When most people think about investing in stocks online, they imagine that only analysts and investment professionals can make money on stocks. But these days, online investing is easier than it has ever been before. More and more self-directed investors are learning how to use online investment brokers to supplement their income in both the short term and the long term.
Online investment brokers are websites where you can buy and sell stocks in real time, and with minimal fees. The advantages are many for people who are unsure and starting out in the world of stocks buying and selling. First of all, you can watch the stock market and certain trends to identify the right time to buy and sell stock. If you pay attention to how the stock market gains points and then looses them, you can learn to buy when stocks are low and then sell when they are high enough to make a reasonable profit.
The dangers to self-directed investors are minimal, as long as you understand how the stock market works and how to make money by buying and selling. If you purchase 5 shares of a stock when it is worth $10 per share, you shouldn’t sell until the stock is worth at least 50% more, $15 per share or more. If you sign up with an online investment broker that includes details of your overall gains and losses, you’ll be able to see when you have made money and when you have lost money. Never sell when shares are low, then you lose money.
For most self-directed investors, the best way to use online investment tools is to do some research, identify relatively safe stock, and then invest only what you can afford to save over the long term. Capital gains are much more likely in the long term, because the stock market does consistently go up over time. Sometimes it drops significantly, but it has always caught up with itself again eventually. So investing in the stock market in the short term can be very risky. If your shares drop in value and you need to sell because you need the cash, you will have lost money overall. But if you can afford to wait until the stock is valued much higher than when you bought it, you can make money by investing in the stock market.
Self-directed investors need to be successful by the ability to do thorough research. Don’t rely on a single investment recommendation, read a number of articles or fact sheets on any company which you are considering investing in. Only buy stock in companies that seem to be doing well and are predicted to do even better in the coming years. Even a six month increase prediction can mean a net gain for you as an investor. Carefully choose your stocks, and then don’t watch them every day while holding your breath. It will take time for your stock to improve, and in the meantime it might lose value from time to time. Better not to watch too closely.
Beware of common missteps that many new investors take. Be cautious about how much you invest, but limit the number of transactions you conduct. If you are starting out, try purchasing stock that seems very safe, a big name that is around to stay. These types of stock already have high value, companies like Google, Amazon, and Apple trade at a few hundred dollars per share, but they also consistently trend upwards. Steady investing in high rated companies can bring overall increases to your investment portfolio.
Never invest money that you will need in the near future. If you will need cash soon, don’t invest your cash in stocks which may or may not go up in the short term. The long game is much safer and more likely to bring benefits. Additionally, do not invest more money than you can afford to invest. Self-directed investors are people who have extra cash or savings that they can invest and forget about for a little while. Give yourself at least three to six months, sometimes much longer. Serious downturns in the stock market can reduce the value of your stock for even a couple of years.
Self-directed investing can be lucrative and exciting, but staying on top of the market is critical to being successful. Knowing which stocks are risky to invest in and which are a safer bet is one of the most important bits of knowledge you can learn. Before investing in anything, read financial news articles about firms that announce increases or decreases in quarterly earnings, and then see what the stock for those firms does in the wake of an announcement. Watch the predictions of certain investment “gurus” or online analysts who publish both their predictions and their personal investments. See how often they are right and how often they are wrong. Learn what you can, there is an incredible amount of free information out there and self-directed investors use that information to their advantage.