Is Online Trading Dangerous?
Online trading can be dangerous if you use an aggressive trading strategy and don't guard yourself against losses. Most day-traders lose money. However, there is nothing inherently more dangerous about investing online vs. investing through a financial adviser.
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Investing
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People invest money in order to get better returns on their money over the long run. Studies have shown that holding stocks for very long periods of time can build wealth better than many other investments like bonds or CDs, but stocks are also riskier.
Buying stocks
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In order to own stock, you have to buy it. You can do this either by hiring a broker to handle your money, or by doing it yourself, in which case you will need to place your own trades. Online brokerages are the easiest way for the average person to place stock trades.
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Investing and Risk
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Investing in anything has some risk, and the stock market is riskier than most investments. Not only this, but your investment strategy can affect the risk to your money. If you constantly trade in and out of stocks, you will lose money on broker commissions, and you may lose money on bad trades. Most active traders lose money. Trying to trade to make money is very dangerous.
Long Term Investing
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Long term investing is where you buy something like a mutual fund, or a few good stocks, and just keep holding them and even adding to your positions. This is still risky because your account's value will fluctuate with the share prices of your stocks, but you aren't trying to time the markets. Over the long term, this is considered by many to be a fine investment strategy.
Brokers Aren't Safer
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Handing your money to a broker is no safer than picking some low-cost mutual funds or stocks yourself because brokers aren't trained to trade markets. A broker is a salesperson who sells you financial products, and they may not sell you good products. The best thing to do would be to learn a bit about investing, and pick a safe strategy you can do yourself.
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References
- Photo Credit Investment image by Svitlana Boldyryeva from Fotolia.com
