Online investing is becoming more and more popular with each passing day, but is this really the way to make your fortune and should you rush to join this online investing crowd?
Investing in individual company stocks and in shared investments, such as mutual funds, is a common practice around the world and, in recent years, a huge number of small private investors have joined the investment bandwagon. It is not surprising therefore that many of these private investors are now moving away from the traditional brokerage houses and are turning to the internet to manage and grow their portfolios. But is this rush towards the internet a wise move?
Let's examine some commonly expressed thoughts by those turning to online investing.
First, there are those who say that they are going to make a killing online.
As with most things in life, online investing can make you a fortune, but it can also result in you losing your shirt. Indeed, studies have shown that the most active online investors, the day traders, tend to lose more than they win. Nevertheless, if you do your research, make careful are reasoned decisions about your investments and maintain a balanced portfolio, then online investing can produce very acceptable results.
Second, there are those who believe that investing online is particularly advantageous when it comes to making a killing on highly profitable initial public offerings.
When publicly traded companies make a new offering of shares to investors, the price often rises sharply in early trading, making them very popular with investors. However, there is almost always a very high demand for these new share offerings and the number of investors who benefit from these issues is very small.
Third, many people believe that by investing online they can benefit from the fact that their shares are purchased the moment that they place their order.
The moment at which your purchase is actually made however depends upon a number of factors but, in times of heavy trading, your purchase can take anything from a matter of minutes to several hours to complete. This means of course that the price shown when you click the buy button may well not be the same as the actual purchase price you end up paying. There are of course systems in place (such as limited orders and stop-loss orders) to counter this effect, but you need to understand the detail of the buying process online if you want to avoid getting your fingers burnt.
Fourth, there are those who believe that the real beauty of this form of investment is that it allows them to trade at any hour of the day or night.
While online investing allows you to access your account at any time, and place orders whenever you wish, any orders placed will only be executed during normal market trading hours and, even then, they may be subject to delay in heavy trading periods.
These, and many other, common misconceptions abound in the investment world and the reality is that the internet represents nothing more than the latest bandwagon. It is not, however, the answer to the investor's prayer and it is simply another tool that can be added to your investment toolbox.
For many, particularly seasoned and experienced investors, online investing does indeed represent a very good way to increase your investment income. To others, and especially to the inexperienced or novice investor, online investing needs to be researched carefully before you decide whether or not it is right for you.
Take your time and do your homework before jumping on this particular bandwagon or your super highway to fortune will rapidly turn into a dirt track to ruin.
