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Technology Has Changed Investing – Here’s How

– Contributed content –

Phone and keyboard

(MaxPixel)

5 May 2017. Computers and the Internet have changed, well, a lot of things in pretty profound ways. Sure, just how much change has occurred due to such technology is often overstated. But there are certain areas of the business and finance world where things were turned almost completely on their head.

One of those areas is investing. Sure, a lot of it is still done the old way. The act of investing in real estate, for example, has seen little in the way of big change. But when it comes to things like stocks, things are different. So much has been fundamentally changed – some things for the better, and some things for the worse.

Let’s take a quick look at the ways in which technology has changed the world of investment.

The barrier to entry has been weakened

In the last thirty to forty years, the number of Americans who own stock has increased significantly (although it has been on the decrease recently). With the Internet, there’s very little anyone can do to stop someone who wants to invest. You don’t have to meet anyone face-to-face or even talk to anyone over the phone. You go to the right website, create an account, throw in your credit card details, and away you go. When you consider the sort of investments that start at very small amounts of money, it’s clear that the barrier to entry in the world of investment has been weakened considerably, if not destroyed.

Hand with tech devices

(Arismendy Polanco, Flickr)

Communication is easier than ever

Investment requires a lot of communication. With email and instant messaging – something stock brokers and other investment professionals are taking full advantage of – you’re no longer stuck to having to phone the person you’re working with and hope they’re available. Trying to call your broker in the middle of the night would probably have gotten you dropped as a client (unless you have a really good investment find). Modern communication technology has changed the game a lot because it’s also made overseas investment so much cheaper and easier. You have to worry much less about the timezone of overseas partners and brokers if you’re only sending them an email!

Investor screen

(dawnfu, Pixabay)

Costs have been reduced

The prices of your average asset certainly haven’t reduced – technology certainly hasn’t helped make real estate more affordable, after all! But the prices involved in the activities you need to engage with in order to start investing have reduced a lot. Communication and commissions are cheaper than ever. A few decades ago, you would have had to call your broker and give them a commission of something closer to $50 than the average $10 today. Back in the day, you were also pretty much forced to use a broker! You can now get into this without one, and brokers are hardly known for providing the cheapest service you can get.

Information is widespread

One of the biggest changes is the spread of the availability of information. You no longer have to rely on brokers or the hearsay of insiders. Google is your friend, and you can get information about the performance of a company in a matter of seconds. (Milliseconds, even.) Back in the day, you’d have to talk to your broker, or order in physical copies of annual, weekly, or monthly reports. By the time you got the information, things may have already changed dramatically! These days, real-time updates are where it’s at. And there are new websites created all the time that provide specialized information about certain investment opportunities. For example, you can get a bunch of investing information here.

Book on laptop

(MaxPixel)

Stock has gone digital

People often forget that stocks used to come in the form of certificates. About forty years ago, you’d have to visit your broker, who would fill out a trade ticket for you once you’d given them some money. They’d then hand you an actual paper certificate confirming that you were the owner of the stock in question. Sure, stock was still technically abstract, but it was still represented physically. These days, paper certificates are a thing of the past. Stock is completely digital, and any certificates you do receive come in digital forms via email. Everything is connected to credit card accounts and online identities.

Stock certificate

(Wikimedia Commons)

Portability allows for faster action

Let’s go back to the “good” old days. You’re an investor, and you own stock in a flourishing manufacturing company. As you walk down the street, you hear two people talking about this manufacturing company, regarding some bad or good news the company had just announced. You have to go over to a newsstand to confirm the news, or get to a public phone and call up your broker or the company itself. Then you need to arrange for the sale of that stock, either to profit or save yourself from a big loss. These days, you could have done all of that within a few minutes using your smartphone.

Man with smartphone

(Tero Vesalainen, Pixabay)

Short-term investment has increased

It’s because of increased speed, lowered costs (and even complete negation) of intermediaries, and pretty much everything else we’ve mentioned so far, more people are investing for short-term gains. People used to be much more concerned with long-term investment. Sure, it was, in part, due to a lesser need for the sort of instant gratification that is certainly a common part of our culture today (itself a possible side effect of advancing technology). But it’s also got a lot to do with the fact that arranging for communication and buying or selling was nowhere near as simple as it is now. It was kind of an unwelcome slog!

There’s more volatility

Here’s one of the bad things about the growth of technology in this field: because of everything else we’ve mentioned, more and more people who don’t actually know what they’re doing are making investments. When you lower the bar and allow amateurs to come and play, the truth is that you get a lot of bad playing! Sure, it’s great in many ways that more people have a chance to play and win. But most experts at investment don’t win most of the time. The increase in day traders and short sellers, as well as the speed of financial readjustments, have made things much more volatile.

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