Looking Deeper Into Online Stock Investing


If you have any sort of interest in investing your money in the stock market, then you have probably considered all the various methods by which you can achieve this goal. The majority of investors simply leave their stock market investing decisions to a person or organization that runs a mutual fund. These mutual funds typically will invest your money in an extremely diversified manner. This is a great way to gain exposure to the stock market without assuming the risk that any particular company’s stock might expose you to. On the other hand, it is extremely difficult, if not impossible, to beat the stock market if you decide to go this route. The mutual fund or money manager who handles your investment decision will typically charge a fee ranging from 1-2% of the money you have invested with them. This fee may not seem like much, but it can be a major drag on the earnings of your portfolio over the course of your life. Most people are familiar with the concept of compound interest. What they generally do not consider is that the principle of compound interest also works in reverse: when a 1% fee is assessed on your portfolio every year, it can add up to about a third of the total value of your portfolio over a multi-decade time frame.

The best way to escape this trap is to invest your money yourself via online stock investing. If you still would like to minimize your risk by diversifying, then you can invest in an ETF like the SPY. The SPY is a fund that trades freely on the stock market, and it is often the security with the highest amount of volume on the market. It is designed to track the performance of the S&P 500 as closely as possible. The fee of the SPY is only .1%, in comparison to the 1-2% fee that is typical of most mutual funds. The S&P 500 is an actively-managed group of 500 stocks by Standard and Poor, so it is as if they are managing your stock portfolio for you for a highly discounted fee.

If you want to add a bit of punch to your stock market returns, then you might want to choose individual stocks to invest in. There are numerous tools available online, both free and paid, which can greatly aid you in these decisions. Google Finance is a great source of free data. You can quickly access all the data from each company’s last few quarterly and annual reports. You can take a hard look at the income statement, balance sheet, and cash flow statement for each company. You will want to make sure that the company you are about to invest in is profitable and has maintained a good balance sheet without a lot of debt. It’s a good idea to read a few books about how to properly read and interpret the financial statements of corporations so that you aren’t fumbling around in the dark. You might want to read books about the methodologies some of the most successful investors of all time have used to amass their fortunes on the stock market, such as Warren Buffet.

To trade stocks online, you will need to choose a broker through which to place your trades. Every time you make a stock trade, you will have to pay your broker a small commission. These commissions can range anywhere from $5 to $25. While you may have the impulse to sign up with the cheapest broker, sometimes they don’t have as many options and tools to help you make successful trades. Sometimes the discount brokers cannot execute your trades as quickly as the more expensive brokers. You may want to try out a few of them to see which one meets your own personal needs. Often, they will offer a discount for new accounts, so you may want to take advantage of these offers.

This post was written by

jason – who has written posts on Budget Clowns.
Father of three and married to a lovely women. Always looking for ways to save money, and invest it properly for my children's future.

Email  • Google + • Twitter

Comments are closed.