E*TRADE launches its community platform. Should stock markets be social?

Stocks. Finance. Banking. Hedge funds. The very words could make a person’s head spin, and that’s because the financial industry is a purposefully complicated one, designed so that the rich get richer and plebeians stay put.

But not even the financial industry can remain untouched by the social web’s golden claw as companies like Zecco, Schwab, and Scottrade have all built online communities for active and casual investors to share information with one another. Jumping on the social bandwagon, E*TRADE launched its own community this week that lets investors (U.S. only) share financial knowledge with other investors.

The E*TRADE Community appears in a seamless fashion in the user’s dashboard. Community members can create pages similarly to the way they might on Facebook, see who’s trading what and when, follow other investors a la Twitter, chat with connected members and compare their activity to other investors. On users’ profiles, members can describe their investment style, objective and experience. The Community aggregates useful information such as whether members are bullish or bearish on a given day; the top 25% stocks held by community members; the most actively traded stocks; the most discussed stocks and a chart of stock totals traded by sell volume versus buy volume. One particularly handy tool ranks the top performing Community members. At this time top performing members can’t exchange advice for cash.

The Community includes a forum to share opinions and browse latest discussions. Here, members can use these discussion boards to ask for recommendations and receive accountable information, insights and strategies. Community discussion features include boards for S&P 500 stocks, and relevant industry topics, key-word search and tagged discussions.

E*TRADE has been experimenting with social platforms since 1999, and has a presence on Facebook, Twitter and Yahoo according to Alison Cahill, Senior Manager, Corporate Communications. But this is a market known for thriving as an opaque environment. How will a social platform affect investors? “We’ve seen such volatility in the markets after the events that have taken place over the past few years and more and more consumers are going to the web to validate their buying decisions. We’re offering an online resource of people who are sharing their opinions and experiences,” says Cahill.

“The recession has woken people up. They want to be more involved and understand what they’re invested in and why. We’ve seen investors move from discretional portfolio mangement to the more self-directed space. I think social investing is going to drive that even further. Education is a huge part of investing and the ability to get online and share ideas facilitates that; social platforms enable investors are to become more educated and engaged,”  says Bonnie Van Dyke, Director of Product Management at E*TRADE.

In the future, E*TRADE will bring its community to mobile and integrate with Twitter so that when a user tweets about an investment it will show up in their E*TRADE profile. Looking forward further, how will a social network affect investors’ actions- will the added transparency benefit investors, perhaps some more than others? Or will it open up vulnerabilities that didn’t exist before?