Online stock investing has opened up the world of investing to the simple investor. However, with that privilege comes the problem of new investors making mistakes that will cost them money. I personally think many new investors are actually gamblers rather than investors.
In my opinion, anyone who has a desire to trade stocks must absolutely read and learn as much as they can before ever putting one red cent into the stock market. As I browse the web and see some questions by new investors it is sad to know that they are in for a big wake up call. This because they think the stock market is an easy game to play.
The truth is that most new investors will lose money and lose it quickly if they try investing in individual stocks. I truly think new investors need to stick with simple index funds or exchange traded funds as their first venture into the stock market. Nothing will turn a person away from investing quicker than losing a lot of money right off the bat quickly. This will probably happen to most new investors if they invest in individual stocks.
Once you understand how stock prices move up and down then start small with a handful of shares. Nothing is more depressing then buying a large amount of shares in any one stock just to see that stock price go down 10 minutes after you place your buy order. This may sound simple enough, but I personally think the greed factor kicks in very quickly with new investors. New investors need to understand that stocks tend to fall in price much more quickly than they rise. So trust the golden rule of diversification because putting all your money into one or two stocks is going to catch up to you eventually.
While I personally have enjoyed my venture into online investing, I have also learned that it is not always a fair game for the small investor. The boys on Wall Street have a lot more control than anyone sitting in front of their computer at home. If you think you will beat them everyday you will be sadly disappointed. So keep it real when you first start investing and do not try to become rich overnight. Learning both the pros and cons of online investing will prepare you for the mentally challenging world of investing in stocks.
By: Chad Surges