THE BLOG

A Short History of Investing

31/10/2016 13:52

The concept of modern investing may seem new to many but its origins can be traced through history. Evidence suggests that debt in ancient Mesopotamian civilisation was recorded through engravings on tablets detailing money that was lent and recording the interest owed. At the peak of imperialism in the 1600s, French, British and Dutch limited liability companies invested in trade with Asia and the East Indies, establishing cities such as Amsterdam as centres of commerce. In the 1300s, the Venetians were the leaders in the field and the first to start trading the securities from other governments. They would carry slates with information on the various issues for sale and meet with clients, much like a broker does today. Belgium, however, would be the first country to offer the world a regulated stock exchange in 1531 and it would be another 242 years before London established its stock exchange in 1773 with the New York Stock Exchange (NYSE) following suit shortly after in 1792, which today is considered by many arguably the most powerful stock exchange in the world.

In recent history, the years have been turbulent for many major economies. Weathering the storms of two world wars and several global recessions has proven taxing, but the power of the stock market has proven its resilience time and time again. The Great Depression of 1929, however, was the most damaging of financial downturns. Starting in the NYSE on Wall Street, and reverberating across the world affecting most countries, many hard lessons were learned. President Roosevelt even created the Federal Deposit Insurance Corporation to protect investors' accounts and the Securities and Exchange Commission to help regulate the market, institutions which still exist today. These moves towards regulation of investing formed the basis for the controls placed on stock markets across the world today.

The economic hardships of the 1930s provided the conditions which allowed the rise of extremist political regimes in Europe, most significantly the Nazi regime under Adolf Hitler. Following the outbreak of war in 1939, domestic manufacturing across Europe and in the USA went into overdrive, employing millions of people in munitions factories and stimulating unprecedented technological innovation. Governments had learnt their lessons from the First World War and the London Stock Exchange only closed for one week at the start of the war, unlike the New York and Berlin stock exchanges which did not close at all.

Since the 1980s, however, the internet has had a huge impact on the world of investing. Information, such as reports on a company's annual performance, is now freely available allowing investors to do their own research and not rely on intermediary experts, financial advisers and asset managers. Fees are also far lower today than ever before, countless alternatives to paying for costly financial advice are now available and advances in technology alongside innovations in enterprise have changed the face of trading and investing completely, rendering the contemporary financial world almost unrecognisable from a hundred years ago.

In the last few years, disruptive FinTech startups have used the internet to turn the investment world into a more level playing field. This rise of new companies has put unprecedented pressure on established banks and financial organisations to raise their game, and new technologies are sure to continue to play an important role in the years to come. Many people, myself included, think that Artificial Intelligence (AI) will be a major player in the stock markets of the future. One thing is for sure, online platforms are making bigger and bigger waves.

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