The idea of investing started around the 17th and 18th centuries. These are the times wherein the roots were traced back by experts nowadays. This was made possible after the successful development of public markets that connected different investors from different places with raining investment opportunities. Also, in 1787, the establishment of the Amsterdam Stock Exchange was made successful. Following that, in 1782, the New York Stock Exchange gave multiple opportunities to people to invest.
Industrial Revolution Investing
During 1760-1840 and its repetition in 1860-1914, the Industrial Revolutions took place. These events that happened at different times then resulted in great prosperity as the product of people became aware of their amassed savings, including fostering a continuously advancing banking system and investing. For most of the years in the 1800s, banks and other institutions started to be established as signs of economic success. Two of these old banks are J.P. Morgan and Goldman Sachs. Both these banking systems began to transform the banking world into what it is now.
20th Century Investing
During the 20th century, a new ground was seen when it comes to the theory of investing alongside the development of new investment concepts such as portfolio theory, risk management, and asset pricing. For the second quarter of the same century, new and proven effective vehicles of investment were developed, such as private equity, REITs, ETFs, venture capital, and hedge funds. This time introduced investors and other people of interest to new ways of investing, making the field much more effective as it grew.
Following that, the 1990s hosted a rapid development and spread of technology and the Internet wherein investing, research capabilities, and online trading became much more accessible than before. Here, the general public is given more chances to learn and work so that we can eventually start our journeys towards success in the world of investment. Also, this is the period wherein completion of democratization and commencement of investing was done effectively.
21st Century Investing
Moving on to the modern era, investing in the 21st century is far way more successful than the previous years. This is because of the burst of the dot com bubble, which made ways for the creation of new lines of millionaires through successful investments in online business and technology-driven stocks. These were ushered effectively in this era, making ways for more investment successes. In 2001, there was a record collapse of Enron that became the headlines for several months. This became a center stage wherein frauds were displayed fully, leading to the bankruptcy of several accounting firms, investors, Arthur Andersen, and other companies.
Furthermore, the 21st century has recorded one notable event that we need to be aware of, and that is the Great Recession that took place between 2007 and 2009. This event happened when several failed investments, particularly in mortgage-backed securities, crippled the economies around the world. Here, well-known investment firms and banks went under and we witnessed a widened wealth gap and surmounted foreclosures. Also, during this time we saw a lot of newcomers to the world of investing, including the unconventional investors through market saturation with online investment company discounts and Robinhood, a well-known free app for trading.
Investing versus Speculation
Whether we are going to buy security, it must qualify between being an investment or speculation depending on these three factors:
- The amount of taken risk in investing is usually completed using a low amount of risks while speculation uses higher amounts.
- The investment’s holding period in investing is typically a longer holding period, measured quite frequently throughout the years. On the other hand, speculation involves shorter holding periods to be completed.
- The Source of returns in investing is less important relatively in terms of price appreciation, while distributions and dividends can be the major parts. In speculation, the main source of returns is price appreciation.
With these mentioned pieces of information about investing, may we have the confidence and opportunities to make the most out of it all the time? As we are all starting to try this field out, may there be more experiences for you to cherish? So, let us start investing and turn our lives upside down.