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The Internet’s Impact on Investment
With a wealth of information, online platforms, and real-time data at our fingertips, the landscape of investing has been fundamentally transformed
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The Internet is a big deal. It changed how we do lots of things, like listening to music, watching movies, buying stuff, and talking to each other. It’s also made investing better for regular people.
Evolution of Communication
The Internet has made investing much easier. Before, if you wanted to learn about investing, you had to go to the library or ask companies for reports.
This could take a long time and cost money. But now, with the Internet, you can find information quickly.
You can get reports from the Securities and Exchange Commission (SEC) website as soon as they’re available. Big documents can be downloaded in seconds, and you can search for specific information. Companies also have web pages for investors where you can find reports and presentations.
Many websites have financial information that you can use to make decisions about investing. In the past, professional investors had an advantage because they could get reports and pay for expensive analysis.
But now, there are free websites and some that charge a small fee for specialised data, so anyone can access useful financial information.
Lower Fees
The Internet has also made investing cheaper for people. In the past, investors had to pay high fees to brokers, sometimes as much as 2.5% of the trade amount. For example, they might have to pay 250 Pounds to trade 100 shares of a stock at 100 Pounds per share.
Now, with the Internet, you can find online brokers that charge as little as $10 for a common stock trade. Electronic networks on the Internet make trading faster, and while high-frequency traders have caused some controversy, they have also made it cheaper.
The difference between buying and selling prices, called the bid-ask spread, used to be bigger, but now it’s just a few pennies.
This used to be another way brokerage firms made money from investors, but the Internet has changed that.
Other Key Benefits
An academic study from the Wharton Business School in 2000 outlined three main benefits that the Internet brought to investing:
Transparency: The Internet allowed a broader range of investors to access and analyse information, enabling them to make their own decisions about how to value securities.
Differential Pricing: This refers to the decline of full-service brokers who used to charge high fees. The Internet reduced the costs associated with financial transactions, making it more affordable for investors.
Disintermediation: This term means that investors could skip traditional full-service brokers and advisors and instead obtain information and trade securities directly, thanks to the Internet.
Bottom Line
In summary, the Internet has empowered individuals by giving them more control over financial information and has greatly reduced costs for most participants in the financial market.
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