Pros and Cons of Online Investment

What is online investment

In recent and modern times investigation has become one of the most important methods of managing one’s finances and it has never been easier for people to invest in modern ever changing and fluid financial markets with an abundance of online trading platforms to choose from. However, with such magnitude and multitude of options to consider, selecting an online platform that meets all of an individual’s specific investment needs can be time-consuming as well as overwhelming.

Online investing opens up for the investors a wide international market to invest and choose from. It allows investors easy, low-cost access to global financial markets. It is essential to go through the entire process of online investment in detail before choosing a platform to invest in. An investor must carefully look into the guidelines and terms and conditions of the chosen platform.

Some of the most important things to consider in this regard are the regulations, what and how much security the platform offers, the chargeable fees and commissions that are being asked, what kind of products and fund management the platform offers. In this regard customer reviews also play a pivotal role.

●     Regulation: Ensuring that the broker is registered to sell securities.

●     Platform Security: In order to protect an investor’s identity and to secure their credentials this needs to be checked and re-checked.

To secure one’s  funds and identity,  an online broker that has enhanced security features should be selected we must remember that the world of online trading is competitive and volatile, like  two-factor authentication (2FA) and SMS or email notification, login security alerts, and also an online platform which agrees not to sell the investor’s personal information to third parties.

●     Fees/Commissions: It is important to choose an online investment platform that offers competitive and understandable trading commissions, as these can accumulate fast.

Although there are many discount platforms which offer zero commission, the investor must be aware that these platforms may make money through a wider space between the bid and the price they are asking.

  • Offered products: It is of utmost importance to associate with a platform that offers all products and the investor can use them accordingly. It must be ensured  that the platform offers stocks, exchange-traded funds (ETFs), options, and futures trading opportunities as well.

●     Online Reviews: a good picture of the trading platform becomes clear from the reviews given by online customers and it greatly helps to understand the portal’s potentiality and the facilities it offers.

Online investment or online trading refers to the buying and selling of securities through the Internet or any other electronic and abstract means such as wireless access, touch-tone telephones, and other new technologies.

In online trading, most cases customers reach out to the brokerage firm’s website through their computers or phones using the internet provided by their regular internet access providers. The customers consult the information provided on the website about the workings of that platform and then create accounts after the registration process is complete the customers log into their accounts to place orders and monitor account activity and the monetary activity.

There are two types of accounts that can be opened,

  1. Cash accounts
  2. Margin accounts

Cash accounts are used by customers who pay in full for the cost of the securities they have purchased or wish to purchase. Margin accounts are those accounts that are used   by customers who have been given the authorization to borrow part of the investment’s total buying cost from the particular brokerage firm. Almost any type of stock, bond, or mutual fund can be bought online.

MARKET ORDER AND LIMIT ORDER

In a market order the customer asks his or her particular brokerage firm to buy or sell a product at the price when the trade is executed at the inception. Preferably as soon as possible.

If the price of the product is quickly and swiftly changing and there is a delay in the carrying out of the order, then the price at which the customer purchases or sells the stock may vary greatly and may seem different from what the customer had expected when the order was initially placed.

In a limit order, the customer specifies the price beforehand at which he or she wants to buy or sell. Limit orders shield the customers from quick price changes when markets are growing and changing fast. However, there always remains the risk that the limit order will not be executed. Also, it must be taken into consideration that limit orders usually cost more than market orders.

Benefits of online investments

●     It is cheaper

●     Can monitor investments anytime

●     Eliminates the middleman

●     Investor has greater control

●     Faster Transactions

●     Better understanding of one’s money

Though there are risks involved, the pros outshine the cons.

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