How it's become cheaper and easier for everyday people to invest over the last 10 years


People have been buying and selling shares of companies in the U.S. for hundreds of years, but changes over the past 10 years especially have made it cheaper and easier than ever for ordinary people to invest in the stock market.

Since the late 1700s, traders working at the New York Stock Exchange have executed trades on behalf of all types of customers. By the 1970s, computers helped to revolutionize how stocks were bought and sold, and the Nasdaq exchange was founded as the world's first electronic stock market.

Peter Tuchman has had a front row seat to the more recent changes: He's been buying and selling stocks at the New York Stock Exchange since the 1980s. He misses the old days when buying and selling was conducted by the individuals who worked at the exchanges. "I would much prefer to scream and yell," Tuchman says. "I prefer the open outcry approach."

Nowadays, a vast majority of trading is executed electronically. And that's been a huge shift for ordinary investors.

How buying stocks has changed over the centuries

Video by David Fang

Here are two key ways buying and selling stocks has changed in the last 10 years.

Investing is cheaper than ever

The price of just about everything, from coffee and airfare to big-ticket costs like education, child care, and health care, has gone up over the past decade. It's rare that anything becomes cheaper over a 10-year span. Investing in the market is a major exception.

Back in 2009, brokerages were charging anywhere from $9.99 to $19.95 per transaction to buy and sell stocks online. As of earlier this year, the cost of investing had effectively been eliminated. In the span of a few weeks, a handful of brokers announced that they would make it free to trade most U.S. stocks and exchange-traded funds (ETFs) online, matching some companies that were already at $0.

The past decade has also seen robo-advisors flourish. These automated investment services are typically low-cost by nature, and they make it easy to get started investing with very little money.

They're also gaining in popularity. Between 2017 and 2019, the amount of money under management by robo-advisors worldwide has more than tripled, from about $240 billion to $980 billion, according to figures compiled by Statista. And the industry is projected to grow to more than $2 trillion by 2022.

As a result, experts don't see stock-trading costs going up again any time soon.

Index funds now rule the market

This year, for the first time ever, the amount of money invested in funds that track the market surpassed the amount managed by people who pick stocks, according to data from research firm Morningstar.

Index funds have become so popular because they simplify investing by making it easy to invest in the broader market rather than in individual stocks. These funds track the performance of a particular market index, like the S&P 500, allowing investors to buy a lot of stocks at once and hold them for the long term — and for far less associated costs than buying each one individually. They're also an easy way to add diversification to your portfolio.

Index funds, a form of passive investing, often include exchange-traded funds (ETFs). Accounting firm PwC estimates that, in 2018, 36% of money in the market was invested in such passive funds.

And the number of ETFs has nearly tripled since 2009, according to figures from Statista.

What hasn't changed about investing in stocks

While the past decade has been one of the best ever for investors, the share of people who are invested in the stock market has actually fallen slightly. In December 2009, 61% of Americans said they owned stocks, either individual ones or through a mutual fund or retirement account, according to surveys conducted by Gallup. That's at 55% as of April.

For those who have stayed invested or started investing, though, the market's strength over the past 10 years has reinforced why it's important to keep a long-term perspective. Experts generally recommend investing in stocks money that you won't need within the next five years or so.

You can see tremendous returns if you're willing to ride out short-term bouts of market bumpiness, like the late 2018 slump that saw major U.S. indexes fall nearly 20%. And if you keep adding money to your portfolio regularly, you can take advantage of dips to get stocks at lower prices.

The market has a history of returning value to patient investors. The long-term historical average annualized return for the U.S. stock market is almost 10%. If you'd invested $500 in the five major U.S. benchmarks 10 years ago, for example, that would be worth anywhere from about $1,500 to more than $2,400 today, depending on which index you picked.

More from Grow: