Market Continues to Modernize


Investors in recent years have witnessed an impressive modernization of the market, not only in terms of product offerings – aren’t exchange-traded funds great? – but just the nuts and bolts of how investment dollars have been handled. Sliced shares are just the latest in a string of enhancements, and to prove it, let’s go back to 1990, for instance, to see how easy you have it today.

Back then, round lot purchases – increments of 100 shares – were the norm. If you bought an odd lot – say, 50 shares – you got whacked with an extra fee, or commission. And yes, you had to pay commissions (wrap fees were rare). I once bought a small stake in a company and was charged commissions to buy, and then to sell, that totaled 10% of my entire purchase. So just to break even I had to notch a double-digit return.

It was common to encounter pricing spreads of 1/8 of a dollar or more, meaning someone was collecting that buy-sell spread over and above the commission. And yes, prices were quoted in fractions instead of decimals, until the SEC stepped in, in 2001. By then, you could spot prices of, say $15 and 13/256. Huh?

Now, you can still lose money. You’ll just do so more efficiently.

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