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How Technology Changed Investing
Investing your money has always been a great way to grow your wealth. The issue, however, has always been the multitude of barriers that are there for lower income people. There is a tendency to think that we need a certain amount of money or special knowledge to invest. Coupled with the tight check to check budgets a lot of us have or fear of losing it all, it can deter many from ever taking the plunge into buying stocks, or other assets with investment value.
Since the beginning of the stock market there has always been a disconnect. With the spread of education and media the walls started to fall with more people learning how to invest from peers or educators and for years it has been a great retirement avenue for the more average income person. Now with the growth of the internet that information has spread even more broadly to the population and people have become more confident with their investments as they learn. The adversary to risk is education in this case.
Enter Investing Online
In 1990 investment trading went online to the public through E*TRADE. The first mainstream online brokerage firm to allow for public trading through an internet browser. As a pioneer in the online retail trading space E*TRADE was quite successful. It pulled 80% of its revenue from trade commissions. Following the success Charles Schwab and Fidelity quickly created similar models of the direct consumer trade business. Shortly after the growth of online desktop investing continued to take off and become very successful until the advent of the phone application superseded it.
Robinhood and Fee Free Trading
Fast forward a couple of decades and it is the year 2013. Just about anyone and everyone has a smartphone device in their pocket and knows how to use it. On each of these devices are easy to use phone applications. Vladimir Tenev had the idea to capitalize on these phone apps with a new trading platform named Robinhood that ran off the philosophy of giving every social class access to the markets and tools that the wealthy have only had access to before.
The biggest change being free trading, without a commission charge to a user executing a trade of a stock. Where before brokers would make most of their money off of this feature Robinhood had a setup that capitalized on a different system altogether allowing for a cost effective service to brokerage users. Also requiring no account minimums to trade for stocks. Technology and Robinhood had changed investing from the old way of using trading fees to a cheaper option for anyone and not just the wealthy.
Eventually the brokerage would add the option of fractional shares as well further breaking down the barrier to buy stocks. This was because you only needed one dollar to invest in any stock rather than the entire share price. If any change broke down the wall between the wealthy affording stocks like amazon for over a thousand dollars and a less wealthy individual, it was this. Being able to now buy that same companies shares at a fraction and investing in any company you wish. Again technology was changing investing in a huge way.
The internet and world wide access to information has grown. With it access to financial avenues only previously available to the wealthy. First E*TRADE made it more accessible and then Robinhood expanded the options and made it cheaper. Further more there are additional brokerages following suit with fee free trading and other features introduced by their example. Hopefully we will see more of this trend continue. This way even the less wealthy can be given the chance to invest in themselves just as they deserve to have the chance to.
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