3 Things To Do Before You Invest Online

Written By Mary Beth Eastman
Last updated May 21, 2021

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Image showing a woman viewing financial graphs and charts
August 20, 2019

Simple. Thrifty. Living.

It’s convenient and straightforward to invest online. But before you dive into online investing, it’s essential to get some critical activities done to prepare you for this fun financial adventure. Here are three crucial tasks you should definitely get done before you invest online:

Investing online is a great way to make some extra income. If you’re good at it, it may be able to bring in a substantial amount that can rival a monthly salary. However, if you have high-interest credit card debt, consider getting rid of it. If you invest while paying debt with double-digit interest, you may find yourself spending even more in fees for selling your shares to pay off your debt. It will also be more challenging to hold on to your investment for long periods to reap its rewards if you have to keep selling shares.

Instead, do the math and consider the average return on your investment and compare it to the interest rates of your current debts, such as student loan debt or your mortgage. For instance, if the interest you pay on your student loans is less than five percent, it may be worthwhile to invest if your seven- or eight- percent return on your investment. It’s also ideal to have an emergency fund in the event of a market downturn. It’s actually quite simple to save up an emergency fund without really trying.

Do your research and get to understand the basics of online investing. Start by getting familiar with common investing terms like “bull market,” “bear market,” and “market order.” You’ll also want to know the difference between mutual funds and ETFs. By knowing the meaning behind these terms and what various security instruments do is a great way to make you understand how to invest online.

It’s essential to choose an online investing site you feel comfortable with and one that fits your needs. Some typical online sites include TD Ameritrade and E*TRADE, which typically charge a fee when trading. You can also consider no-fee online sites, such as Robinhood, as well as robo advisors like Wealthfront.

Each online investing site features different tools to help you with investing. For example, Robinhood is great for beginner online investors since it doesn’t charge fees for buying or selling your investment. However, Robinhood doesn’t have advanced stock tools and in-depth research like TD Ameritrade and E*TRADE. It also doesn’t boast the algorithmic approach of Wealthfront. Therefore, it’s essential to choose an online broker based on your trading strategies and needs.

With the right strategies, investing online is a great way to earn extra income to reach your financial goals. But you still want to ensure that you take some essential steps before you begin. Just consider the tips mentioned here and pick the right site, and you can take advantage of the benefits that online investing brings.

About the Author

Mary Beth Eastman

Mary Beth Eastman serves as the content manager for Simple. Thrifty. Living, where she is dedicated to helping readers use money and credit wisely. Mary Beth believes that access to the right financial information paired with a growth mindset are essential tools for getting out of debt and building wealth. Mary Beth has a degree in Journalism from Bowling Green State University and has focused her 20-year journalism career on putting readers front and center, carefully considering their concerns and presenting information that will help them in their everyday lives. She has won numerous statewide journalism awards. Her writing on personal finance as been featured on numerous websites in addition to Simple. Thrifty. Living, including Huffington Post and Lexington Law blog. Mary Beth resides in Pittsburgh, Pa., with her family and two rescue dogs.

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