The Internet has Changed Investing and it is one of the most revolutionary and disruptive technologies in history, creating a major paradigm shift. It has had a profound impact on the way consumers listen to music, watch movies, buy and sell products and communicate. This has also had a significant positive impact on investments, especially among private investors.
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Keep in Mind
- Although we take the Internet for granted today, trading in American markets dates back more than a century.
- With the advent of the Internet, it revolutionized business by introducing electronic markets and automated order fulfillment.
- This has resulted in lower fees, more efficient markets and increased information and transparency for investors.
Development of communication
Widely available information is perhaps the biggest advantage of investing in the Internet. Before the Internet, the best choice for a private investor was to go to the local library and read the financial literature, researching companies and securities such as stocks, bonds and mutual funds.
Another option is to contact a company directly for the latest financial report, which for larger financial reports can be expensive in terms of shipping costs and take some time as you have to wait for the investor report printable and robust . We didn’t send it to the Investor Relations Department.
Through the Internet, an investor can find online company reports on the Securities and Exchange Commission (SEC) website immediately after they are posted. Large financial documents can be downloaded in seconds and searched by keywords, topics or specific financial statements. Companies also maintain online investor relations pages, where the same documents can be found, as well as annual reports and other presentations to investors at industry conferences.
Hundreds of websites also provide access and collection of financial information for investors to analyze and understand. This requires substantial resources to pay for expensive services to obtain large financial reports or perform security analysis. Many free websites today offer financial information, while others charge a nominal annual fee for more specific data.
Internet has Changed Investing-Reduce Expenses
Another major advantage that the Internet has in the field of investment is its impact in lowering fees for investors. Retail investors in particular saw a sharp decline in commissions paid on securities traded. Today it is very common to find an online broker who offers about €10 to make regular stock trades. Before the widespread availability of discount brokers, full-service brokers could control the market and charge what now seem exorbitant commission rates.
A 1992 “Money Magazine” article, just as the Internet was beginning to penetrate the consumer market, detailed that a full-service broker could charge a 2.5% commission on stock sales. The example he gave was a $250 commission for trading 100 shares of stock selling for $100 per share.
Trade itself has benefited from electronic networks that can transfer trade information through Internet pipelines. However, these traders are also credited with reducing the bid-ask spread, which is simply a separate cost incurred when a security is bought (bid price) and sold (ask price).
Today, spreads are currency-dependent, but in the past they were much wider and gave brokerage firms a new opportunity to take money out of investors’ pockets and put it into their own.
Other Important Benefits
A 2000 academic study from Wharton Business School summarized the key benefits of investing in three key Internet factors.
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