From Trading Floors to Smartphones: Investing Today

I'm Andy Temte and welcome to Money Lessons! Join me every Saturday morning for bite-sized lessons that are designed to improve financial literacy around the world. Today is November 29, 2025.

Last week, we discovered how mutual funds and index funds democratized equity investing by solving the diversification challenge. The 1940 Investment Company Act created the regulatory framework, and Jack Bogle's 1976 index fund innovation proved that ordinary investors could capture market returns at minimal cost.

But mutual funds still required calling brokers and waiting days for transactions. Today, we're exploring how technology completed the democratization journey—transforming stock ownership from an exclusive privilege into something anyone with a smartphone can do in seconds.

The Electronic Revolution Begins

Picture the New York Stock Exchange in 1970. Traders in colored jackets crowd the trading floor, shouting orders and scribbling on paper slips. The system works, but it's expensive, slow, and requires physical presence.

In February 1971, NASDAQ launched—the National Association of Securities Dealers Automated Quotations system, and the world's first fully electronic stock market. Unlike the NYSE with its physical trading floor, NASDAQ was purely electronic. Dealers connected through computer terminals, trading without anyone shouting across a crowded room.

NASDAQ proved that stock markets didn't need physical locations. Electronic systems could match buyers and sellers efficiently, transparently, and at lower cost.

The Cost Barrier Falls

But individual investors still faced a major obstacle: cost. Until 1975, the SEC required brokers to charge fixed commissions—often $100 or more per trade. Such high fees made frequent trading or building diversified portfolios prohibitively expensive for most Americans.

In May 1975, the SEC eliminated fixed commissions. Competition could now drive prices down. Within months, Charles Schwab launched his discount brokerage, offering trades for a fraction of traditional costs. What had cost $100 could now cost $29.

Remember our compound interest series? High costs destroy returns over time. Reducing trading costs from $100 to $29 meant middle-class investors could build diversified portfolios without fees consuming their prospective gains.

Traditional brokers initially dismissed discount brokerages, claiming investors needed professional advice. But many investors, especially those buying index funds, simply needed inexpensive execution. Schwab proved that a massive market existed for low-cost, no-advice brokerage services.

The Internet Changes Everything

The 1990s brought another revolution: online trading. E*TRADE launched in 1992, followed quickly by Ameritrade. Now investors could trade from home computers without calling brokers or visiting offices.

Commissions dropped further—to $20, then $10 per trade. Account access became 24/7. The barrier between investors and markets practically disappeared.

This accessibility had consequences. The late 1990s saw explosive growth in day trading—people quitting jobs to trade stocks full-time from home. Internet and technology company stocks soared to unsustainable valuations as investors rushed to capitalize on the prospect of a new internet economy, creating what became known as the dot-com bubble. Online trading made this speculation easy and widespread. When the bubble burst in the early 2000s, technology stocks lost trillions in value. Many inexperienced traders who'd quit their jobs to day-trade lost their entire savings, learning painful lessons about the difference between investing and speculation.

The Smartphone Era

By 2013, smartphones had become ubiquitous. A new brokerage called Robinhood launched with a radical idea: zero commissions. No fees whatsoever for stock trades.

The industry dismissed this as impossible. How could brokerages survive without commission revenue? Robinhood's answer: they sold their customer orders to market makers—the financial firms that actually execute trades—who paid Robinhood for access to customer order flow, making their profits from the trading process itself. We'll explore how this works in future episodes. Commission-free trading had arrived.

Within five years, every major brokerage had eliminated commissions. Schwab, Fidelity, TD Ameritrade—all dropped to zero by 2019. The cost barrier to investing had completely disappeared.

Robinhood and competitors added another innovation: fractional shares. Previously, if a stock cost $1,000 per share, you needed $1,000 to invest. Fractional shares let you buy $10 worth of that same stock—owning 0.01 shares. Remember our latte example from the compound interest series? Investing $5 daily is now literally possible through smartphone apps offering fractional shares.

The Journey Complete

Let's step back and see how far we've traveled through this series. Roman publicani in 200 BCE required enormous wealth to participate in state contracts. The Dutch East India Company in 1602 needed substantial capital for even modest stakes. Railroad stocks in the 1850s brought ownership to the middle class but required hundreds of dollars and broker relationships. Mutual funds in 1940 enabled diversification for ordinary savers but still involved paperwork and intermediaries.

Today? Anyone with a smartphone and as little as one dollar can own fractional shares of the world's largest companies, hold diversified index funds, and build wealth through compound growth. The 2,000-year journey from exclusive privilege to universal access is complete.

The technology exists. The costs have vanished. The barriers have fallen. Stock ownership is now more accessible than at any point in human history.

The New Responsibility

But here's what we must understand: accessibility doesn't equal wisdom. The same smartphone app that lets you build wealth through disciplined index fund investing also lets you gamble on speculation or follow social media hype into disastrous losses.

The democratization of investing is complete. Now comes the harder work: financial education. Understanding compound interest. Recognizing the power of diversification. Distinguishing investment from speculation. Controlling emotions during volatility. Making decisions based on long-term goals rather than short-term price movements.

This is why financial literacy matters so deeply. The tools for building wealth are now in everyone's hands. Whether those tools build fortune or destroy it depends entirely on the knowledge and discipline we bring to using them.

The future belongs to the educated investor. The technology has done its job. Now we must do ours.

Until next week...

Grace. Dignity. Compassion.