In the modern world, numerous people are turning to online investment. Online investment enables many to bypass the charges and the fees levied by investment banks and traditional brokerages, manage their portfolios, act upon and find new opportunities for investment. For the newbie investors, it has become easier and popular to invest in stock online. For newbies, the greatest challenge lies on developing a good plan to ensure the investment stabilizes and yield maximum profit.
Basic Stock Investing
A beginner should liaise with registered stock brokers to buy shares through them. He only needs to place an order with the broker indicating the number of shares to purchase and the specific stock preferred. The broker moves further to market and buy shares for the beginner’s account. The transaction is made fast if the beginner pays for the share electronically through credit card or online accounts. In stock investing, the investor makes profit from the dividends paid by the share’s company and rising stock value. One can make more profit during a bull market, when the value of stock markets is high, and less profit during the season of the bear market, when the value of stock markets decline.
Large entities such as the federal government or corporations borrow money from individual investors through selling bonds. New investors can purchase bonds through a brokerage firm. A newbie should choose the bond type from different entities that are solid financially. Bonds are considered as safer investments for beginners since their prices are less volatile, though they involve a slight risk. Sometimes the entity issuing the bond may be unable to pay back the loan if it goes bankrupt. Beginners are advised to purchase the federal bonds through the agency itself, the treasury direct. This helps the new investor purchase bonds without the aid of brokers. Investors in bonds benefit in receiving the interest payments and principal debt when the bond matures.
Mutual Funds Investment
Many new investors may lack knowledge on individual stocks but wish to enjoy the benefits in the stock market. Mutual funds would be appropriate for such a newbie; it represents a large number of investments that are spread out to reduce the investor’s exposure to the risk. For newbies, mutual funds are not likely to make them broke; it is unlikely to result in an early retirement. This is because mutual funds invest in bonds, stocks, derivatives, commodities, real estate, cash accounts or may involve an interest in a combination of investments, such as one part of bonds, one part of stock and one part of cash. New investors begin with opening an online brokerage account from a brokerage company that does not charge commission fees for regular automatic payments and allows automatic investment. To make the investment easier and faster, the newbies should fund the account by online transfer. New investors are advised to know their timeline and goals before they invest in mutual funds. This would enable them to choose the best mutual fund to invest in that fits their investment goals and needs. If new investors have not decided on a mutual fund, they are recommended to temporarily park their money in a money market mutual fund. It helps them to earn a little money as they protect their principal while they decide.
What Online Investing Site Should You Choose?
We looked at some of the top sites and picked which ones we thought were the best for newbies. Here’s what we found:
OptionsXpress by Charles Schwab: This is the best of the best when it comes to newbies. Since it is run by Charles Schwab, which has a long history of investment knowledge, the site is better at explaining the different types of investing and teaching you how to invest. You can check out OptionsXPress by Charles Schwab here.
OptionsHouse: This site has the least expensive rates, which makes it perfect for any newbies who want to take a few risks without getting hit by expensive rates. OptionsHouse also does a good job at showing you the different types of investing. You can check out OptionsHouse here.
TD Ameritrade: This site was rated the #1 site for novices by Barron’s, which is a magazine for stock trading. It also has one of the longest histories of online trading. You can check out TD Ameritrade here.
E*Trade: E*Trade, meanwhile, was founded in the early 1980s, making it a pioneer in the field. Based in New York City, it is an online discount stock brokerage service for those comfortable with doing their own trading. You can check out E*Trade here.