They list 8 things you need to know if you are interested in the stock market for beginners and are considering investing online.
- Start small
You know it makes sense - don't bet the house ! You can always decide to increase your online account if things work out OK.
Online investors tend to focus on stocks, and in particular large-cap domestic stocks. These stocks should be a large part of your portfolio, but to increase risk tolerance you should put together a well-balanced portfolio of stocks, bonds, and cash.
- Don't ignore mutual funds.
Mutual funds have the expertise (take care here as they often make mistakes too!). Keep your mutual funds - don't put everything into individual stocks.
- Keep a close eye on costs they may not always be obvious. Online brokerage costs are lower than offline brokers, but they can still add up. You also must reckon with federal capital gains tax.
- Make sure your orders work for you.
When investing online, learn how to use the tools available. (Obvious but true)
Make sure you know the difference between a MARKET order, a LIMIT order, a STOP-LOSS order, "stop orders," "day orders" and "good-till-cancelled" orders.
- Take care with market orders.
A limit order limits the price you are willing to pay, a market order means the price when the order is finally placed, which may be a lot different to what it wa when you looked at it.
- Problems are inevitable.
Investing online will undoubtedly cause problems - you may be away from your computer, your Internet connection may crash etc... your online broker may have problems etc... In this respect I would recommend anyone reading this to steer clear of TDWaterhouse in my experience you can expect problems - for further info see. TDWaterhouse Problems .
- Information is power.
When investing online, you must keep youself well informed. Don't be drawn into hype - make sure you check the facts - I would also add make sure you get to grips with at least the basics of technical analysis and stock market charts.
You also need to understand about stock charts - see online stock trading for beginners
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