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Online Investment

Online investing for starters can be scary, confusing and even financially devastating if you are unsure of the decisions to make. The Internet has made it easier for just about anyone to get involved in various forms of online investing from opening simple savings accounts online, to investing directly into the stock market. The fact is, online investing even for beginners can be quite lucrative, but dangerous at the same time. 

For people who aren’t used to using the internet or at least haven’t done any stock investing online, there are a lot of questions, especially regarding the safety of your funds from hackers and other scammers, especially when large sums of money is involved. Others are worried about the complexity of investing online, may be a wrong click and buying the wrong stock or worse yet transfer it to the wrong account. Most of these fears can be put to rest because the major online investment brokers have built a system that is both easy to use and very secure. 

How To Open An Online Trading Account

The first thing you need to do when beginning investing online is to open an online trading account. There are number of major companies you can work with to open your first online investment account. You can use one of the major players in the online investment trading world like ETrade, Scottrade or Schwab. These major investment houses are used to dealing with people who are buying stock online and investing online for the first time; they can provide good support for investing online and they have an interface that is fairly user friendly. Your bank may also have an online investment option that you can use as well. 

If you are not sure which online stock broker to use for investing online, then a good place to start is with the fees that they charge. Whenever you buy stocks or some other type of investment fund you get charged a commission and that trade commission can change from broker to broker, so you want to see which price works best for you. 

Opening an online investing account for the first time, you will be taken through a number of steps which vary from brokerage to brokerage, but typically will require you to fill out forms with some of your personal information. Many people are uncomfortable giving their tax information away online, during the process of online investment but online brokerages are required to report any investment income that you have to the IRS so this information is mandatory. 

Depositing Funds In Your Online Investment Account

Once you have your online investing account set up, the first thing you need to do is to deposit funds so you can get started buying stock, bonds, or mutual funds. Depending on the brokerage, the methods used to deposit funds may differ. 

Determine Your Online Investment Risk Tolerance

Before you invest online, a single penny in any stock, bond or mutual fund, the first thing you need to do is figure out how much risk you are willing to take on. When we get started in investing online, we automatically assume that we are going to make a fortune on our very first trade and retire early. Understanding your risk level is very important. As a general rule, the closer to retirement that you are the less risky you should be with your online investments. Ideally we would all buy in to the lowest risk online investments available but risk and return have an inverse relationship, or said another way if you aren’t willing to risk much, you can expect a lower return on your online investment, while those who take on more risk can make a lot, or lose a lot. 

Depending on the amount of risk you want to take on there are a lot of online investment options. Bonds are generally viewed as one of the safest investments for beginners because they have a guaranteed rate of return for their investors. They are also often backed by bond insurance in case the issuing agency or company goes under. Stocks on the other hand are on the riskier side of investments. 

If you are looking for something in between the risk level of stocks and bonds, take a look at mutual funds. Mutual funds are investments that are comprised of a mix of securities, divided in to – slices and these slices are sold depending on how much you want to invest. 

Beginner Stock Market Investing Research

When it comes to online investment for beginners however you need to take a step back and be much more methodical. Many Wall Street stock brokers have been investing for decades so making split second decisions is a regular occurrence, but if you are investing online for the first time, it is highly recommended that you do a lot of careful online investment research and do a thorough analysis on a stock before buying it. 

There is an old saying in investing that goes “buy low, sell high” and that, in short, is your objective but doing so is easier said than done. Before you buy any stock, make sure you read about the company, starting with past performance. How has the stock fared over the last 2-3 years? Are there any new products or services coming out that may drive the stock up or down? Is the stock seasonal? 

You should also take a look at the company behind the stock before buying. Does the company have a lot of debt? Have they had any problems with bankruptcy? Could any current events impact the company’s success like the airline industry or banking industry over the last few years? These are all very important considerations before investing online, your hard earned money. 

Buying/Investing in Your First Stock Online

Once you find a stock, bond or mutual fund that you feel meets your criteria for investment, log in to your online investment account and walk through step by step through the buying process. Most brokerages have different processes, but typically you just enter the ticker symbol, the number of shares that you want to purchase and agree to pay commission on it. Online investing has a significant learning curve. You should see that as a benefit as you are less likely to make mistakes in the future if you learn from the ground up.