Becoming an Online Investor is a very simple process. And trading online has never been easier or more cost effective. But being successful with your investing means more than finding the cheapest brokerage.
Here are a beginners key steps to getting started as
an online investor:
1) Choose how much capital you intend to invest with
We all have to start somewhere, and the age old saying of “only invest what you can afford to lose” does have some merit. Just be aware that the smaller the amount of capital you use, the more riskier your investing becomes as you don’t have room to move if stock prices (or whatever you are trading) move against you.
With more capital, you have the ability of diversifying and spreading your Risk. Capital amounts for someone starting as an online investor usually are around $2,000 to $10,000. It’s quite rare for an individual to start with $100,000 or more. Quite often I hear “I’ll start small and add more money to my account when I’m confident”.
Fear is the driving factor for not committing more capital. But starting small does not make you successful. In fact, as previously mentioned, it inhibits your ability to professionally manage your Risk.
2) Select a brokerage service.
Online platforms all offer the same information. It’s just that they have different platforms to display it in. All platforms provide instructions on how to use them, and most will have a demonstration access so you can play around with it first.
Next is whether there is a cost to the platform, fees for data, and what the brokerage fees are.
Does the broker service provide phone and online order taking? Check whether there are additional fees for placing orders over the phone and whether you can access your trading terminal from different computers. As an online investor, you are most likely wanting to trade from anywhere, hence you need the ability to be flexible with how you access your trading terminal.
And last but not least, is how quick transactions are processed. Not only do you need a sufficient internet access, but the brokerage platform needs to process your orders instantaneously. Unfortunately, the only method in being able to evaluate this is through the use of trial and error.
3) As an online investor, will you make investing decisions yourself, or if you will take advice from a reliable source?
If you are intending on making all your own decisions, then you need to have a Plan in place. Just haphazardly selecting stocks without having any reference or understanding of what will impact the value of the share is a suicidal method of flittering away your hard earned cash.
On the other hand, there are various different services you can subscribe to or participate in to receive recommendations on what to buy and sell. At the same time, you still need a plan on how to evaluate and select from the recommendations you receive. Remember, your role is to manage your account and place the orders to trade. Whether or not you are also making the decisions on what to buy or sell.
At the end of the day, to become successful as an Online Investor will require research, advice, support and practice. For those who already have knowledge on how to invest or how to choose a stock to buy or sell, then becoming an online investor is a simple process of learning how to use your trading platform.
Australian Investment Education (AIE) provide education on Stocks, Options, and Futures trading. Our members receive trading recommendations and support, with an affiliation with one of Australia’s leading online broker services.