By: Joseph Goldy, CFP®
April 30th marked the 30th anniversary of the World Wide Web being introduced to the public for the first time. Tim Berners-Lee was a 37-year-old researcher at CERN, a physics lab in Switzerland, when he created the first website and launched it on the Web as we know it today. 1.8 billion websites later, Lee's invention has revolutionized the way human beings interact and learn on a global scale.
Despite Encyclopedia Britannica's best efforts, sharing knowledge by selling an updated 32 volumes of books every year peaked in 1990. By 1996, just three years after the launch of the Web, all 1000 remaining door-to-door encyclopedia salespeople were eliminated.
For the first time, humans could share knowledge on a global scale. As great of an invention as the Internet was, perhaps Tim Berners-Lee's most crucial contribution was convincing CERN to allow access to the Web for free rather than licensing it out for profit.
Although how the World Wide Web has impacted society can be debated, the Web has dramatically changed how people invest. I can think of three ways the Web changed investing for the better.
Access
I remember opening my first online brokerage account with a company called Datek. Datek's website from 1996 was cutting edge, as you can see below.
Photo Credit: The Internet Archive Wayback Machine
As a new investor, for the first time, I now had access to buying and selling stocks independently without needing to call a broker and pay hundreds of dollars in commissions. Datek's homepage said it all:
"At Datek Online, we put the power in your hands. You make your own decisions. You place your own trades. You don't need to wait for a broker to get back to you with a report."
It was tremendously empowering, leveling the playing field with the big boys. I began consuming any information on investing and trading I could find. I was obsessed with the online financial website The Motley Fool and even went to a book signing in New York City of the two Fool founders, brothers David and Tom Gardner.
The Web opened the doors of investing to millions of people like nothing else before it. We now could do our research on companies, make our own decisions without having to clear it through a stockbroker first, and hold only ourselves accountable for our mistakes. It was an exciting time to be an investor.
Education
For long-term investors, the Web also brought an abundance of information, much of it for free. Below is an example of research on Schwab's website in December 2000 discussing the tech bubble bursting. Having analyst information such as this in real-time allowed investors to act much faster than in the past, where we read about something in the Wall Street Journal days later, or worse, in a financial magazine the following month.
Photo Credit: The Internet Archive Wayback Machine
Self-directed Investors now had all the free education they could handle at their fingertips with the click of a button. This democratization of information allowed investors to make more informed decisions with better outcomes.
It was also around this time that the wealth management industry was going through an evolution of its own. Financial advisors were transforming from just doing client portfolio construction to more asset allocation and wealth planning.
Access to such a supply of investment information and education enabled investors to make better investing decisions and ask more profound questions of their wealth advisors. The result was deeper relationships between investors and their wealth advisors since the collective financial wisdom of people overall increased.
Automation
As transformative as access to the financial markets and an endless supply of quality education are, perhaps the most important thing I could think of that the Web offered investors were automation.
Automatic investing is the single most significant achievement of the Web for investors. Putting an investment plan on autopilot creates the discipline to invest in good markets and bad, allowing investors to benefit from dollar-cost averaging. Dollar-cost averaging is an investment plan where you make regular investments despite what the market is doing. The benefit is that you're buying more when the market is down and less when the market is up, eliminating the need to "time" the market.
A secondary benefit of automatic investing is the long-term view it encourages for investors. You set up an automatic investment plan and monitor occasionally, but not daily. You know you are investing for the long run, and it provides a sense of relief of not having to worry about what the markets are doing daily and month to month.
It's hard to imagine a world without the Web since it's been with us for three decades. I believe the good has far outweighed the bad, and it will be interesting to see if artificial intelligence is as transformative in 30 years as the Web was back in 1993.
From our perspective, long-term investors should never abandon sound financial planning principles regardless of whatever new technologies appear in the future. What was on Highland's homepage 17 years ago still holds just as true today: "A sound financial plan helps you navigate and be ready for whatever lies ahead."
Photo Credit: The Internet Archive Wayback Machine
Joseph Goldy, CFP®, is a wealth advisor and CERTIFIED FINANCIAL PLANNER™ at Highland Financial Advisors, LLC, a fee-only fiduciary wealth advisory firm based in Wayne, New Jersey.
Joe specializes in working with newly independent women because of divorce or losing a spouse. He understands firsthand the value of having a clear financial picture pre- and post-divorce and a plan to restate goals as a single person. When he is not helping clients, Joe enjoys spending time with his two sons outdoors and volunteering to help raise money for Type 1 diabetes organizations.