Using the Power of the Internet


‘Risk comes from not knowing what you are doing.’
Warren Buffett

Stock markets around the world are involved with staggering amounts of money – around US$70tn – and so they attract the attentions of a great many clever and ambitious people, many of them ruthless.  Combine this with the vagaries of geopolitics and the often rapidly changing fortunes of companies – resulting in severe volatility in share prices – and the stock market becomes a frightening place for a great many people.  It is important to realize that markets, as expressed through indices such as the S&P 500 (USA) and the FTSE 100 (UK), can be highly volatile, moving up and down dramatically in very short periods of time. The fluctuations in individual share prices can be even more startling.  Individual share price movements of 30% or more in one day are not unusual. However, a good understanding of how the markets behave and how to manage your investment risk should enable you to succeed as an investor.   An ability to cope emotionally with serious volatility is useful, but this is much easier to handle if you understand what is going on.

This book is written for people like the author – the ordinary man or woman in the street – who want to make their money work for them. He (and of course, she) is often referred to in the industry as the ‘retail investor.’  This is intended to be a very practical guide to successful investing. …

CHAPTER 1 – The Power of the Internet

Nasdaq and the Big Bang

The door is opening to the retail investor.

There have been many significant events in the evolution of ‘joint stock companies’ and stock exchanges around the world – ‘joint’ means jointly owned by a number of shareholders.

In the US, a profound change to the old order took place in 1971, when the Nasdaq Stock Market was founded by the National Association of Securities Dealers Automated Quotations.  It was the world’s first electronic stock market and it paved the way for easier and cheaper access to stock markets for the retail investor – as well as the introduction of automated trading systems, which has not been entirely positive.

The New York Stock Exchange (NYSE) has responded to the challenge from the Nasdaq and most of its trading is now undertaken on electronic systems.  However, the traditional stock jobbers on the trading floor – matching buyers and sellers using an auction process with ‘open-outcry’ – still retain a place on the floor of the NYSE. …