Peter Hodson, a seasoned investor and founder of 5i Research Inc., takes a trip down memory lane in this article, reflecting on the evolution of the investing industry since the 1980s. He argues that while the industry has become more accessible and cost-effective, it has also become more treacherous, with investors facing new challenges and risks. Hodson begins by recounting his personal journey, from his first stock purchase in 1974 to his career in the investment sector in 1985. He highlights the stark contrast between the investing landscape of the 1980s and today, emphasizing the impact of deregulation and technological advancements.
One of the most significant changes, according to Hodson, is the dramatic reduction in trading costs. In the 1980s, investors had to pay hefty commissions to trade stocks, which could reach $200 for just 100 shares. Today, commissions are 95% lower, and multiple brokers offer free trades, encouraging excessive trading. While this sounds appealing, Hodson warns investors to be cautious, as it can lead to short-term gains at the expense of long-term success. He emphasizes the importance of long-term investment strategies and the need to avoid the temptation of quick profits.
The article also delves into the impact of regulations on the industry. The Bernie Madoff scam and the 2008 financial crisis led to significant changes in banking and financial regulations, with a focus on investor protection. Money laundering regulations, Know Your Client (KYC) policies, and other rules have made compliance a significant burden for brokers and advisers. Hodson acknowledges that while these regulations have improved investor protection, they have also added complexity to the industry.
The availability of instant information is another game-changer, according to Hodson. In the past, investors had to rely on annual reports and phone calls to gather company information. Now, with a computer, they can access billions of data points on any company, stock, industry, or market. This has democratized investing, allowing retail investors to manage their own accounts and compete with institutional investors. However, Hodson warns that not all information is accurate, and investors must be cautious about scams and promoters who manipulate stock prices for their benefit.
The influence of retail investors has grown exponentially, thanks to deregulation, lower fees, and instant information. Online forums like Reddit's WallStreetBets have empowered millions of traders to move individual stocks dramatically. Companies like WealthSimple Inc. have thrived as investors take control of their investments. Research outfits such as Seeking Alpha Ltd. and 5i Research Inc. have emerged to support the do-it-yourself crowd. Hodson concludes that while institutional investors remain important, individual investors now have more clout and power than ever before.
Despite the increased influence of retail investors, Hodson notes that stock market volatility has not necessarily increased. A 2016 McKinsey study found that while day-to-day volatility increased, there was no significant difference over a longer term. However, an update in 2026 revealed that U.S. market volatility had increased compared to other global markets. Circuit breakers, introduced in 1988, have been instrumental in stemming panic during dramatic stock movements. These halts, now percentage-based, prevent markets from experiencing extreme drops, such as the 22% decline in the 1987 crash.
In conclusion, Hodson reflects on the transformative changes in the investing industry, acknowledging both the benefits and challenges. He emphasizes the importance of staying informed, making prudent investment decisions, and adapting to the evolving landscape. As the industry continues to evolve, investors must navigate the complexities and opportunities, ensuring they make informed choices to achieve their financial goals.
