Efficient and more transparent

The negative spinoff of this development is that it enables investors to speculate. Since the margin requirement is low,retail investors use these instruments without fully understanding the risks they carry. When the bet goes against them,they end up losing a considerable amount of money.

Introduction of ETFs. Index funds have been around in advance markets like the US for more than a couple of decades. But exchange traded funds ETFs are a more recent introduction even in the US. In India,we have been quick to introduce this product.

According to Pune-based financial planner Veer Sardesai: 8220;Earlier,for investors to buy physical gold and store it was quite a task. But now they can buy gold ETFs online,or with just a call to their broker,and participate in the ongoing gold rally without having to bother about where and how they are going to store the gold.8221; Their gold holding is merely a ledger entry in the demat account.

ETFs based on important stock indexes like the Sensex and the Nifty and several more are also available. They allow investors to take positions in these indexes on an hour to hour basis. The NAVs net asset values of index funds,by contrast,are made available only once a day. The cost of ETFs is also much lower than that of index funds. Thus the introduction of ETFs has made it possible for investors to take positions in gold and stock market indexes in a low-cost and transparent manner.

Online trading taking over from physical brokers. Earlier you had to telephone a broker and place the order,and the latter would execute it on his terminal. A lot of small investors felt cheated because brokers treated them unfairly. For instance,when an investor placed an order with the broker,the latter would buy the stock on his behalf and hold it. If the price went up by the end of the day,he would sell it and pocket the gain,and buy the stock for the investor at the higher price. Nowadays you get a time stamp on the contract note so that you know when the stock was purchased.

Two,another dodgy practice brokers indulged in was to encourage investors to sell what they were holding and buy a new stock so that the higher churn would increase their payoff. Now when an investor invests online,he does not have to deal with such suspect advice. He can invest based on his own independent research.

Three,after they had sold stocks on your behalf,brokers would hold the money for some time before releasing it to you. Now the money comes into your account almost immediately. Similarly,if you bought a stock,it would be credited to your demat account after some delay.

And four,the brokerage charges were also high.

In dealing with human brokers,investors had to try and find a reliable person who would act in good faith and protect their interests.

Many of the above-mentioned malpractices have disappeared with customers moving to online trading. It has put the trading terminal in the investor8217;s hands. They can see the current price,set a price limit at which they will buy the stock,and so on. A few broking houses even allow you to buy products like an ETF through a systematic investment plan SIP.

Electronic sale and delivery of stocks introduced by NSDL amp; CDSL. Even today if you use a physical broker,you have to fill out a delivery instruction and give it to your depository participant DP. The DP processes the instruction and transfers the shares to your broker for selling them. Now you can issue an instruction to your DP over the Internet. The DP then transfers the desired number of shares to your broker. This transfer of shares gets reflected in your account statement by the end of the day. Thus there is no paperwork involved and you don8217;t have to visit the DP to hand over the instruction. You can also see the number and value of stocks that you hold online at the depository8217;s website. Earlier you had to get physical statements from the DP to see this. All these facilities have made it easier for you to monitor your transactions.

Plethora of knowledge available online. A few years earlier,if you were a serious investor and wanted in-depth information about a company that you were interested in,you would have to buy a database. Now even if you can8217;t afford a database service these services are quite expensive,a lot of information is available online. Says Sardesai: 8220;The presentation that companies have made to analysts and the transcripts of the conference calls that the company has held with them are available at the company8217;s web site. All this was not available to the common investor earlier. A number of personal finance websites have research reports on stocks from broking houses. Even if these research reports are a little dated,a lot of information can be gleaned from them.8221; Based on this wealth of information,investors can take independent purchase and sell decisions.

Shorter duration of market cycles. Another trend that is increasingly being witnessed in recent times is the relatively shorter duration of market cycles both bull and bear. 8220;Due to the increasing penetration of the internet and TV,and good media coverage,all factors affecting the markets get discounted very fast. Reactions are nearly always very severe and short lived. Recent bull and bear markets have ended much faster than earlier ones and even the present bull market is likely to be extremely unpredictable,8221; says Ashish Kapur,chief executive officer,Invest Shoppe India. 8220;From long-term investing,which remains the best and proven method of making gains from the stock markets,there has seen a definite shift towards tactical and shorter-term strategies.8221; Investors would do well to understand the basics of fundamentals-based investing instead of getting lured into speculative trading.

While investing in the markets has become more convenient,it is still up to the individual investor to exercise due diligence and learn about the stocks that he invests in,instead of treating stock market investment as another form of gambling. u

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