You don’t need to be Nostradamus, or Einstein, or the luckiest stock-picker in history to build wealth in the stock market. It is easier than ever for everyday investors, but this wasn’t always the case.
Today, you only need discipline and the patience to hold on for the long term, but when I started my career 54 years ago, retail investors faced significant challenges.
Information was sparse and dated. There was no internet for detailed, current information on stocks and companies. I had to scour library archives and pore over hard copies and microfiche of news and corporate reports.
Commissions on US stock trades were typically 2pc and remained so until 1975. Bid/ask spreads – the gap between buyers’ and sellers’ offering prices – were fat. Both sliced chunks off your returns, in the US or UK.
Suddenly, that all changed on both sides of the pond. The Thatcher government’s Big Bang of 1986 scrapped UK fixed commissions and opened the London Stock Exchange to foreign stocks, while making trading far more efficient with computerised platforms.
But the boom in data has taken hold since the noughties. Mobile phones now yield more than you would ever need or want, anyone can open online accounts with next to nothing – and trade cheaply with tiny bid/ask spreads. You can even buy slices of shares!
Stink at stock-picking? Don’t have time for research? No problem. You needn’t find the next Amazon, Nvidia or LVMH. Exchange-traded funds let you own the broader market at an incredibly low cost.