What You Need to Know About Online Investment

Online Investment

by David Redmond on 22 Feb, 2011

Investing online has become one of the most popular ways of investing money over the last few years. It offers unprecedented ease and control over your investments. However, as with almost all technological changes, the freedom and convenience of online investment comes at a price.

It’s Risky

All investments are risky. Despite the enormous advances in mathematics and data gathering that stock brokers have made use of over the last few decades, markets are inherently unpredictable things, as became all too clear at the tail end of 2008.
However, online investment presents further risk. Whereas individual investors traditionally went through stock brokers who brought with them their greater knowledge of the market and portfolio strategies, online investment puts you directly in the trading chair.

Know Your Markets

The upshot of this freedom is that no one is there to help you. By investing online you’ve just turned yourself into a stock broker, but with none of the knowledge.

If you’re to make any sort of profit and minimize the risk you confront yourself with, you have to acquire as much knowledge of the markets and portfolio strategy as you can. You also need to thoroughly research every company you are considering investing in – this includes their competition.

You Need Good Tools

Good online investment platforms will give you the same tools they use at the big investment firms, so this information is at your finger tips. Before settling on an investment platform, make sure it gives you all the tools that you need to get the full picture on investments and market sectors.

Not having all the latest information at your fingertips will put you at a severe disadvantage.

Research Your Broker

Despite giving you the freedom to make your own investments, online investment still goes through a broker, who will give you varying levels of freedom. Often, all client investments go through a qualified stock broker who will review it to make sure no illegal or particularly unwise trades go through – the trades you make will still reflect on the firm.

Given the extra risks involved in not having the advice of a qualified stock broker, it would be a good idea to go with a platform that offers the greatest amount of involvement from the firm, for your security and theirs. Spend time looking at different brokers and go with the one you feel most comfortable with.

About the Author

David Redmond


David Redmond is a Partner of Don Gilliard Finance Group. He is a fee-only, independent financial advisor and financial planner. For over 15 years, he has been helping individual investors and their families realize their investment goals.