Online Investing For Dummies

Matthew Krantz

• Publisher: For Dummies
• Year: 2019
• Print ISBN: 9781119601487
• eBook ISBN: 9781119601500
• Edition: 10
• Topic: Personal Development
• Subtopic: Personal Finance

Build a winning portfolio—and reduce your risk—with this bestselling guide

Online investing has never been easier—or more potentially confusing. Now that every broker or finance site has its own app, data, or approach, it can be all too easy to be misled and make a bad decision. Online Investing for Dummies helps you reduce risk and separate the gimmicks from the gold, pointing investors of all experience levels to the pro-tips, calculators, databases, useful sites, and peer communities that will lead to success.

Updated to include information on mobile trading and the influence of social media on the markets, the book also covers the basics—showing you how to figure out how much to invest, find data online, and pick an online broker. It then progresses through to more advanced topics, such as calculating returns, selecting mutual funds, buying bonds, options, commodities, and IPOs, taking you and your money wherever you want to go in the global market.

• Set expectations and assess your risk
• Analyze stocks and financial statements
• Assemble the suite of tools to calculate your performance
• Get tips on choosing the right online broker and on protecting your information online

It's time to get a pro strategy, and Online Investing for Dummies has all the inside information you need to build up that winning portfolio.

Part 1

Getting Started Investing Online

IN THIS PART …

Discover everything you need to know to get yourself and your computer or other device ready to pick, buy, and sell investments online.

Learn all the key terms you need to know to set up investment accounts, pick a broker, and get started.

Understand the main ways to invest online, and quickly gain the wisdom of more experienced investors.

Find the answers to two of the most commonly asked questions investors ask me: “How do I get started investing online?” and “How much money do I need to invest online?”

Chapter 1

Getting Yourself Ready for Online Investing

IN THIS CHAPTER

Analyzing your budget and determining how much you can invest

Taking the basic steps to get started

Understanding what returns and risks you can expect from investing

Getting to know your personal taste for risk

Understanding your approach to investing: Passive versus active

Finding resources online that can help you stick with a strategy

Before doing something risky, you probably think good and hard about what you stand to gain and what you might lose. Surprisingly, many online investors, especially those just starting out, lose that innate sense of risk and reward. They chase after the biggest possible returns without considering the sleepless nights they’ll suffer through as those investments swing up and down. Some start buying investments they’ve heard that others made money on without thinking about whether those investments are appropriate for them. Worst of all, some fall prey to fraudsters who promise huge returns in get-rich-quick schemes.

So, I’ve decided to start from the top and make sure that the basics are covered. In this chapter, you discover what you can expect to gain from investing online — and at what risk — so that you can decide whether this is for you. You also find out how to analyze your monthly budget so that you have cash to invest in the first place. Lastly, you find out what kind of investor you are by using online tools that measure your taste for risk. After you’ve become familiar with your inner investor, you can start thinking about forming an online investment plan that won’t give you an ulcer.

It’s only natural if you’re feeling skittish when it comes to investing, especially if you’re just starting out. After all, it’s been a brutal couple of decades even for veteran investors. First came the dot-com crash in 2000, then the vicious credit crunch in 2008 that threatened to drop-kick the economy, and then a nasty bear market in 2008. The stock market then proceeded to soar starting in March 2009, roughly quadrupling in value through mid-2019. But even that rally wasn't painless, because the stock market short-circuited in May 2010, due in part to computerized trading, causing its value to plunge and largely rally back in just 20 minutes. Don’t forget the 2015 Greek debt crisis and fears of a major economic slowdown in China that rattled investors. Confused yet? Get this. Even good news can hurt the market. Stocks dropped roughly 20 percent in late 2018. Why? The economy was doing so well that investors worried that the nation’s central bank, the Federal Reserve, would slow it down.

Some think all this chaos is just too much to bear and choose to avoid stocks altogether. That decision is a mistake, though. Prudent investing can be a great way for you to reach your financial goals. You just need an approach that will maximize your returns while cutting your risks. And that’s where this book comes in.

Why Investing Online Is Worth Your While

Investing used to be easy. Your friend would recommend a broker. You’d give your money to the broker and hope for the best. But today, thanks to the explosion of web-based investment information and low-cost online trading, you get to work a lot harder by taking charge of your investments. Lucky you! So, is the additional work worth it? In my opinion, taking the time to figure out how to invest online is worthwhile because

• Investing online saves you money. Online trading is much less expensive than dealing with a broker. You’ll save tons on commissions and fees. (Say, why not invest that money you saved?)
• Investing online gives you more control. Instead of entrusting someone else to reach your financial goals, you’ll be personally involved. It’s up to you to find out about all the investments at your disposal, but you’ll also be free to make decisions.
• Investing online eliminates conflicts of interest. By figuring out how to invest and doing it yourself, you won’t have to worry about being given advice that might be in your advisors’ best interest and not yours.

You may still decide to hire a financial advisor. For some people, the extra guidance or piece of mind you get from a person whose job it is to watch your portfolio makes a ton of sense. Even so, it’s a good idea to know how investing and markets work so you can understand what your advisor is doing with you money. Advisors, too, appreciate it when clients comprehend the plan. It’s like when you travel to different parts of Europe — the locals like to see you at least try to speak their language.

Getting Started

I can’t tell you how many investors just starting out write me and ask the same question. Maybe it’s the same question that’s running through your head right now: “I want to invest, but where do I start?”

Getting started in investing seems so overwhelming that some people get confused and wind up giving up and doing nothing. Others get taken in by promises of gigantic returns and enroll in seminars, subscribe to stock-picking newsletters with dubious track records, or invest in speculative investments hoping to make money overnight, only to be disappointed. Others assume that all they need to do is open a brokerage account and start madly buying stocks. But as you’ll notice if you look at the Table of Contents or flip ahead in this book, I don’t talk about choosing a broker and opening an account until Chapter 4. You have many tasks to do before then.

However, don’t let that fact intimidate you. Check out my easy-to-follow list of things you need to do to get started. Follow these directions, and you’ll be ready to open an online brokerage account and start trading:

1. Decide how much you can save and invest.
   You can’t invest if you don’t have any money, and you won’t have any money if you don’t save. No matter how much you earn, you need to set aside some cash to start investing. (Think saving is impossible? I show you digital tools later in this chapter that can help you build up savings that you can invest.)
2. Master the terms.
   The world of investing has its own language. I help you to understand investingese now so that you don’t get confused in the middle of a trade when you’re asked to make a decision about something you’ve never heard of. (Chapter 2 has more on the language of online investing.)
3. Familiarize yourself with the risks and returns of investing.
   You wouldn’t jump out of an airplane without knowing the risks, right? Don’t jump into investing without knowing what to expect, either. Luckily, online resources I show you...

Table of contents

• Cover
• Table of Contents
• Introduction
• Part 1: Getting Started Investing Online
• Part 2: Using Online Investment Resources
• Part 3: Maximizing Investment Knowledge
• Part 4: The Part of Tens
• Index
• About the Author
• Advertisement Page
• Connect with Dummies
• End User License Agreement