How do I Invest in Online Stocks?

The ability to trade online has made it possible to bypass the direct use of human brokers on the floors of stock exchanges.

The ability to trade online has made it possible to bypass the direct use of human brokers on the floors of stock exchanges.

Buying and selling online stocks is one of the easiest and potentially profitable ways to grow your wealth. Over time, stocks have outperformed bonds, CDs and real estate. So, if you and your partner want a piece of this action, then pool some money, do some research and start investing. Keep in mind, however, that with the potential for profit comes a greater risk for losing money. So start small and educate yourselves.

Define your investment goals with your partner. Because online trading has made it easy for more people to buy and sell, the market fluctuates. Many experts urge you not to invest in the stock market unless you plan to leave the investment untouched for five or even 10 years. However, day traders, who profit from investing in daily or even hourly market fluctuations, would argue otherwise. As business news is published, online traders make trades that affect the market. So be sure to have a plan of attack for your investment strategy.

Choose an online stock brokerage. If day trading and short-term speculation is your strategy, then consider an agency that charges a flat monthly fee. If you plan to make long-term investments, then consider a firm that offers a per-trade fee. Also check to be sure the initial minimum deposit required by an agency is not more than you and your partner planned to invest.

Fund your account. Most agencies will offer the option to fund your account by sending a check via snail mail. However, the quickest way to fund your account is to direct deposit from your bank account to the investment firm. If you are not an experienced investor, then only fund the account with as much money as you can afford to lose.

Diversify your portfolio. As the saying goes, "Don't put all of your eggs in one basket." This goes for your stock portfolio as well. If you only buy stock in the tech sector, and that sector takes a dive, then 100 percent of your investments take a dive as well. If you diversify by investing one-third of your portfolio in health care, one-third in manufacturing and one-third in technology, then only one third of your portfolio is hit if the technology sector takes a dive.

Items you will need

  • Internet access
  • Initial investment funds

Tips

  • Consider automatically depositing funds from your paycheck into your online fund.
  • Set stop-loss limits to ensure you sell stock before they fall below a certain quote that you specify.
  • Sign up to receive news from the companies whose stocks you're interested in purchasing.
  • Diversify your investments by sector.

About the Author

Michelle Boardman has worked as an information-technology consultant and trainer for numerous Fortune 500 companies since earning her master's degree in rhetoric from Purdue University. From technical training guides to professional editing for university publications, Boardman's eclectic experience includes graphic design, business analysis and copywriting.

Photo Credits

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