Ten years on from the dot-com bubble

April 8, 2010

James DalyJames Daly is TD Waterhouse Investor Centre Representative regarding investor confidence. The opinions expressed are his own. –

It’s been a decade since the notorious ‘dot-com bubble’ hit the stock market but while it went from boom to bust within five years, technology and trading has been inextricably linked ever since.

As with the majority of trends, the sudden rise in internet-based companies – or dot-coms as they became known – created the opportunity to make a quick buck for some while others weren’t quite so lucky.

The dot-com bubble took hold as many companies became quick to learn that adding an e-prefix or .com to their name sent their share prices soaring.  Rock-solid confidence in the technology soon overtook the traditional tried and tested indicators used by investors such as P/E ratios.

By the time the dot-com bubble reached its climax in March 2000 (with the NASDAQ climbing to 5132.52) it had created tremendous levels of private investment and given birth to the UK’s first breed of day traders.

Technology continues to create opportunities now as it did then with the internet in particular shaping the landscape in which the financial markets operate. While investors were quick to buy into the internet for gain during the dot-com bubble it has since become a preferred vehicle for them to research and execute trading activities as well as ensuring the survival of the day traders.

The emergence of online stockbrokers has become big business with increasing numbers (60%) of investors now preferring to trade online, according to responses to the most recent TD Waterhouse Investor Confidence Survey, which surveyed 1,000 individual investors across the UK towards the end of last year.

The speed and convenience of internet trading has led to a new group of private investors who may have otherwise never considered trying their hand in the stock exchanges while at the same time it has helped drive the costs of trading down.

Bringing with it easy access to company reports and all the stock market information an investor could wish for, the internet has certainly transformed not only who trades but how they trade. Almost two thirds (64 percent) of investors participating in the Investor Confidence Survey said they rely on the internet to help them make investment decisions while a further 32 percent have completely branched out – preferring to use the services of an execution only broker.

It is often remarked that a stock market bubble provides funding that revolutionises the sectors involved, but the benefits do not necessarily go to the people who provide the cash.  So, thinking back to ten years ago, did the dot-com bubble change the way you invest?

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