The Internet has made investing in the stock market easier and more convenient than ever. Online brokers make it possible for investors to execute trades sitting at their own home computers for as little as $4 per buy or sell order. Some online brokers even allow prospective clients to open accounts with no minimum balance. Numerous websites list brokers, rate brokers and reveal the costs and minimums associated with each one.
Trading stocks online with a no-minimum brokerage account
The first thing any would-be investor should do is research the various brokers with online trading. Typically, online brokers require a minimum of $500 or more to set up an account, but a few require no minimum. Certain websites list online brokers and provide details about each one. Among online brokers that require no minimum are ShareBuilder, the online investment arm of ING Direct; Zecco; and Charles Schwab.
As you research various brokers, you may want to consider factors such as how much specific firms charge for trades. Investors should also note the services available. Anyone considering opening an account with a specific online broker should thoroughly research the type of support available. Some online firms offer only online support, while others provide telephone support as well. In some cases, an online broker may maintain small offices in selected cities. Having an office nearby is a plus if you need help or decide to cash out available funds and want a check tomorrow instead of a week from tomorrow.
When you select a broker, you will be asked to complete an account application. Most firms accept applications online, but a few require would-be clients to print out the application and either fax it or send it by mail. The application may ask for some credit information, including bank account numbers. Some firms will draft money from a bank account to set up trading, but others may require you to send a check by mail. Once your application is approved and your funds have cleared, you will be ready to start trading stocks.
Find an online investing tutorial to guide you through the initial steps of researching companies whose stock you are considering. Sites like msn.com, aol.com and yahoo.com provide a wealth of investing tools including stock ratings, quotes and up-to-date news regarding the financial markets.
First-time investors and those who begin trading with limited funds may want to look into exchange traded funds, commonly known as ETFs. Unlike an individual stock, which offers the investor the opportunity to buy into one company, an ETF makes it possible with one transaction to invest in several companies within a specific sector. ETFs are traded like individual securities, but they offer the diversification of mutual funds. ETFs reflect all sectors of the economy, including banks, health care, housing, energy, consumer goods, bonds and commodities. It is also possible to invest in currencies and international companies through ETFs. The Internet provides a wealth of information for anyone interested in learning more about ETFs.
Individuals who invest online should follow their accounts closely. Setting stops helps reduce losses in a time of market volatility. Most online brokers make it easy to input stops that will trigger an immediate sell when a stock's price falls to the level of the stop. As positions in a trading account rise, stops should be raised accordingly.
Individuals who manage their own stock portfolios should closely monitor their investments and stay informed of national and world events that could affect financial markets. Investing, especially in today's economy, is not for the faint of heart.