Beginner's Guide to Online Investing: A Step-by-Step Approach

Technology has made it easier for amateur investors to have direct access to buying and selling stocks with online investing. Now that you have all the information at your fingertips it’s time to get organized. Here are the steps to take to prepare for the world of online investing.

1. Get a Plan
Before you begin to trade online, decide how much money you can afford to invest. This will impact which type of investment vehicles you will use. Determine how much risk you are willing to take and set a goal for how much return on your investment you expect to make. Studying where the market has been and where it looks to be going can help you can make this analysis. If you’re in a hot market, expect your profits to come quickly. For a bear market year, expect slower profits. Also, it’s important to be realistic in the amount of time you have set aside to invest. If you only have a few hours a week to study market trends, it doesn’t make sense to jump into day trading. Your plan should define your short term and your long term goals.

2. Become a Resource of Information
Your computer will be the resource for all your financial information, as well as your trading platform. It will be up to you to determine what you want to invest in, since you aren’t relying on the advice of a stockbroker. As an amateur investor, you will need to research what options are out there. This includes the companies you want to invest in and determining where they are headed. Start locating the top financial websites, blogs and forums and set up shortcuts on your desktop. Once you have access to your trading platform you will need to familiarize yourself with how to execute trades. Clicking on the wrong button is the last thing you want to do in real time with money on the line. 

3. Choose An Online Broker
When choosing an online broker, you will want to comparison shop for the fees that they charge. Some brokerages require a minimum amount of money to be held in your account while others have no minimum requirements. Your market order fee, or fee that is charged per trade, will also vary. Most often you have the option of setting up a cash account, margin account or an IRA account for retirement savings. A cash account is money you deposit with your broker. A margin account is borrowed from your broker. Your cash account secures this loan from your broker and is considered high-risk investing. A margin account may not be available immediately to new account holders, but as you get more experienced in your investing, this strategy can expand your purchasing power. 

4. Just Do It
All the information floating around about this stock or that company can be overwhelming, and possibly stop you from moving forward in online investing. Yet, experience is the key to your growth in understanding the markets, and in becoming skilful at investing wisely. Don’t be afraid to take the plunge.