Table of Contents
The investment world is a lot different than it used to be. Things used to be slower and only accessible to a few wealthy individuals. They would pool their money together to form corporations and take on monumental tasks. Things such as building a massive intercontinental railway required investment from dozens of billionaires or ultra-wealthy people.
As time went on, they were able to sell parts of these companies to other people who wanted to invest in the business. This is how the stock market began.
Eventually, people found that they could take the money they had sitting around and put it in the stock market where it could grow and give them returns. Their money would literally start making money for them. This is the world that created investing and this is what drives it even today. Investing today involves short-term trading and finding high dividend stocks for long-term profits.
Modern investing is similar but different in many ways. The main way is that technology has changed how we invest and who can invest. We have also seen a lot of new investment instruments come into play. Things like derivatives and other financial instruments are now being traded by banks and other institutions. In the past, there would only trade stocks and other assets of companies. They wouldn’t trade secondary options on companies.
The stock market has grown up a lot, and it has moved away from what it was intended to do. However, with that change has been a lot of opportunities where people can now make millions of dollars on the stock market without ever creating any value as a business owner. For some people this is bad, but for others, it is a very good thing that has allowed the economy to grow and get better.
Technology in the Financial Markets
Technology has changed the way we invest. Wall Street is an actual street. This is where most people use to go to the markets to trade stocks. With the creation of technology, you didn’t have to go to Wall Street to trade anymore. At first, people used phones to call each other to make trades. If you own stocks, you could call your broker and make a trade. The internet also made it easy to look at information about the markets. This has been an important development in the way we can trade. It means you don’t have to be in that small New York area in order to be on Wall Street.
You can trade the way you want in a city that pleases you. However, technology has also made it possible for some companies to exist. These companies are called high-frequency trading companies. They work by using servers that are very close to the actual location of the terminals that actually make the trades. They can then buy and sell stocks in a fraction of a second without any issues. This is why the world has changed so much.
New Technologies Being Deployed
As computing technology has evolved, one thing that is getting more important in finance is artificial intelligence and machine learning. These two software technologies are leading the way in changing the game in finance. Today, most trading is done by software robots instead of real people. This has led to a lot of issues in the past such as flash crashes.
This is where a lot of robots make the same trade simultaneously which causes a steep drop in the market. Automation is the future of finance and trading. We will see high-speed networking become more important along with supercomputers and graphical processing units. These processors are able to crunch huge amounts of linear algebra and matrix calculations.
Future of Finance
As computing technology gets better, we will see more and more people investing for themselves. We will also see more robotic trading and also the need for mathematics will grow in trading. We will also see a democratization of finance.
More people will be able to spend money investing in stocks and bonds. The reason for this is because more people will have extra money that they can afford to invest with. They will also have the option to do it because the internet allows everyone a chance to buy the stock they want.
Featured image source: Freepik