Online Trading and the Investor

Published: 03/12/2013 by Bai Mike

On-line trading is an affordable way to manage your stock portfolio. Until recently, most investments were handled through brokers and their firms, which provided their clients with expert advice and research. These brokers helped their clients create and manage long-term wealth and develop a financial management strategy. While many brokerage firms offer online trading, most investors use the online technology to execute their own trades. On-line trading allows the investor to be in control of their investments and portfolio. On-line trading has opened the stock market to investors who would not normally be interested in working with a broker.

Investing in stocks online means that you have to be up to date and on top of the stock market and its trends, not just your own portfolio. Many financial experts suggest that you shore up your own personal finances. Having between six and twelve months of savings can provide a level of protection against a severe market down turn. You will want to structure your account so you re-invest your dividends and profits and not spend them.

On-line trading requires the investor to do his or her own research. You should be able to find company prospectus, annual reports and quarterly Securities and Exchange Commission (SEC) filings. Before investing online, you should have a complete understanding of the company's business plan and financial management strategies. Before you invest online, you should be able to read a balance sheet and understand the language of earnings reports and SEC filings.

The easiest way to start online trading is to open an account with an on-line brokerage firm. You should do research into the firm's fee structure. There will be fees associated with balance transfers, trades, and other miscellaneous maintenance fees. These fees will vary and they can add up when you have a smaller account. Diversify your account with a mix of Blue Chip, growth companies, and emerging areas. Diversification should also take into account different areas of the world, as well as different industries and products.

If you have a long-term investment strategy, on-line trading can be an efficient and economic tool to help you grow and manage your wealth. Long-term investors can handle the inevitable ups and downs of the market. When you are investing on your own, with the experience and expertise of a broker, you will need to be disciplined so you do not succumb to the urge to sell if your stocks lose some value. With on-line trading, you are in the driver's seat, researching and identifying stocks that will advance your objectives.

One of the biggest advantages of online trading is that you can execute trades on your own schedule. Be sure to take advantage of standing buy, sell and stop orders, so you can continue to manage your day and live your life without staying glued to your computer. These strategies will also help you identify your risk tolerance, which is an important lesson for all investors. While these platforms are open 24 hours, trades will only be executed during conventional business hours.

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