The Skinny on Online Investing

The world of stock trading has changed dramatically over the last 20 years. Trades that use to take more than a week to process now take only moments. While once you needed to have a stock broker to make a trade for you, now, from the comfort of your own computer, you can make as many trades as you like, and at a much lower commission than your grandfather would have paid to make the same trade 50 years earlier. The world of online trading can be very tempting to many. Investing is a lot like gambling, with possible huge profits and even bigger losses possible. But how do you know if online investing is for you?

The first question you need to answer is do you have money to burn? Of course, none of us want to toss our money down the drain, but you have to be prepared for the worst. Most online investors are armed with a copy of the New York Times, online subscriptions to several investment websites as well as strong word of mouth from family and friends, but even with all this information, some investments don’t go the way you want them to. Make sure you have room in your budget so that you can afford to lose some and still be secure. Online investing can be addictive, so you should know when to stop.

Be prepared to arm yourself with as much information as possible. While it’s true that even the most informed traders make mistakes, the more you know, the less likely this will happen. This means immersing yourself in reliable, timely and knowledgeable advice. If you’re not willing to take the time to properly educate yourself, you might want to leave investing to your broker.

A good investor has to learn to be patient. While it is tempting to take on the human herding instinct and put your money on the latest trend or the most fashionable stock, those investors that are confident and patient usually come out on top.

If you’re new, stick to blue chip stocks. There is a reason they are called blue chips, they have shown slow and steady growth over long periods of time. There is no such thing as a safe stock, but blue chips are the closest thing you’ll find. A good tip is to always leave a portion of your investments in blue chips, so if the rest of your investments go south, you’ll have something to fall back on.

Online investing can be exciting and fun, but it can also be terrifying for a newbie. Do the research, develop some patience and stick to familiar ground and online investing can be a great way to develop your portfolio without having to bow to mainstream brokers.