Advantages and Disadvantages of Online Investing
Similar to direct investing (though for different reasons) online investing offers many advantages over dealing with brokers or brokerage firms. Of course, nothing is perfect so we’ll also discuss some of the disadvantages of online investing in this article as well.
Advantages of Online Investing
First and foremost, online investing offers you a great deal more flexibility in your trading activities. Compared to direct investing and/or dealing with a broker you’re usually able to move more quickly on stocks when you see an opportunity to do so. This can be a good or a bad thing depending on your trading style but the average investor prefers to be able to buy and sell shares quickly.
The other major advantage of online investing is paying significantly lower transaction fees. Most brokerage firms charge you a premium for each trade you make. They’re able to do so because most brokers provide additional value by offering good and timely advice on a regular basis. If your broker doesn’t provide such services and you’re still paying high trading fees you might want to consider online investing or at least, finding a better broker.
Online investing, depending on which online trading platform you use also allows you to create a watchlist for you stocks and see real-time activities affecting your portfolio. This allows you to monitor trends and get a more accurate picture of what the stock may do in the future.
Disadvantages of Online Investing
Similar to direct investing, online investing reduces the amount of professional support you’re receive when making buy or sell decisions. Because there is no human involvement (apart from your own), there really isn’t anyone that you can bounce ideas off of when considering investing in different stocks or when you’re thinking about dumping stocks that seem to be underperforming.
Choosing good stocks also requires a good deal of information and knowledge if you want to succeed. Unless you’re following insider trading data or another proven online investing approach, you might find that you’ll spend a great deal more time investigating stocks than you would if you had a broker to consult. This is fine as long as you’re comfortable researching companies as you will be saving a bit of money on brokerage fees, etc.
At the end of the day, it is your money and only you can decide what is best for you. While online investing continues to gain popularity for the reasons listed above, every investment opportunity comes with some risk. It is always wise to do your homework to the best of your abilities prior to making any significant moves.
Source:
insiderslab.com
http://insiderslab.com/media/mediaRoom.php
Reported on Aug 17, 2011
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