One of the most popular ways to invest today involves using the internet but, if you’re not experienced, it can actually be an overwhelming experience. Many people who wish to begin investing online actually try to do too much, too quickly and end up getting in way over their head. Indeed, as with any type of investing, the most simple way to ensure that your online investing is successful is to start slowly. Over time your confidence and comfort level will increase and, most importantly, you’ll have a much better idea of exactly what it is that you’re getting yourself (and your money) into.
With that in mind, the following 3 steps should be followed if you’re just getting started so that, as mentioned above, you slowly but surely learn the ins and outs of online investing and protect yourself from getting in over your head and possibly losing quite a bit of your hard-earned money.
The 1st step is to decide what type of online trader that you are going to be. Just like anything else in life that you wish to accomplish, you’re going to need a plan for investing if you want to achieve success. Part of that plan includes deciding what type of investor that you want to be. Are you keen on being an active trader who handles multiple transactions every single day? Maybe you would prefer to be the kind of online investor who is conservative and follows the ‘buy-and-hold route’? The answer to this question is vital to picking an online broker, one that best suits your particular needs and will help you to become one of the other type of investor.
For example, if your keen on becoming an involved day trader you might consider finding and using a qualified discount brokerage firm because they will usually have transaction fees that are much cheaper than a full-service firm. In many cases, these discount brokerage firms offer trade rates as low as $1.00.
Your 2nd step is to choose the right broker for your needs. The simple fact is that no two brokerage firms are the same or offer the same services. If, for example, you want to do mostly your own research, your broker will need to offer tools that help you do that such as analysis software and research reports. Some brokers have physical branches that you can visit or offer round-the-clock support and, if that’s something you need, make sure that you choose a broker that has the resources. Before you make your final choice it’s best to know what type of asset classes that you want to get into such as futures, mutual funds or bonds.
Keep in mind that the average brokerage firm is going to charge you an annual fee and, if you don’t use them regularly enough, inactivity fees as well. In other words, before you choose broker make sure that you read all the fine print their services and know exactly what to expect.
Step 3 is simply to responsibly fund your account. Once the task of finding an online broker has been accomplished, you’ll need to endow your new account with the funds that you’re going to use to make trades. It’s vital that you know exactly where that money is going to come from. Will it be from your savings account? Maybe it’s going to be a check that you’ve just received or even a portion of your weekly paycheck.
Most brokers have requirements about minimum balances so it’s best that you decide beforehand on an exact dollar amount that you might start with. For example, there are some brokerage accounts that will require you to have an initial account balance of $10,000 whereas with other brokers you can actually start with a minimum deposit of $0.00. That’s a huge difference, obviously, and should be determined with great care.
Finally there’s the 4th step which is simply this; stick to your principles. Once you’ve established your account with your new broker it’s vitally important that you stick to your goals and develop your own personal strategy. Diversification of your investments in your portfolio is also vital as well as focusing on the markets that you find most interesting and, more importantly, the easiest to understand. As with any other type of investment, it also makes sense to carry out detailed and diligent research on any investments that you’re going to make.
Best of luck with your online investing dreams and goals. If you have any questions about online investing or personal finance questions of any kind, please ask us any questions or drop us a line anytime and will be sure to get back to just as quickly as possible.