IT the backbone of the modern investment world

Over the last twenty years information technology and the internet have completely reshaped the world, from the way we do business to our social interactions. The world of investment and investment advice is no exception. As technology advances, so certain professions become redundant and disappear overnight, while others need to change significantly in order to survive in the modern era.

The rise of online trading

Investing online has been the norm since the beginning of the current century. Online brokers and trading platforms allow individual brokers to buy and sell securities over an electronic network. To realize how radical a change this is, remember that not so long ago, trading securities meant contacting a stockbroker by telephone and instructing them to implement the transaction on your behalf.

Order Infrastructure PoliciesDownload Selected Pages Infrastructure Policies  

Today the traditional stockbroker has all but disappeared, replaced by the online "discount broker" as well as a range of tools and information directly accessible to the ordinary investor. In fact, the phrase discount broker is misleading, as many high net worth individuals use online brokers to facilitate high value transactions, because of their low fees and commissions and the speed and ease of the process.

Self-management of investments

Thanks to the rise of technology, anyone with a little experience and knowledge can now be their own investment manager. A multitude of finance websites exist to help the novice investor play the market, while those more seriously involved can benefit from more advanced analytic tools and specialist sites. There's no longer any need for anyone to scrutinize the columns of the Wall Street Journal to find out how their investments fared at the end of the day, as online platforms include tools to track and monitor securities, portfolios and indices, research tools, real-time streaming of quotes and news all designed to facilitate trading. Ultimately, the whole process of trading has been demystified and made more transparent.

Importance of investment

While technology has put investment within the reach of everyone, it has also increased the number of parties who need to have some serious knowledge of investment. Any freelance IT specialist should have a good working knowledge of the investment world, as increasingly their work is going to involve the construction of data management programs for businesses looking to go further into investment management, particularly in the area of alternative investment options. As traditional funding options become scarcer, a wide range of investment options is becoming crucial to the business plans of many start-ups and small businesses, and IT is the best way to facilitate this.

Types of investment

The basic forms of investment are bonds and stocks. An investor buying bonds is lending out their money to the business they are investing in, and expects to eventually get their money back, plus a certain amount of interest. This is a low-risk investment, but also gives relatively low returns as a consequence. Buying stocks or equity gives an investor a share in the business and sometimes - but not always - a part of the company's profits in the form of dividends. Stocks increase and decrease in value depending on the company's performance, and there is no guarantee that the investor will get back the money they paid for them. On the other hand, the stocks may also increase greatly in value.

There are many other forms of investment however, especially online. Binary options are also known as fixed return or all-or-nothing options, and as the name suggests there are only two possible outcomes from this type of investment: generally a fixed, predetermined amount of money or assets, greater than what you paid, or nothing at all. As they are digitally traded, binary options are easy to access, but it's very important to use safe and trusted binary options brokers.

An Exchange Traded Fund (ETF) is a fund that behaves like an individual stock, even though it's actually a collection of assets, meaning they can be bought and sold throughout the day. Most ETFs track an index, and shareholders are entitled to interest or dividends. They have low annual expenses and no minimum investment requirements, but the choice of ETFs can be bewildering and there are a number of risks, including currency risk, counterparty risk and volatile indices.

Technology improves processes and makes them easier and more efficient, opening possibilities that couldn't even have been considered a few years earlier. But with any kind of progress there will always be casualties. This in essence is the impact technology has had on the investment world, and why it is vital for investors and their advisers to stay up to date with IT in order to remain in the game.