How The Web Has Changed the Life of an Investor
The Internet has completely changed the way we live and do business. It has made the world smaller, information easier to obtain, and products or services easier to locate and purchase. It has altered the way we think, act, and communicate. It has also revolutionized the way we invest and trade the financial markets. The life of an investor is vastly different than it was in the pre-Internet age.
For those of you who are considered to be baby-boomers, you certainly remember investing before prior to the advent of the Internet. It was an entirely different era for investors: slower, less diverse, and with limited access and information. Trades were made through a full-service broker; they were more expensive and time-consuming. The web has fundamentally changed the way investors interface with the markets and their brokerage accounts.
Before the age of wireless communication and the Internet, investors used full-service brokers to make trades. You sent your picks to your broker and the broker executed the order; trades usually had to be made in share lots of 100 or more. A large percentage of people did not participate in the market as these full-service brokers were priced far too high for the average working person in the United States. These brokers charged commissions that were often hundreds of dollars per trade. In today's market, investors can trade and manage their accounts from the comfort of home, without the services of a personal broker. You can sign into your brokerage account, fill in the information on the trades you want to place, and click. You can purchase just one share or hundreds. Online investing is accessible and affordable for almost every investor.
Many investors now utilize the services of online discount brokers. However, this was not the case for most of the 20th century; traditional brokerage houses controlled the market. Investors had nowhere else to turn if they wanted to get involved in the financial markets. The era of the discount broker began in 1975, long before the Internet became a household fixture. On May 1, 1975, the United States Congress deregulated the stock brokerage industry and took away the power of the New York Stock Exchange to determine commission rates charged by its members. Quick & Reilly was the first brokerage firm with a seat on the NYSE to substantially lower their commissions for its no-frills service. With this no-frills service, an investor worked with a broker to execute trades, but did not receive any investment advice.
Though discount brokers existed before the proliferation of the Internet, these low-cost brokers are now ubiquitous in the investment world. With discount brokers, investors get faster service at far lower rates; they can also trade from almost any location and at any time of the day that fits their schedule.
Prior to the Internet, research on stocks, bonds, and other investments was more difficult to find. Valuable research existed in the certain publication such as, The Wall Street Journal, Barron's, but the print media could not offer real-time market coverage. The Internet can provide investors with real-time coverage of events and changes in market conditions. The web allows investors to have up-to-the-minute data on markets, stock prices, investment research, and analyst's opinions. Most online brokers offer a vast range of research and analytical tools geared for the average investor. For almost any stock or investment vehicle, the web can provide information, analysis, and opinion.
There are so many types of investments and so much information available now that investment discipline cab be a problem. Investing online is like a small kid getting locked inside the largest candy store in town; there are so many choices and temptations, it takes determined discipline to choose wisely. You can trade stocks, options, futures, bonds, binary options, and other exotic investments. The trading choices are seemingly endless and information on these choices is only a click away. However, the Internet is also replete with misinformation, hype, and promotional hyperbole. With so much information, it almost becomes impossible to differentiate between the good and the bad. Before investors are constantly bombarded with vast amounts of information, discipline is even more important now than in the dark days before the web. It is essential to assess your goals, your expectations and your resources before you begin to invest. Once you have created an investment plan, it is vital that you be disciplined enough to stick to it, and flexible enough to adapt to a constantly changing financial environment.
In 1995, it is rumored that Bill Gates said, "the Internet is just a passing fad." If Mr. Gates truly said that, he sure misfired on that prediction. The web has influenced every aspect of our lives. From entertainment to business, from travel to consumer spending, from education to investing, the Internet has revolutionized our society. Investors now have access and information that would have seemed like science fiction only thirty years ago.