Every time I need to buy or sell a stock, mutual fund, or index fund, I hop online and enter the trade on my brokerage website. It wasn’t always this easy to invest and we are lucky to live in an age of cheap, online investing.
In the old days, if you wanted to buy or sell a stock you would call your broker, he would send an order to the stock exchange floor, the floor trader would receive the order and make a deal, the deal would be recorded and sent back to the broker, and you would get the updated details on a statement. Now you can do it yourself in about 5 seconds.
In the old days I mentioned above, trading stock was often cost prohibitive for many investors. Fees were so high that you had to invest thousands or tens of thousands of dollars to make any investment worthwhile.
Nowadays, online brokerage companies often charge less than $10 per trade. To break even on a $500 investment, your investment only needs to rise 2%. With a $50 fee, you would have to invest $2,500 to wipe out your costs with a 2% increase, or your $500 investment would have had to rise by 10% to break even.
Picking an online broker is easy. Popular online brokerage firms make it easy to buy and sell investments quickly and easily. When you are looking for a discount brokerage, these are important criteria to use:
- Access to Many Investments: Make sure you can quickly and cheaply buy and sell stocks, bonds, mutual funds, and index funds.
- Free Fund Options: Most brokerage firms offer some of their own ETFs and mutual funds with no trade fees. Standard index funds are an important investment choice, and trading them for free is a great benefit.
- Extensive Research Materials: Should you buy or sell? How are the company’s financials? Is this a good stock to buy both technically and fundamentally? What do most investment advisors have to say? Your broker should give you access to extensive information to make informed decisions.
Use Care When Managing Your Investments
When you use an online firm to trade, no one is watching out for your investments other than you, so it is important to keep a portfolio you can handle.
If you are trading for short-term investments, it takes a ton of work to stay on top of things. I am more of a fan of making long-term investment choices based on company fundamentals. Using that approach, I don’t have to check in as often and can trust that my portfolio is working for me even when I am not watching.
How Do You Invest?
How did you pick your brokerage? What is your strategy to monitor your portfolio and ensure you are set for long-term growth? Please share in the comments.
Image by creecher94 / flickr
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