Stocks then and now

Technology and communication developments have made the world a global village than it was fifty years ago. This is particularly clear in investing, where technological advancements have radically changed the investment procedure.

Due to regulatory developments, the difference between banking institutions and brokerages has also become hazier in recent decades. The prospects accessible to investors have improved due to these adjustments and the rise in globalization during the 1980s. But these higher opportunities also brought more risks along with them. Consequently, investment is more difficult now than in earlier eras, notably the 1950s and 1970s.

Investing in Stocks in the 1950s

According to the New York State Exchange (NYSE) first shareholder consensus conducted in 1952, about 6.5 million Americans (or 4.2% of the country's population) owned common stocks. Most individuals in the 1950s avoided stocks because they belonged to a generation deeply affected by the 1930s Great Depression and the 1929 market crash. In reality, the Dow Jones Industrial Average (DJIA) didn't surpass its 1929 peak until 1954, 25 years after the stock market crash.

Additionally, investing back in the 1950s required more time and money than today. Stock brokerages were autonomous organizations due to the Glass-Steagall Act (Banking Act of 1933), which forbade commercial banks from conducting business on Wall Street.

Because there was little competition, the fixed commission was a norm. However, that commission was high and non-negotiable. Because of the technological limitations, it took a long time to conduct stock trades from when an investor and a broker first spoke until the trading ticket was issued and executed.

There were few options for investments in the 1950s either. High dividend yield stocks were the best-performing stocks in the 1950s. The huge mutual fund boom was far away, and the concept of foreign investing was non-existent. Finding active stock values was also fairly challenging. If a shareholder desired a current price quote on a stock, they had no choice but to contact a stockbroker.

Though low trading volumes underlined the relative originality of stock investing at that time, by the middle of the 1950s, things had already started to alter. 1953 was the last year when daily trade volumes on the NYSE were less than one million shares. The NYSE introduced its monthly investment strategy program in 1954, allowing investors to make monthly investments of as little as $40. This innovation served as a forerunner to the regular investment plans in the stock market that most mutual funds later promoted, which sparked the broad adoption of investing in the stock market among Americans in the 1970s and 1980s.

Investing in Stocks in the 1970s

The 1970s saw an increase in change in the financial world, notwithstanding the stagflation-filled decade in which the U.S. stock market limped. At the beginning of the 1970s, the DJIA was slightly over 800 points; at the end of the decade, it had only increased to roughly 839, or a 5% overall gain.

However, after the development of individual retirement accounts (IRA) and the launch of the first mutual index fund in 1976, mutual funds began to gain popularity. The NYSE's trading hours were increased by 30 minutes in 1974 to compensate for the market's expansion.

The biggest development for investors in the 1970s was the increased resolution of stock trades electronically instead of physically. In 1975, SEC outlawed fixed commission rates, which had previously been a pillar of U.S. securities exchanges and markets worldwide, in the landmark development.

These adjustments (along with the dramatically improved trade execution and settlement brought about by the increased use of technology and automation) provided the groundwork for much-increased trading volume and the rising popularity of investing in the stock market in the coming years. In 1982, the NYSE's daily trade volume hit 100 million in the stock market for the first time. The NYSE census from 1990 concluded that around 51 million Americans owned stocks. General Dynamics (GD) was one of the best stocks in the 1970s, returning 445.4%

Investing in Stocks in the 2000s

Stock investment has become much easier now than in previous decades allowing investors to trade esoteric assets in distant stock markets with a mouse click. Today, so many investment options are available, which can be overwhelming and complicated for novice investors. The new investing paradigm has been mostly attributed to technical breakthroughs, while there have been other advancements over the past 20 years.

Exchange-traded funds (ETFs) have made it simple for any investor to trade stocks, commodities, and currencies on domestic and international exchanges. These ETFs have made it simpler for investors to execute somewhat complex techniques like short sells. Trading volumes have soared in the new century due to these factors.

The Bottom Line

The number of investment opportunities available to investors has increased, but so have the hazards that go along with them. As evidenced by the synchronized downturn in global markets during the "tech disaster" of the early 2000s and the financial meltdown of the 2000s, the globalization trend has brought world markets closer together. This implies that there could not be much of a safe refuge during a worldwide storm. The world of investment is also considerably more complicated than ever; a seemingly insignificant event in a remote foreign market can set off a worldwide reaction. These changes have made investing slightly more difficult (but convenient) than it was during the 1950s and 1970s.