic behind an investment social network is simple: to build an online community where individual investors and amateur market researchers can share their collective knowledge and offer advice. People can swap tips about buzzworthy stocks and discuss the investment strategies that pay the biggest returns.
Investor Village is an investment social network that has been around since late 2003. It was originally called "BuyB4theRush" and was a private stock discussion community. Since its start, Investor Village has earned a reputation for the intelligence of its users and the civil discourse of its message boards.
Investor Village is still primarily a message board site, with over 16,000 active boards and hundreds of member-run groups -- some with tens of thousands of subscribers.
How exactly do you use Investor Village? Is it safe to make a trade based on advice you read on one of the site's message boards? Most importantly, is it free?
Using Investor Village
Alas, Investor Village isn't free. Only registered, paying members can view individual message board threads and respond to postings on the site. As of June 2009, the cost of membership is $8.99 a month, or $71.88 for the entire year. If you're interested but not ready to make a commitment, Investor Village offers a seven-day no-obligation trial as well.
Every new member chooses an "alias," the username by which he or she will be known on the site. Members are also encouraged to fill out their user profile, which includes information like age, sex, location, education, occupation and favorite stocks. There is no official place to enter your name, so most members keep their identities anonymous.
The Investor Village Web site is organized into three main sections: message boards, groups and a personalized member area called MyIV. If you click on the "Message Board" link in the top navigation menu, you'll be brought to the Message Board Directory. Each message board is named after a publicly traded company and is listed by the company's name and stock ticker symbol. At the top of the Message Board Directory are search fields where you can locate a message board by company name, ticker symbol or keyword.
Below the search area, you'll find a list of the top five most active message boards for eight different categories, including large cap, mid cap and small cap stocks, as well as community boards and Investor Village Groups.
Investor Village Groups look a lot like normal message boards, but there are some key differences. Groups are started by members and can be built around any topic, not just an individual company. Also, participation on group message boards is limited to members of the group. Any registered user can apply to join a group and some are more exclusive than others.
In the MyIV section, members can view their inbox of "private messages," Investor Village's internal messaging system. MyIV is also where members can save and track their favorite message board threads, build a list of favorite members, share their investment portfolios and set notification preferences.
In notification preferences, you can choose to be e-mailed every time another member comments on one of your board postings or sends you a private message. As June 2009, the Blog section of the Web site is still in development.
On the next page, we'll examine how safe it is to use a social network like Investor Village.
Investor Village Security
Security concerns at a social networking site like Investor Village are less about hacking or forfeiting personal information than being swindled by inept or purposefully misleading financial advice.
To register for Investor Village, you need to check a box agreeing to the terms and conditions of membership, also known as the user agreement. The user agreement makes it clear that the owners and administrators of Investor Village do not verify or endorse any opinions posted on the site. Therefore, they take no responsibility for the accuracy of the content provided by the site's thousands of members.
The Investor Village user agreement emphasizes that members are not financial experts. Many of them are, to quote the user agreement, "'do-it-yourself' retail investors and/or traders with little or no training, education, experience or any other specialized knowledge of the markets, investing or other financial matters."
Investor Village administrators suggest that all advice and information found on the site should be considered with "discretion and skepticism." They encourage members to independently verify all tips before taking action that could be financially ruinous.
The Investor Village user agreement calls special attention to information on the site concerning small cap stocks. These types of stocks -- denoting companies that are generally worth $2 billion or less -- are much more susceptible to price manipulations.
The most popular price manipulation scheme is called a "pump and dump" operation. In this scam, a collection of self-proclaimed "experts" or "insiders" spread the news that a hot new stock is going to skyrocket over the next few days. As other people buy the stock, the price will naturally rise, lending an air of credibility to the tip.
Unfortunately, the bubble always bursts, often because the stock represents only the shell of a real company. As everyone starts to sell like mad, the price comes crashing back down. The perpetrators of a pump and dump scheme know the collapse is coming, of course, and wisely "dump," or sell, their stocks at the inflated price [source: SEC].
Investor Village does not routinely scan message board posts for illegal or abusive activity. Instead, the site relies on a self-regulating system in which users can flag messages that appear to break the user agreement. The site administrators say that they do their best to investigate all claims of abuse and take appropriate action.
As long as you're a cautious investor, there are a lot of advantages to joining a social networking site like Investor Village. Read more about them on the next page.
Benefits of Investor Village
The biggest benefit of joining an investment social network like Investor Village is the chance to tap into the collective wisdom of people who are serious about investing. Members are not all experts, as the Investor Village user agreement asserts, but they are actively engaged in identifying emerging markets and pinpointing stocks with the most growth potential.
Since Investor Village is for paying members only, it isn't a popular target for spammers, phishers, scammers, flamers and other message board annoyances. The average Investor Village user is older, affluent -- and hopelessly addicted to the Web site. According to the Web analysts at Quantcast, 87 percent of Investor Village members are male, 85 percent are 35 years of age or older, 62 percent make more than $100,000 a year and a core 45 percent of members drive 91 percent of the traffic [source: Quantcast].
The kind of person who would benefit most from a membership to Investor Village is someone who already spends a lot of time researching companies and studying market trends for personal investments. For this type of person, a social network like Investor Village provides an excellent sounding board for new strategies.
Another benefit of Investor Village is that other members can turn you on to stock picks that you may have never considered otherwise. Perhaps you post a message about what you feel is an underexplored sector of the market, like mining companies. Another member might post a reply recommending some mining companies that he's been following for several years. Now you have a head start on your own research.
Ultimately, one of the greatest benefits of Investor Village is that it provides a sense of community and camaraderie with other investors who are looking for ways to turn a profit during an unprecedented global financial crisis [source: Bogoslaw]. Members can share the excitement of beating the system together -- finding the small niches of the market that are still growing and scoring big.
For lots more information about investing and the stock market, follow the helpful links on the next page.
Related HowStuffWorks Articles
- Bogoslaw, David. BusinessWeek." Social Networking Hits Investing." August 21, 2007 (June 15, 2009)http://www.businessweek.com/investor/content/aug2007/pi20070820_780840.htm
- Investor Village. "User Agreement"http://www.investorvillage.com/UserAgreement.asp
- Quantcast. "Investor Village" (June 15, 2009)http://www.quantcast.com/investorvillage.com
- Shell, Adam. USA Today. "Stocks fall to lowest level since 1997 as Dow drops below 6,800." March 2, 2009 (June 15, 2009)http://www.usatoday.com/money/markets/2009-03-02-stocks-monday_N.htm
- U.S. Securities and Exchange Commission. "Pump and Dump Schemes." (June 15, 2009)http://www.sec.gov/answers/pumpdump.htm