Investing in the stock market and derivatives was once a fairly straightforward process, as well as a predictable one. Markets would rise and fall, and for the most part, the reasons why were fairly obvious.
With the advent of new technologies and a new societal investing culture, however, the entire game has changed in several essential ways. Here are four ways that investing is changing.
1. More institutions, fewer people
Institutional investing is on the rise, and that should be no surprise, given the massive impact of corporations on every facet of our society. Corporations have much more capital and wealth at their command than most individual citizens do, at least when it comes to discretionary assets that can be invested.
As a result, massive movements in positive and negative directions can occur much more quickly than they did in the past.
2. Computerized trading
Another contributor to the wild swings on investment markets is the relatively new phenomenon of computerized trading. Computers set to auto-trade at certain levels, and auto-react to others’ auto-trades, share much of the blame for recent market collapses and booms.
Humans can’t escalate trades as fast as computers, and that can be a very dangerous thing for the markets, especially if 50% to 70% of all market activity can be linked to high-frequency trading.
3. Even less to do with financials
More than ever, stock trading sciences are less sensitive to the actual financial performance of companies. Today, they react more to the psychology of the traders and their related actions.
In other words, it’s becoming more like a poker game, and less like a report card.
4. Education is faster and cheaper
There was once a time when, if you wanted to become educated on investing, you’d have to go to college for several years — or at the very least, pay a hefty subscription fee to a variety of newsletters and publications. With the advent of the Internet, and the ability to trade virtual portfolios online, the cycle of education is happening much more quickly, and for much less money.
There’s even a resource where you can attend a virtual stock trading tips clinic for as little as two minutes per day.
Often the information you’ll find there is the work of professionals who sell advanced products or simply enjoy sharing their knowledge and engaging in discussions with others.
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