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Empowering your money

How to invest online: Stocks, bonds, and more

At a glance:

  • Online services available to investors

  • Tools you need to trade online

  • What to consider when investing online

  • Summary of online investing

The Internet has made it possible to manage all your own finances online. It provides services from basic information to sophisticated securities trading.

While there are still concerns about identity theft and online safety, banking and investing online are no more risky than using the telephone or an ATM machine, or even visiting your favorite investment company office. Online investment services provide all the information you need at the tip of your fingers.

Exercise due caution and know with whom you are dealing, and you shouldn't have problems.

Online services available to investors

There are many ways the Internet can help you conduct financial research. You can access everything on the Web from financial planning advice to company reports.

Search engines can help you find information on anything imaginable. You can read financial magazines, newspapers, and newsletters over the Internet, and even chat live with other investors to get the information you need. You can also email your questions to financial experts.

You have a lot of options

There are lots of options for researching specific stocks, bonds, and funds online. Many trading sites give out free stock quotes, breaking news, charts, historical data, and market analysis, sometimes by email. You can even listen in to conference calls with Wall Street professionals.

Some online trading sites let you keep a hypothetical portfolio to see how your picks would do using your own investment strategy. You can also create your own personalized home page with up-to-date financial information on any securities you choose.

Need to plan your retirement?

If you are trying to find out how much money you need to retire, the Internet has many sites that will walk you through a retirement plan. By answering a series of questions on Website electronic worksheets, you can calculate how much you need to save each year and at what interest rate.

You can create your own investor profile based on your risk tolerance and even track your investments by asset class.

You can trade online, too

Looking for a convenient way to buy or sell securities? You can also do this online. You can place orders anytime, and it is generally inexpensive because you don't need to speak with a broker.

Some brokerages will ask you to open a minimum account before you can trade with them. To buy or sell, you simply enter the name and number of shares you wish to trade and then click.

A young woman uses her laptop in a restaurant. (Photo: Omar Havana/Getty Images)
A young woman uses her laptop in a restaurant. (Photo: Omar Havana/Getty Images)

When choosing an online broker, keep the following in mind:

  • Hidden costs. Does it cost you extra to get real-time stock quotes and market reports? Are you being charged for postage and handling?

  • Trade size. Are you charged more for smaller trades?

  • Can you talk to a real person if you need to?

  • Is there a time lapse between your order and the actual security trade?

How to do online financial research

One of the best places to start your online financial research is the Website maintained by the Securities and Exchange Commission (SEC) at www.sec.gov/.

The SEC can help you

The SEC is responsible for regulating the buying and selling of securities. At this Website, you can find the EDGAR database. EDGAR (Electronic Data Gathering, Analysis, and Retrieval system) contains the official forms of companies that have issued securities. Through EDGAR, you can find detailed company information and a listing of those companies about to have an initial public offering.

Go to company websites

You can often read a company's stock prospectus directly from its website. You can also get a feel for its style, look at its latest financials, and get an idea of its management. Websites such as Stocksmart (www.stocksmart.com/) also contain in-depth company research and profiles.

Tools you need to trade online

You don't need the latest, fastest computer with all the fixings to invest online. Getting connected has never been easier. The basics you'll need include a computer and monitor, means of connection, Internet access provider, and Web browser such as Firefox or Internet Explorer.

The more up-to-date your computer and browser, the more you can get out of the online experience; but the one crucial feature you will need is a browser that supports 128-bit encryption, which keeps your online trades secure.

Your options for software

There are lots of software options for tracking your online investments. Some brokerages will give you free software to download once you open an account with them. You can also buy software to keep up-to-date stock prices floating past your screen, but oftentimes your online brokerage site does this for you. Money management tools such as Quicken and Microsoft Money can take your online information and download it to your desktop to be organized anyway you wish.

There is also a large amount of "free" shareware software available for you to download. Examples include stock selection and portfolio management shareware programs.

What to consider when investing online

With so many people offering free investment advice online, the question is, whom can you trust? Remember that anyone can put up a site or newsletter and offer advice.

The key is to stick with well-known sources, such as the stock exchanges themselves or Yahoo Finance, for example.

Online investing lacks the personal touch

Online investing can also be a very impersonal experience. Because you're not directly using a broker, you are handling your money all by yourself. It can be easy to treat online investing like a new toy if you get carried away.

If you feel that you can handle all your investments by yourself, an online broker may be for you. But if you are in need of investment advice, you might be better off meeting with an investment advisor in person or over the phone.

Beginners, take note

Because you are relying on your own resources to invest online, you will need a certain degree of sophistication with securities trading and computers. Although its convenience and ease of use make it appear to be for everyone, online investing may not be for beginners.

Summary of online investing

The Internet is quickly changing entirely the way people handle their money. There are many resources available to you online that can help you conduct research, plan for retirement, and invest online.

Sorting through the wide array of financial sites on the Web is no easy task, but armed with the basics, it should be enough to get you started.

Do your homework and know with whom you are dealing.

This content was created in partnership with the Financial Fitness Group, a leading e-learning provider of FINRA compliant financial wellness solutions that help improve financial literacy.

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