Online stock trading first arrived in Britain 15 years ago this year. Looking back, it's no exaggeration to say that those 15 years have utterly revolutionised the opportunities available to the average private investor.
Back then, placing a trade meant calling up your broker at the time, mine was some long-since rebranded arm of Barclays and paying at least £25£30 in commission for even the simplest trades.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
No wonder we embraced the low costs and greater efficiency of the pioneer online brokers in my case IMIWeb, which later became iWeb, now owned by Halifax.
Despite some very rudimentary dealing platforms and widespread fears about the safety of making financial transactions online in the early days of the internet, online trading gradually became the method of choice for most British investors.
Over that time, competition and technology have seen services become ever cheaper and more sophisticated. If your goal is simply to minimise costs, anyone can now deal in UK shares from as little as £5 per trade and you can reduce that even further to as low as £1 if you're happy to give up control of exactly when the trade is executed.
If you want to diversify your portfolio, you can now trade in more than 20 international markets just as easily as buying shares on the London Stock Exchange and at a comparable cost.
Meanwhile, the online data and research services that have grown up alongside the brokerages allow us to analyse financial information in a way that was unimaginable in the days when everything came printed in vast books or piles of company reference sheets.
For more active traders, recent years have also seen the growth of online spread betting, CFD trading, FX trading and options and covered warrants. All of these products existed in one form or another before the internet, but online providers have helped to bring them into the mainstream.
By giving us the ability to sell stocks short, use leverage, and trade markets and instruments that we would otherwise not be able to access, they have opened up a huge range of new investment strategies to retail investors. Overall, there's no question that online trading has delivered huge benefits.
However, if you've considered opening a new account or branching out into an area such as spread betting for the first time, there is one cautionary note to bear in mind.
Trading too frequently is one of the most common mistakes for retail investors and online trading has made this far easier than it used to be at least, telephone calls, paper certificates and contract notes forced us to slow down and think more carefully.
Make sure you avoid falling into this trap. In particular, don't be tempted to trade more often because your broker offers discounted rates for frequent traders.
And if you're trying spread betting or foreign exchange trading for the first time, trade with the demo accounts that all providers offer for several weeks to get an idea how everything works before risking any real money.
-
Top 10 areas with the biggest inheritance tax bills – is your town on the list?People in some of the wealthiest parts of London pay the most inheritance tax – but there are a few areas outside the capital where big bills are paid when a loved one dies
-
Inheritance tax reform ‘largely protects family farms’ – what are the alternatives?Independent analysis of the government’s inheritance tax reforms has found eight out of 10 farming estates will be able to pay their IHT bill without having to sell off parts of the farm
-
Barclays: not cheerful, but cheapFeatures Of all the big banks, it's probably fair to say Barclays has had its fair share of bad publicity, says Matthew Partridge.
-
Want to buy the euro while it's cheap? Here's howMerryn's Blog A new online bank account lets you hold 24 different currencies. Ideal if you think you should be holding some euros, says Merryn Somerset Webb.
-
The FX fixing scandalFeatures New allegations suggest that key benchmark rates have been manipulated in the foreign-exchange (FX) markets. Are traders gaming the system? Matthew Partridge reports.
-
How to play a short, sharp rise in the Indian rupee
Features India's rupee is down 18% against the US dollar since March. But smart spread betters might want to position themselves for a short-term bounce, says Tim Bennett. Here’s how.
-
Revisiting the Barclays share price – how to trade with FibonacciFeatures John Burford looks at using Elliott wave and Fibonacci principals in this short trade on Barclays shares.
-
Three ways to profit from the yen
Tutorials With the carry trade coming to an end, the tide is turning for the once-weak yen. What's more, the Japanese economy looks well-placed to ride out the credit crunch. Tim Bennett looks at how to profit from this strengthening currency
-
Find the best online broker
Tutorials It looks like most private investors now getting back into the stockmarket are doing it over the internet. But how do you find the right online share dealing service for you?
-
Are shares the best long-term buy?
Tutorials The latest annual study from Barclays Capital suggests that shares generally outperform bonds and cash in the long run, says Martin Spring in the On Target newsletter. But there's still no guarantee of success - equities have been known to generate negative returns over periods as long as 20 years. And generating the best returns relies on one vital investment strategy...
