The Internet has changed how we do countless things, and that includes investing. Today, it’s just as easy to invest your money online as it is to order a book on Amazon.com. Investing online ins’t just convenient, it’s empowering and can help you build wealth faster than ever before.
When preparing to start investing online, though, it is important to follow a few steps. These will help you to ensure that you are going in the right direction with regard to the stock broker you choose as well as with your specific investment strategy.
#1. Learn the Basics
For most people who are just starting out, investing your money online can be somewhat of a mystery. So, prior to investing, it is a good idea to have knowledge of investing in and of itself. One of the first steps here is to determine your overall investment goals. For instance, what are you investing for – retirement, a new home, a child’s college education, or all of the above?
Knowing what your desired result should be will help you in putting together a timeline for your particular investments, as well as a proposed amount that you will need to set aside on a regular basis, given a particular estimated rate of growth.
In addition, investors should also decipher their risk tolerance.
This means determining just how much market volatility you can stomach in your portfolio. For example, those who are fast approaching retirement will not likely want to be invested in riskier investments that have the potential to lose a great deal of their principal – regardless of the potential gain over time – because these individuals have a much shorter investment time horizon that someone who is in their 20s or 30s.
Once you have your investment goals in place and a good idea of your risk tolerance, you should also become familiar with the various types of investments that are available and how they work in relation to what it is that you are trying to achieve.
#2. Choose a Broker
When you are ready to begin taking the next step to online investing, you should familiarize yourself with the different online stock brokers that offer online investment services. Visit each company’s website and compare all of the benefits of each.
It is important to note that the companies with the lowest commissions may not always be the best choice for you, so be sure to compare all of the available features of each online brokerage firm you are considering.
Most online brokerage firms offer a wide range of investments to choose from. In addition, many also have areas of their websites that provide investment education to both new and experienced investors. This could include updated news about the market as well as videos and online seminars regarding other types of investment related topics.
Some online brokerage companies even offer personalized investment guidance where you can get help with creating your overall plan, choosing investments, and managing potential risks to your portfolio.
Live support is also often available if you have questions about how to open an account, how to transfer funds into or out of your account, or about general investing information. You can usually contact someone via email, phone, or live chat – and often these services are available 24 hours per day, 7 days per week. This way, you are not just limited to market hours for asking questions or opening an account.
#3. Open Your Account
When you have decided upon the online brokerage firm that will work best for you, the next step is to open an account. By having an account, you will be able to purchase and sell stocks, bonds, and other types of investments that are offered through the company you have chosen.
Typically, online investment firms will require a minimum initial investment when opening an account. These amounts can range from $500 to $1,000 – however, there are some firms that allow minimums of $100 or less in some cases.
You can usually fill out an application form right online to open your account. In terms of making your initial deposit, you are typically allowed to send in a check or to link your bank checking account to your new online brokerage account.
#4. Choose Your Investments
After your account has been opened, you may begin investing. Deciding upon what to invest in should correlate to the investment goals you have established as well as to your investment time frame and risk tolerance.
Here is where you may also want to refer to the education section of your online investment firm’s website or a free indepdent data source like Morningstar, the leading source of unbiased ratings and analysis of mutual funds and other investments.
#5. Make Your First Trade
Making your first trade online can be exciting. Most online brokerage websites will walk you through all of the necessary steps in making your investment. Here you can specify exactly what you are investing in as well as how much. For instance, if you have chosen to purchase stock, you will need to specify which company’s stock you are purchasing as well as how many shares you intend to buy.
Once you have made your trade, you will be sent – either online, through the mail, or both – a confirmation of that trade. The confirmation will state the date of the trade, the share price at which you purchased, and how many shares you bought. You will need to keep track of your trade confirmations because when the time comes to sell your stock, the purchase share price will be used in determining your overall gain or loss on that investment.
#6. Track Your Progress
The online brokerage firm you choose to invest through should also have an area of their website where you can track your investment progress. It is likely that you will invest your money in more than just one stock or other investment vehicle, so it is important to have a way to monitor all of your investments as well as their performance over both the short and the long term.
When following your portfolio’s performance, though, be careful not to get too caught up in short term market fluctuations that may cause impulse decisions. As an example, in cases where the market causes stock prices to go down, stay calm and don’t make a rash decision to sell your shares because chances are that the market may come right back up. In other words, the market will fluctuate, but remember your long term goals and stay the course.
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