Invest online , also known as online trading or online commerce , is a process whereby individual investors and traders buy and sell securities through electronic networks, usually with a brokerage company. This type of trade and investment has been the norm for individual investors and traders since the late 1990s with many brokers offering services through various online trading platforms.
Video Investing online
History
Prior to the Internet, an investor must place an order through a stockbroker, directly or by telephone. The brokerage firm then enters orders in their system, which are linked to the floor and the trading exchanges.
In 1985, Trade * Plus offered retail trading platforms at America Online and Compuserve, and in 1991 one of its founders, William Porter, created a new subsidiary called E * Trade Securities, Inc.
In August 1994, K. Aufhauser & amp; Company, Inc. (later acquired by TD Ameritrade) became the first brokerage firm to offer online trading through its "WealthWEB". Online investment has experienced significant growth since then. Investors can now enter orders online, or even trade with other investors through electronic communications networks (ECNs). Some orders that go online are still channeled through brokers, allowing agents to approve or monitor trades. This step helps protect both clients and brokerage firms from unlawful or incorrect trades that could affect the client's portfolio or stockbroker license.
Online brokers in the US are often referred to as discount brokers, but in Europe and Asia many so-called online brokers work with high-value individuals. Their popularity is due to the speed and ease of their online order entry, and the fees and commissions are significantly lower than the full service brokerage firms in the US. Two types of online brokers have emerged in the US in the mid-2000s: which offer direct access trading on the exchange, and those who ship orders to market makers to fulfill their orders.
Maps Investing online
Trading tools and platforms
Investors who trade through online brokerage firms are provided with an online trading platform. The online trading platform acts as a hub, allowing investors to buy and sell securities such as fixed income, stocks/equities, options, and mutual funds. Included with the platform is a tool for tracking and monitoring securities, portfolios and indexes, as well as research tools, real-time streaming quotes and latest news releases - all of which are necessary to trade profitably. Often, stronger research tools are available such as comprehensive and in-depth analytical reports and analyzes, as well as customized retooling and screening to see how specific investment strategies will materialize over different historical periods.
Risk
In all investments, there is a risk of investment fraud. This risk may increase for online brokers where investors have no personal relationship and brokers may be located in different jurisdictions. For this reason some financial regulators warn potential investors to research the online brokers they plan to employ, ensuring that the companies are licensed within their state, provincial or national jurisdictions. Informed investors are less likely to be victims of unauthorized securities schemes, such as "boiler room" fraud. The US Federal Government provides practical tips for avoiding investment fraud through their OnGuard Online website. This website warns investors to be careful with internet newsletters, investment blogs, or bulletin boards. Stock manipulators often throw false information and "hot tips" on these sites, as part of efforts to influence stock prices in certain security. Investors are also advised to switch to an unbiased source when researching investments. In the US, the US Securities and Exchange Commission (via their EDGAR database) is one such example.
Online investors usually invest without the assistance of a stockbroker or trained investment advisor, and may not fully understand the potential risks of investing in a particular security. Inexperienced investors are easy prey for stock manipulators and pumping and disposal schemes that are often associated with penny stocks. For this reason, many online brokers offer a number of investment tools to educate and inform new investors.
Investment selection
Many online brokers provide tools to help investors research and select potential investments. There are also many third party information providers, such as Yahoo! Finance and ADVFN. Other leading sites provide information about the business sector, news and financial reports of each company, and basic tutorials on subjects such as diversification, basic portfolio theory, and risk mitigation associated with volatility in the stock market.
See also
- Comparison of online brokers in the United States
- Crowdfunding Equity
- Financial advisor
- The online trading platform
- Online trading portal
- Share selection criteria
- Stockbrokers
References
External links
- Overcoming Risks in Online Stockbroking - UK FSA (Financial Services Authority)
- EDGAR Database - US Securities and Exchange Commission
Source of the article : Wikipedia
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