Empirical research on retail investors has attempted to explain online investor subpar perfor­ mance by inferior decision-making and behavioural biases. The previous findings on human reasoning have mostly been based on quantitative transaction and investing account data. The purpose of this study was to explore investor priorities and reasoning to improve investing processes co-created by investors and online investing platform service providers. The findings are based on direct access to investors through qualitative interviews and participative analyses of live online investing platforms. A modified design science approach was applied to evaluate the development initiatives identified.
While investors remain exposed to behavioural biases, bias mitigation methods have been dis­ covered to develop during the investor life-cycle - reducing the explanatory power of traditional biases. A new biased behaviour named tangibility bias has been suggested. This bias makes investors compromise portfolios for improved contrai and transparency.
An investor's portfolio management activities may be limited by bounded rationality, but the individual also lives in a reality bounded by practical restrictions, non-financial objectives and beliefs. This contextual rationality may involve hedonic objectives and the investor may ques­ tion the validity of investing tenets like portfolio asset allocation. As a result of bounded and contextual rationality, experienced investors may have an inclination for underdiversified port­ folios with a strong focus on individual investment positions. lnvesting is a multiple-year, man­ aged undertaking, and focusing only on human shortcomings in momentary decision-making fails to recognise the importance of the overall investing process managed over multiple years.
The use of decision support provided by online investing platforms was limited. The main prac­ tical role of the platforms was execution of already incubated decisions and monitoring of in­ vestment performance. The reasons given for not adopting portfolio-level decision support were: incompatibility with investors' investing approach, usability issues and lack of transpar­ ency. More trivial reasons included absence of portfolio management functionality or investor disinterest in implementing normative investing tenets and asset allocation. ln empirical litera­ ture, potential reasons have been discovered for the negative impact of online investing. lnves­ tors found information overflow complicating the decision-making. Short-term position data was conspicuous at the cost of long-term portfolio performance feedback. A proportion of investors felt a push to deviate from their rather passive investing agenda.
Potential for improved investor-platform interaction was evaluated using an ex-ante focused design science approach. The analyses and evaluations showed that investors can be nudged to adopt planning and portfolio level functions if the user experience is positive, the investor is not required to change the investing process and perceived complicity is not increased. Not only the investing style, but persona! motivation and engagement play a role in the adoption of new platform decision support. lnvestors are a heterogeneous group of users and modularisation of investing services is suggested to match the diversity in investor needs and priorities. Even though automated investing did not attract this self-directed investor sample, a proportion of investor participants expressed interest in interactive artificial intelligence based analytics, advice and suggestions.