Investments

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It’s 2020 and investing in nearly anything can be done at the push of a button. Your smartphone is capable of some astounding things and investing is one of many. But investing wasn’t always so easy, in fact it was a process, and that process began in 1700 BC. The Code of Hammurabi provided the first known framework for investing, a law that established a way to pledge collateral (a horse, jewelry, home, etc) in exchange for the ability to invest in a certain project. If you broke the obligation, as either a debtor or creditor, you were punished. Yet, that punishment wasn’t a fine or even jail back in the day. It was typically losing a limb or death. Wonder what the default rate was?

When we think of investments today, we are talking stock trading, banking or securities trading. This is done on a stock market and the first stock market is widely regarded as the Amsterdam Stock Exchange. Founded in 1602, this exchange was novel for the time, connecting potential investors with opportunities. The market offered liquidity, a publicized value, the availability of said opportunity and accomplished one thing extremely well – it lowered transaction costs. This is important as with a market (the middleman), a transaction is expensive as the buyer and seller does not have any information about either. Investing was easier with a dually trusted middleman and that is why the industry thrives today.

Moving on, some of the bigger players in the investment arena, JP Morgan and Goldman Sachs to be exact, were founded in the late 1800s. Merchant bankers in Paris and London were financing industrial expansions in the U.S., and massive projects like the Transcontinental Railroad required significant amounts of money. These same institutions then sold off bonds to help the federal government finance the Civil War. Post-war financial institutions invested heavily in individual states and stock market indexes made their way to the scene.

If you are relatively new to investing, all you need is an internet connection these days. Stockbrokers are firms or people who are licensed to buy and sell stocks (and other securities) that are listed on stock exchanges. Pre-internet one needed to hire a broker to place trades in the client’s name. You might remember you Mom or Dad on the phone with the broker giving instructions. Those days are long gone as you can now do this yourself while also counting on a broker to give you advice on which ones to pull the trigger on.

TD Ameritrade is a well-respected online platform, principally because it serves the needs of beginners all the way to more seasoned traders. Featuring $0 commissions on stock, ETF and option trades, free research, no account minimums and really good customer support, it’s no wonder many flock to this site. Yet, once you want a broker to come in and assist, the fees can add up quick, so take caution. Another big player in the game Interactive Brokers IBKR Lite. Like TD, there are no stock-trading commissions on the low end, the investment selection is quite large, strong research tools and over 4,300 no-transaction-fee mutual funds. But a common knock is the website can be a bit clunky, and again, once a broker is involved, that’s where the fees come in.

But you know what, nothing is free in life. It can be annoying to read comments online of people complaining about trading fees when brokers are involved. They’re brokers, people, flesh and blood. They have an expertise and if you want to make some decent returns on your investment portfolio the government doesn’t provide that to you for free. You need to pay for it, so the whining can be a bit too much. Bottom line, pick a provider, know you will pay some commission, but those are the rules of the game. Now it’s time to make some bank!