The internet is undoubtedly one of the most ground-breaking and unsettling technologies in history. For example, technology has created a paradigm shift in how humans listen to music, buy and sell products and communicate.
The gaming industry has also benefited massively from the internet. For example, you can access your favorite casino games from your home. In this regard, blackjack fans may enjoy online blackjack at Ignition from their PCs or phones. Additionally, the internet has also massively impacted investors, particularly retail investors.
The Internet is a Massive Library
The internet has transformed investing by making a lot of information available to investors. Before the advent of the internet, retail investors had to visit their local libraries to access financial literature. It is here that they researched companies and securities, including mutual funds, bonds and stocks.
Alternatively, investors had to contact companies directly to get their latest financial reports. However, this option was costly in terms of postage for bulky financial reports and could also take some time because you have to wait for the company to print the report before sending it to you.
Instant Access to Information
Thanks to the internet, investors can find a company report from the Securities and Exchange Commission (SEC) website immediately after they post it. You can download large financial documents within seconds. Moreover, the internet allows investors to search for keywords, specific financial statements and topics.
Companies also have online investor relations pages where you can find the same filings. You can also find annual reports and company presentations to investors during industry conferences.
Brokers no longer have an Advantage
Numerous websites also compile and maintain financial information that investors can analyze and understand. In the past, financial intermediaries like investor managers and brokers held an advantage over individual investors.
For example, the intermediaries had more resources, allowing them to get large financial reports. Moreover, the resources enabled them to pay for expensive services to conduct security analysis. Nowadays, many free sites offer financial information and reviews on the best investment companies. But others charge nominal yearly fees for those who want to get more specialized data.
Online Trading is more Economical
Another critical benefit the internet has had on investing is lowering investor fees. Particularly, retail investors enjoy a significant decline in the commission rates they pay to trade securities. Nowadays, you will regularly find an online broker offering about $10 to make a regular stock trade.
Before discount brokers became widely available, full-service brokers exerted their control over the market. This control allowed them to charge what is not considered exorbitant commission rates.
Trading has Benefited from Internet Piping
Trading has also benefited from electronic networks that provide trade information through internet piping. There is a lot of controversy surrounding high-frequency traders (HFT). For example, many accuse them of contributing to above-average stock market volatility.
However, HFTs have also been credited with reducing bid-ask spreads, which is the different cost that exists when you buy (the bid price) and sell (the asking price) a security. Currently, the spread has been reduced to pennies. In the past, the spread was wide enough to allow brokerage firms a chance to take money from investors.
Transparency
Many investors can analyze information and draw their own conclusions on how to price securities correctly. As a result, it leads to disintermediation, allowing investors to bypass the traditional full-service brokers and advisors for information and trading.
A New Generation of Investors
Online trading apps have given birth to a new generation of investors in the stock market. The trading apps allow casual investors to trade without going through bank-run brokerage companies.
Moreover, the apps offer options trading, a form of trading where users reserve the right to buy stock in the future. They make the purchasing decision based on what they believe will happen to the stock prices.
Also, this new generation of investors loves the combination of gamification and community. Reports have suggested that these two elements have attracted many investors.
Final Thoughts
By and large, online investment has given individuals considerable power by changing how investors get financial information. It has also significantly lowered trading costs for those participating in the financial markets.
