Online Investing for Beginners
Online investing or internet investing is essentially self-directed investing from the comfort of your own home or office (for those of you who like to surf at work). In other words, you make the decisions to buy and sell stocks, mutual funds, bonds or whatever without a broker’s assistance. Since the onset of the internet, online investing has become extremely popular in the financial industry whether for the low commissions, online advice or you just don’t like your financial planner trying to sell you on an investment you don’t want. Whatever your reasons, more and more individuals are handling matters on their own without the assistance of an actual broker or brokerage. It has become so commonplace that now that even the big brokerages are offering an online investing and trading platform for their clients.
Unfortunately for the big brokers more and more investors are looking to the internet for their investment portfolio and the brokers that charge the super high commissions for offline trades are becoming a thing of the past. Before internet investing you would have to either meet your broker face to face at their office or contact them by phone in order to do any investing or trading. Suffice it to say, the internet has provided us with a major money-saving and time-saving convenience in the process.
Online Investing Tips
Is online investing right for you? Here are a few things to consider before investing online:
Consider your tax liabilities before you ever invest – a primary consideration is the amount of tax that you want to be liable for. Whenever you are considering any type of investing, you should contact your accountant or income tax preparer to hear their advice or suggestions about the matter.
Trust is everything – never believe everything that you read about an investment broker or brokerage, especially if you are considering online investing.
Keep bank accounts separate – you should always separate your investment accounts from your personal (or family) checking and savings accounts. It enables you to monitor those accounts much easier.
Use online payment processors – there are numerous options for paying for your investments online, but it is always recommended that you employ a payment processor for this. There are a number of trustworthy options that you can search out online.
Play with house money – in other words, once you have recouped your initial investment, you should withdraw the funds you invested initially and let the gains do their job compounding. The mentality here is that you are now investing what is referred to as OPM (Other People’s Money) and not your own. The worst case here is you break even right?
Don’t use your “living” money to invest online – the #1 rule of thumb with investing, whether through a broker or online is to never invest money that you cannot afford to lose. Although the temptation to use whatever funds are available, you should never interrupt the monthly cash flow necessary to maintain your lifestyle.
Be patient – patience has always been a virtue, especially where investing is concerned. No matter what your broker urges you to do, or what opportunity seems to be enticing, exhibit patience – especially if things go wrong or the market slows down. Remember not to panic when this happens. Sometimes those bumps in the road are only temporary and are not financially disastrous.
