Online investing is a method of trading in the financial market by placing orders for buying or selling the securities through the Internet. The development of the Internet has changed the way stock and securities trading is done today because every investment opportunity is just a click away.
The conventional method of trading by placing orders through a broker has changed because Internet investing is so simple and easy to do. Through online investment, it is possible to eliminate the need of meeting with a broker to decide what securities to buy.
How is Online Investing Done?
Online investing is very simple to execute but the first step is to opt for a reliable online brokerage. Online brokers are also known as discount brokers since they are cheaper than the traditional brokers. It is important to do a thorough survey before choosing an online broker. The broker of your choice must have a license to trade in the given territory.
Examples of Online Investing
seniors checking over recordsSenior citizens have long been a coveted demographic for financial fraud, but when banks, too, try to get in on the action, something really stinks. The case of a Wachovia client who recently sued the bank for turning a blind eye on a questionable practice that cracked her nest egg, and the attorney who helped her win back her losses, shines light on the hidden relationships between banks and brokerage firms that sell investment products.
In a claim against Wachovia, as in similar cases that securities fraud attorney Mark Tepper said he has tackled, a retired court clerk alleged a bank teller disregarded her request for opening an IRA account and instead told her to speak with a Wachovia financial adviser. The adviser was not an employee of the bank, but worked for its sister company Wachovia Securities, Inc. (now Wells Fargo Advisers), and had a desk on the premises of the bank.
Wachovia disagreed with the $25,000 award, set by the Financial Industry Regulatory Authority, which also ordered an additional $5,525 interest payment to the bank's client.
"The paramount priority of our firm is always to do what is right for our clients. Any implication that practices contrary to that priority ever 'flourished' or have 'been allowed to flourish' in this organization is simply incorrect," a spokesman for Wells Fargo said.
The practice of redirecting seniors to investment specialists, even when they only request simple services such as buying Certificates of Deposit or opening a money market account, is something banks do to develop business for their affiliate companies, the Fort Lauderdale, Fla.-based Tepper said.
"Some banks institute policies like these that reward tellers for referring bank clients to the broker that's sitting in the bank," Tepper, a former New York assistant attorney general, told Consumer Ally. "Elderly people are a targeted group for these aggressive types of referrals because they just seem to be less combative."
In another case Tepper won for a client, an AmTrust bank teller told Jacob Froess, a 56-year-old retired auto mechanic who wanted to purchase a $70,000 CD, that he had to speak with a financial adviser. Unknown to the client, the adviser did not work for AmTrust bank, but for its sister company, AmTrust Investment Services, Inc., which sells mutual funds, annuities and life insurance.
To convince him to abandon his plan for a CD and buy into a high-risk mutual fund instead, the adviser told Froess that CD rates are low and that he could do much better than a CD, according to the lawsuit. To cajole him to pay a $3,157 up-front fee, she explained: "This stuff is so good that you have to pay to get in -- but it is worth it, it is that good! And you will make it back in short order, and make more money."
Froess, who earned less than $25,000 a year and had saved the money in his CD over eight years, had virtually no experience with stocks, bonds, or mutual funds. Despite this, the adviser indicated he had good knowledge of each type of investment, including, astonishingly, options, variable contracts and limited partnerships, the claim said.
When he realized a few months later the investment did not earn any interest and was in fact losing money, he sold it -- at a loss of $12,000.
"This is a bait and switch case," Tepper's claim against AmTrust contended. A FINRA arbitration panel awarded Froess full restitution of his losses, plus $7,000 in what would have been accrued interest had his investment performed as promised.
A broker will provide online trading platforms that act as a virtual trading floor. The orders for buying or selling can be placed on these trading platforms. After selecting the broker and ensuring the availability of the online trading platform, it is important to undertake a survey of the segments in which you plan to trade.
Portfolio analysis and a thorough study of market fundamentals are required to formulate an effective strategy to reach a diligent investment decision. Then, orders can be placed online as these are routed through the broker to the exchange. Routing through a broker is advisable as it facilitates order and transparency in the trade.
Online investing can be done for a number of financial instruments. Some examples are securities, options, mutual funds and forex. There are online tools and techniques that help investors to track the securities, portfolio and indices. Many online trading firms offer alternatives like fax and touch-tone telephone trade to investors who face delay while placing their orders through the Internet.
Online investing is something you can do in seconds but before you do that, be clear about why you are buying or selling and the extent of risk on your investment.Download