Monday, June 23, 2008

Online Investing--Getting Your Toes Wet

Online investing a.k.a. Do It Yourself investing has been gaining in popularity. You might even feel left out if you're not into it. But is it for you? This week we'll explore the basics of online investing.

I used to think of stock investors as old guys in sitting around cigar clouded rooms talking about stuff I couldn’t understand or playboys wearing Italian suits and driving fancy sports cars. That’s a result of too much TV I’m sure.

But then there are those Etrade commercials...

Cute, funny they make it look so easy. Is it? Is online trading right for the beginner?

The top 5 online investing sites (not necessarily in ranking order) are:
1) E*Trade Financial Network





Most online sites are not for true investing newbies. You’ve got to know something about what you are doing. And then there’s Sharebuilder.

First understand that this isn’t an advertisement or endorsement for Sharebuilder. I just haven’t found any other online investment vehicle that really allows you to get your feet wet the way this one does.

Sharebuilder began in 1996. Then in late 2007 they were purchased by ING. So now when you type in you’ll see the big orange ING logo.

Sharebuilder is different from the others because it uses a DRIP like style of investing rather than true dollar cost average. Though you can perform weekly investments (Tuesdays) for any dollar amount (even $1) it’s really designed for ongoing investments. Besides real investors don't change their portfolio every week. You decide an amount to invest (yes, even $1) and the frequency (weekly, biweekly or monthly). Earnings are then reinvested into your portfolio.

In Summary: I don’t have a lot of personal experience with Sharebuilder. A coworker used this account for her nephews. Instead of giving them gifts of cash she gave them investments in their favorite companies like toy companies and Harley Davidson. It was fun for them.

Pros: good for new investors, cheap, flexible, owned by ING

Cons: Not useful for true dollar cost averaging unless you have lots to contribute each month. If you're comfortable with stock investing one of the other online trading companies may offer more sophistication for you.

Wanna Play but not Pay: For no-risk investing there are games you can use to become familiar with investing. These are good tools for anyone to who wants to learn. Books are good too, but a game can give you a more real experience.

Wall Street Survivor

Investopedia Stock Simulator

Virtual Stock Exchange

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