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Until the early 1990s the fastest way to invest in the stock market was by telephone. A investor would call his broker, who would call or fax the home office traders, who would call the floor traders, who would execute the trade to buy or sell.
During the 1980s the biggest change in the investment industry was the rise of discount brokers such as Charles Schwab. These brokers allowed investors to trade at much lower commissions but did not offer investment advice as did the full-service firms.
In 1991, Etrade started offering online services through AOL and Compuserve. By the mid 1990s several of the discount brokerages had set up online trading platforms. By 2009 there were at least 15 online stockbrokers. - The biggest effect of online investing is that investors can buy and sell quickly at very low cost. The online platforms allow investors to buy and sell stock options, mutual funds, exchange traded funds and futures as well as stocks. This type of specialty trading was almost impossible for the individual investor before he could buy and sell over the Internet.
- Investing through an online brokerage account comes without the advice of a trained investment adviser or stockbroker. Online trading is for the investor who is comfortable doing his own research.
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Online investors open a stock brokerage account over the Internet and fund it by bank transfer or sending in a check. With an online account, an investor can place trades through a brokerage's website, and the trades are completed electronically.
The types of investments that can be made online are the same as an investor would make if she went to a stockbroker's office and opened an account. -
Investment online is not a new type of investment that is specific to the Internet. It is the ability to make traditional investments in stock, mutual funds and options directly through online accounts.
Investing online has opened up the world of short-term and day trading to the individual investor. Until the start of online brokerage accounts only traders with large investment firms had the real-time price data required for successful short-term trading.
