Search Dadmag.com


Behavior
Sports
Health
Activities



Relationships
Travel
Money
Sex
Fitness
New Dads
Single Dads
Divorce
Teens
Personalities


Books
TV
Music
Video


Letter From The Editor
Partners
Employee Search
Contact Dadmag.com
Feedback
Become An Affiliate








Online Brokers
How To Invest Via The Internet And Deciding If It's Right For You

By Paul Barr


Investing And The Internet Were Seemingly Made For Each Other.

Choosing One click and you can get quick and easy access to thousands of Web sites offering quotes, research, and loads of other cool stuff to help you become an investing whiz. And with all the stories you've read and heard about people hitting it big online, maybe you're starting to wonder if you should open an online brokerage account too.

Depending on your situation, online investing makes good sense. If you have an interest in investing and some time to spend doing it, you should check it out. "Whether or not someone should manage their own finances is a personal question," says Azhar Usman, founder of Xolia, a Web site that helps people pick an online broker. You need to be able to tolerate risk, you need to have some financial savvy, and of course you need enough time to perform research on the stocks you're considering, Usman says.

If you're comfortable having your finances professionally managed in boring but safe mutual funds or with the help of a broker or a financial planner, then you should stick with that approach. Online investing is something people should do because they enjoy it, not because it's a necessary component to your life. You've got enough keeping you busy without having your eyes drilled to your screen for projected revenues for semiconductor chips in 2001 and 2002. And don't expect to hit the jackpot. The gravy train of quick and easy profits has left the station.the right brokers

But if the thought of becoming an amateur financial analyst does appeal to you, getting started with an online brokerage account can be one of your easiest investment decisions, if you do some planning ahead of time. There are three Web sites that can help you choose a broker that's right for you and your investing style.

Your first stop should be Xolia (www.xolia.com), which will walk you through a short series of questions about the kinds of features you might need. If you're a novice investor, some of the questions may not mean much to you at this point. (Chances are, you aren't ready to use wireless devices to place trades.) Even then, Xolia gives you a great way to narrow down your brokerage possibilities to three companies.

Say you've taken the test and you end up with three brokers that to your eye come across as blindingly similar. They're not. Online brokers can be very different in personality and in character of their sites, and which one is best will often be a matter of personal preference.

So visit the Web pages of each of the three firms Xolia recommends. Call their customer service line a couple of times to see how comfortable you are dealing with them. Don't worry, they've probably heard every stupid question in the book, so if you want to know something get an answer now before they have your retirement nest egg in their clutches.

You can also get some expert opinions on brokers from Gomez Advisors (www.gomez.com), an online consulting firm and from Don Johnson, a retired professor who now runs a site devoted to rating online brokers (www.sonic.net/donaldj). Don't rely solely on either for making a decision, but both offer useful information. Gomez can fill you in on what the hottest issues are concerning online brokerage, while Johnson keeps close tabs on which firms are garnering the most complaints from investors.

About Those Commissions
When making a decision you should keep in mind an important point about trade commissions, a major selling point for online brokers. There's a big difference between a trade that's considered a market order and a trade considered a limit order. While market orders often are cheaper to place than a limit order, you can usually save a lot of money in the long run by using limit orders. If you enter a market order, it's like going into a car dealership and offering to buy a car at whatever price other people are paying, just as long as you get our car fast. Market orders are most useful when you're in a hurry to get your shares. Much more useful is a limit order, which lets you place trades at a maximum price for buys and a minimum price for sells, increasing the odds you'll get a fair price when you trade.

On the flip side of that, a high-cost online broker is still way cheaper than what a full-service broker usually charges-though you won't get any advice from your online broker either. An expensive online broker will charge about $30 bucks a trade, while inexpensive online brokers charge less than $10 a trade. A full service firm might charge you more than $100 or $200, depending on the stock and the number of shares you're trading.

Researching Stocks And Security
As you're making the broker decision-and before you execute your first trade-you should learn as much as you can about the markets and researching stocks. The Motley Fool (www.fool.com) is a Web standby offering educational resources that are as good as it gets, and are free to boot. Quicken, the personal finance company, also has free online tools that can help you get started (www.quicken.com/investments). It's Stock Evaluator, found in the Stocks section, will walk you through the process of analyzing a stock, telling you what's important from different investment perspectives, and including links to educational resources along the way.

And if you're concerned at all about online fraud or security, you should visit The Securities and Exchange Commission site-click on Investor Education and Assistance-as well as the North American Securities Administrators Association-www.nasaa.org, click on Investor Education. Both organizations are dedicated to protecting customers from hucksters and frauds, so you'll find plenty of help for beginners.

Online investing should be fun not frustrating, so don't get lulled into the easy way out when picking an online broker. The free $150 or so you might get for opening an account now won't be such a good deal if you don't like your broker down the road.





Paul Barr is senior editor for Online Investor magazine (www.onlineinvestor.com) and writes about money and investing for dadmag.com.








Content in DADMAG.com is meant to be distributed freely to interested parties. However, any excerpts from the stories in DADMAG.com must credit DADMAG.com. Copyright 2000, DADMAG.com, LLC. All rights reserved. Site Development - Andexler.com