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Published On: Wed, Jun 12th, 2019

Online investment: a guide for newbies

By VJ

Investing online is a popular pursuit these days – and it’s easy to see why. Gone are the days when a complex route into investing was the only way to do it: now, it’s possible to get set up an online broker account and start placing trades without the need for a stockbroker or even an investment advisor. But what should a newbie online investor look out for when placing a trade for the first time?

From the potential for criminals to defraud you to the risk that the broker you choose isn’t offering you the best fees, there are a range of potential downsides to online trading that you should always be wary of. This article will look at some of the major steps that a newbie needs to take in order to find success in the online investment world.

Fraud and crime

Image by fajar budiman from Pixabay

Sadly, it’s the case that fraud and crime are rife in the online investment worlds – and this shows no sign of going away anytime soon. Every week, there seems to be a new case of online investment scams that attack hardworking investors who are simply looking for a place to grow their wealth. As a result, it’s wise for newbies in the investment field to always exercise caution, and to consult the website of a regulator such as the Securities and Exchange Commission to check that their preferred investment schemes are legitimate.

It’s worth pointing out here that some of the most modern online investment vehicles, such as cryptocurrencies, are particularly vulnerable. One report from the firm CipherTrace found that cryptocurrency fraudsters were able to steal well over $1bn globally from unsuspecting investors in just the first quarter of this year – and the real figure, when unreported cases are taken into account, may be even higher. Even those crypto schemes that seemingly have the endorsement of household names can also be allegedly fraudulent. The recent case of Centra Tech, which saw boxer Floyd Mayweather and music mogul DJ Khaled promote it on social media, just goes to show how no investment scheme can ever be fully relied upon to deliver what it appears to. As a new investor, then, sticking to more established asset classes is sometimes wise.

Choosing the wrong broker 

While the traditional stockbroker role is now largely outdated, what is still the case is that brokers – in their modern, platform-based sense – still play an important role. Take the example of fees: some brokers charge no flat fees for access, for example, but quite high proportional fees on individual trades, which wouldn’t suit a high frequency trader. Other brokers, meanwhile, only offer some asset classes – such as foreign exchange pairs. If you don’t read forex broker analysis (or, indeed, analysis for your chosen asset class) prior to getting started, then you may find that you waste time. 

Or finding the wrong asset class 

In an age when there are so many different investment options to choose from and yet the role of advisor and middleman has declined so sharply, it’s often the case that the wrong asset class for your needs can be chosen. Say that you’re looking for a hands-off online investment that you are happy to leave to hopefully grow over a period of time: in that case, opting for a day trading asset where you have to open and close positions on a regular basis is likely to cause you significant problems.

Unfortunately for those who are in a rush or who are looking for a get rich quick scheme, the only guaranteed way to defend against this sort of problem is to educate yourself about the different options on the market. Before opening an account at a particular broker or in a particular destination, it’s wise to read some independent reviews about what trading that asset will entail.

Getting started in the online investment world may seem like a difficult task – which isn’t made any easier by the fact that there are so many potential pitfalls, including fraud or a wrong broker choice. However, the reality is that there are lots of ways that a newbie can ensure that they get their online investment decisions just right: by doing their research into asset classes, reading as many broker reviews as possible, and always being on their guard against potential crime, the chances of a smooth internet-based investment journey are much higher.

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