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Investing 101

Lesson 1: Stocks and Their Value

Understanding the Stock Market from the 1960s to 1990s

It took many years for the US stock market to recover from the crash of 1929.

It wasn't until 1954 that the stock market finally rose above its 1929 peak. Today's market is dominated by institutional trading, which includes mutual funds and pension funds. In 1960, institutions and other professional investors controlled about half of the shares traded on the NYSE. In the 1990s, this number jumped to almost 90% of trades controlled by institutional investors. Today the tables seem to be turning, as more individual investors are choosing to do it themselves. How much of an impact this will have on these numbers is still a big unknown.

In 1961, the US Congress asked the SEC to conduct a study of the securities markets. The completed study was finally released in 1963. The SEC concluded the over-the-counter (OTC) securities market was fragmented and obscure. The report called for automation of OTC market and gave the responsibility to the National Association of Securities Dealers (NASD) to implement the project. In 1968, the NASD began construction of this system called the National Association of Securities Dealers Automated Quotation (NASDAQ). The first trading day for the world's first electronic stock market, the NASDAQ, was February 8, 1971, which included more than 2,500 securities. Today the NASDAQ is the fastest growing stock market.

In the 1990s, individual investors reasserted themselves. Online investing and the extensive information on the Internet certainly helped to fuel this shift. Now the SEC is pushing for analysts' calls, where key corporate personnel discuss significant new company information with select analysts. Continuing the shift, there has been a more even playing field for individual investors. Consumer empowerment has never been stronger. Today, you have greater choice in how you want to invest, what type of investing instruments you want to use, and how you want to access the market. In next week's lesson, you'll explore both the fundamental and technical analysis of stocks.