Sunday, July 16, 2006


Only a few years ago, online investing focused on finding the lowest transaction costs at one of a few discount brokers that offered cheap electronic trades. Today the Internet is major force in the investing environment. It has opened the world of investing to individual investors, creating a more level playing field and providing access to tools formerly restricted to professionals. You can trade many types of securities online and also find a wealth of information. This information ranges from real-time stock price quotes to securities analysts' research reports and tools for investment analysis. The savings from online investing in terms of time and money are huge. Instead of wading through mounds of paper, investors can quickly sort through vast database to find appropriate investments, monitor their current investments, and make securities transaction--all without leaving their computers.


Online investing's popularity has grown almost a fast as stock market valuations. In just one year, from 1998 to 1999, the percentage of retail securities trades executed online jumped from 27% to more than 50%. Investors have opened over 16 million online accounts at the 170 brokerage firms that offer online services. About 4 million household manage over $550 billion in assets online. The Internet makes buying and selling securities convenient, relatively simple, inexpensive, and fast. In today's rapidly changing stock markets, it provides the most current information, updated continously. Even if you prefer to use a human broker, the Internet provides an abundance of resource to help you become a more informed investor.

How can you successfully navigate the cyberinvesting universe? You probably already have the technology you need: a computer, modem, and Internet service provider to connect you to the Internet. Open your web browser, and you are ready to explore the multitude of investing sites. These sites typically include a combination of resources for novice and sophisticated investors alike.


The Internet offers many tutorials, online classes, and articles to educate the novice investor. Even experienced investors will find sites that expand their knowledge. Although most investing-oriented websites and financial portals include many educational resources.


Once you familiar with investing basics, you can use the Internet to develop financial plans and set investment goals, find securities that meet your objectives, analyze potential investments, and organize your portfolio. Many of these tools, once used only by professional investment advisers, are free online. You'll find financial calculators and worksheets, screening and charting tools, and stock quotes and portfolio trackers at general financial sites. You can even set up a personal calendar that notifies you of forthcoming earnings announcements and receive alerts when one of your stocks has hit a predetermined price target.


The power of the Internet as an investing tool is alluring. "Do-it-yourself" investing is now possible for the average investor, even novices who have never before bought stock. However, online investing also carries risks. Trading on the Internet requires that investors exercise the same--and possibly more--caution that they would if they were getting information from and placing orders with a human broker. You don't have the safety net of a live broker suggesting that you rethink your trade. The ease of point-and-click investing can be the financial downfall on inexperienced investors. Drawn by stories of others who have made lots of money, many novice investors take the plunge before they acquire the necessary skills and knowledge--often with disastrous results.

Online or off, the basic rules for smart investing are the same. Know what you are buying, from whom, and at what level of risk. Be skeptical. If it sounds too good to be true, it probably is! Always do your own research; don't accept someone else's word that a security is a good buy. Perform your own analysis before you buy.