When the era of the Internet began, it literally changed everything in our lives. The influence of the Internet has spread to human behavior: the way we listen to music, communicate, watch movies, the shop has changed. In particular, the development of the Internet has influenced the way we invest.
Statista shows that most millennials worldwide invested in 2019 because they believed it was the best way to make money in the long run. According to a survey of people between the ages of 23 and 35, the main reason millennials in the United States had financial investments in 2019 is ways to plan for retirement. On the other hand, 54 percent of respondents in the United Kingdom said they had a financial investment with a higher return than a savings account.
So, how has the Internet affected the Invest sector?
Communication has evolved
The Internet has given us all the widespread availability of information.
Before the advent of the Internet, it was difficult for the average investor to find up-to-date information about the state of the markets. The only way to find information was to go to the library and study financial literature. Or look for an intermediary for information and investment advice.
Thanks to the Internet today, you quickly find an online company report on the Securities and Exchange Commission (SEC) website as soon as it is published. Large financial documents can be downloaded in seconds and searched for by keywords, topics, or specific financial statements. Not to mention the thousands of web pages with helpful information for novice investors.
Low fees
Another advantage that the Internet has given to investors is the reduction in fees and commissions for investments.
In particular, retail investors have seen a sharp decline in the fees they pay when trading securities. Before discount brokers were widely available, full-service brokers could control the market and charge fees that now seem absurd.
Forbes writes that lower investment fees may correlate with better results.
Research has shown a striking gap between the average return of certain mutual funds and the average return of investors in the same funds. For investing, time is everything – this gap can be explained by when investors buy and sell their mutual fund positions and how long they hold them.
And trading itself has benefited from the Internet – high-frequency traders (HFT) have been able to influence the narrowing of spreads between sellers and buyers, which are different costs incurred in buying (ask price) and selling (selling price) security.
Transparency
The transparency of information via the Internet makes it possible
for many investors to analyze the data and draw their discourse on properly valuing securities.
Differentiated pricing
There is no longer a need for full-service brokers to create high prices for investors to enter the market. The Internet has significantly reduced the costs that were charged for making transactions.
Disintermediation
Disintermediation is the process of removing intermediaries from the chain of economic activities. Thanks to the Internet, you can do without unnecessary links in the investment chain, and this is good news as it reduces the time for operations and costs by itself.
Online-trading
While e-commerce has reduced the need for traders, online trading has changed the role of a broker. Before the proliferation of online trading platforms, investors had to call to trade with a full-service broker or financial advisor, usually paying up to 2.5% commission on completed orders.
Combined with easier access to extensive public company information over the Internet, conventional investing has evolved from purely private, broker-driven trading to direct analysis and execution by individual investors.
Artificial intelligence
Many financial companies today are turning to computer algorithms to gain a competitive edge. Modern financial institutions use AI to analyze voice patterns of recorded calls to investment banks, detect fraud, recognize trading patterns, and more. All this would be impossible without the Internet.
A few words in conclusion
The Internet has significantly influenced our lives. Today, it isn’t easy to imagine a person who does not start his day by studying the news using the Internet and a mobile device. Likewise, the Internet has freed the hands of investors, and today any of you have the chance to start investing, even if you have never done it before. Regardless of whether you are a dedicated development team employee or just a housewife – a couple of clicks thanks to the Internet, and now you are an investor. Isn’t that wonderful?
Author’s bio: Anastasiia Lastovetska is a technology writer at MLSDev, a software development company that builds web & mobile app solutions from scratch. She researches the area of technology to create great content about app development, UX/UI design, tech & business consulting.