How to Buy Shares Online

These days it seems you can do just about anything on the internet. Many people look for ways to get rich quick online and while that does not always work out as it might seem, getting rich slow is very possible through the web. Getting rich slow refers to the old fashioned way of accumulating wealth, by saving and investing over a long period of time. It is one of the only tried and true ways of getting wealthy. And now, thanks to the internet, buying stocks online is easy, cost-effective and perhaps most importantly, very secure.

Reason to Buy Shares over the Internet

Some people may wonder why one would choose to invest using the internet when they could go to an office and speak face-to-face with a real stockbroker. Well, the reasons will vary depending on the person, but some people actually just prefer to do the research themselves and not to feel pressured to make certain purchases. Speaking with a broker can be very beneficial, but not all brokers are the same and some will actually try to sell clients a little too hard or really do not have their clients’ best interests in mind all the time. Fortunately, bad brokers are few and far between, but they are out there, and for many investors, doing the research and being highly involved is a great thing. Also, the online brokers are available 24/7 (although trading is not), research and advice is often a few mouse clicks away, transactions can be tracked and stored electronically and online brokers are usually much cheaper than live brokerage firms.

Security is always an issue however, especially when dealing with one’s life savings and investments. It is always important to deal with a reputable stockbroker, whether online or in person. When entering any type of personal information on your online broker’s website, make sure you see that you are on a secure network, which will be evident if you see http replaced by https before the URL. You should also read and understand the site’s security policy, which usually includes guarantees to protect your account against any security breach or fraud.

Choosing an Online Broker

The entire process begins by choosing your preferred online stockbroker. There are quite a few from which to choose and a number of variables to help you decide. It is always a good idea to ask friends and acquaintances that you know trade stocks online which website they use. Often, they have already done the research and made an informed decision, plus they can help you get set up and answer questions along the way.

If you do not know other online traders or would just rather figure it out for yourself, the internet has a wealth of information available. You will find some sites during your research that even allow you to compare online brokerages side-by-side so you can quickly evaluate prices, services and restrictions. Things you will want to watch for include minimum balances, trading tools, whether or not live help is available and how to reach them, as well as the fees. Some sites will charge a monthly fee along with a trade fee while others only charge when you make trades. They may also waive certain fees if you make an established number of trades in a given period or if you carry a set minimum balance. Make sure you research the standard fees too, not just the one they advertise the most, which are usually reserved for higher volume traders. Some sites will also offer a bonus of sorts such as a free gift, free trades or even cash when opening an account, so take note of that as well. Our article on UK Brokerages and Stockbrokers can help you to get started.

Opening an Online Trading Account

Once you choose an online stockbroker you will need to create an account. Online brokerages must follow the same rules as other brokers. In fact, many of them also have standard offices in various locales so they must be diligent in following proper regulations. This includes gathering personal information and KYC laws. KYC stands for Know Your Customer and is required by all financial services companies. It basically requires them to make honest and reasonable efforts to verify your identity, your investment history and experience, and to have an idea where your capital is coming from. For instance, if you said that your annual income was £50,000 but you were investing £10,000 per month, that would send up a red flag according to KYC regulation and they would be required to investigate it. The laws were enacted to help recognize and prevent money laundering, especially for terrorist organizations and organized crime; although a bit of an inconvenience, these checks are completely standard, painless, and simply part of life these days.

Funding Your Online Trading Account

Upon opening your account you are ready to begin trading. If you are transferring an account from another stockbroker, this can usually be done online as well. Some brokers will charge a fee for transferring out, so be sure to check on that beforehand. Depending on the company you are transferring into, you may be able to deal with a transfer specialist, even with an online account. They will help to make sure the transition is smooth and that all transfers are taking place.

If you are funding your account with new money instead, you can begin by initiating a bank transfer. This can usually be done through your online account by entering your bank information. Alternately, you can often simply mail a cheque or call customer support for other transfer options. Most online brokers will also allow you to set up regular bank transfers. Making regularly scheduled transfers and purchases into your share trading account is one of the best ways to invest, especially when starting out. When buying shares online, the brokerage can help you set up these regular transactions, saving you from having to remember and initiate the transaction every so often. By investing small amounts on a regular basis, it is easy to adjust the rest of your budget so in essence, you do not even “miss” the money you are investing. When doing this however, be sure to check the fees. Some sites will charge a standard fee for every transaction, but most solid companies will offer this pre-scheduled investment service at a reduced rate or even free if investing in a no load, no transaction fee mutual fund or ETF.

Getting Stock Advice Online

Most online brokers will not offer much in the way of customized advice. They will generally offer a lot of great references including stock charts, quotes, research and analysis, however. We suggest you read on How To Research Stocks for good research practices and references.

Buying shares online seems like it could be a bit of a challenge at first. But really, the biggest challenge is simply choosing your online brokerage and understanding their software. By deciding to trade shares online rather than through a traditional dealer you will save money, first and foremost. However, many investors will also benefit greatly by doing their own research and initiating their own trades. You will have a better understanding of exactly what is in your portfolio and the reasons you own any particular investment, rather than simply because it was recommended to you by your stockbroker.