Investments  

The digitisation of investing

The digitisation of investing

Digital investment solutions and self-directed investing are on the rise.

Today, more than 100m people around the world invest and trade online. 

The UK has the most online traders in Europe, and while there are country and regional differences in trader and investor mindsets, the trend is only heading in one direction: more and more individuals are taking advantage of the democratisation of information, education and market access to achieve their own financial goals and impact and influence the society they live in.

To a large extent, the democratisation of trading and investing has been fuelled by the internet.

Key Points

  • The internet has democratised online trading
  • Most managed investment solutions are too expensive and underperform
  • Open models of technology allow for quicker and cheaper adaption

I founded Saxo Bank in 1992 and we were one of the first companies to focus on leveraging the internet to deliver better investment solutions.

When we started on this journey, our principal belief was that the many, rather than the few, should be able to access the world’s financial markets in an optimal way.

New technologies and the availability of information and knowledge have helped create a more level playing field, which means the investment opportunities and tools previously only available to large financial institutions on Wall Street are now available to the people on Main Street – at ever lower prices.

My belief remains that everyone should have the freedom to build a comfortable foundation of savings and maximise those savings for retirement or to support other life goals.

Benefits of online trading and investing

For those new to the world of online trading and investing, one of its primary advantages is the ability to access a wide variety of asset classes – equities, bonds, commodities, exchange-traded funds, mutual funds, futures, options, contracts for difference and other products – from a single place and at cheaper rates than those offered by typical financial intermediaries.

The ability to efficiently diversify across geographies and asset classes is important because your investment universe plays a key role in determining your overall investment returns.

Individual savers and investors often end up investing in portfolios that concentrate on a few domestic stocks.

We drink wine from France, wear shoes made in Vietnam and travel to other continents for our holidays – so why are investments often overwhelmingly local?

In a globalised economy, multi-asset trading allows you to invest in any macro cycle and hedge those exposures accordingly.

In addition to nearly round-the-clock access to global capital markets, online trading has brought about reduced transaction costs.

For example, in the 1980s, the cost of making a trade on the NYSE reached hundreds or even thousands of US dollars, today it can be done for less than $10.

The impact of investment costs and fees can be difficult to grasp but the effects on returns can be profound.

The Danish consumer council has calculated that by shifting your savings and pensions from traditional bank-backed investment solutions to lower-cost investment alternatives, individuals can save the equivalent of four years of retirement over a lifetime.