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.
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