The Basics Of Online Investing

Starting to invest in the stock market can seem like an impossible task. Plus, with every trade you make, you have both the potential to make money AND to lose money. However, while there are no guarantees with online trading, there are a few things you can do to help you ramp up your knowledge of online investing quickly and efficiently.

Tips for learning how to invest in stocks online:

1. Set your investment goals. Following the stock recommendations of your neighbor, your co-worker, or your brother-in-law is a recipe for disaster. A much better plan is to decide ahead of time how much money you are going to invest, at what intervals and in what types of stocks.

2. Learn the differences among basic investment products. Set yourself up for success by learning the differences and the pluses and minuses of stocks, bonds, annuities, mutual funds, and other investment products.

3. Start a basic reference library. A couple of good books on investing can be great reference tool. You want to choose at least two books from respected investors or finance professors for balance. In addition, you can refer to the reference section of your online trading site, but it's not a great idea to rely solely on their advice (to minimize potential bias).

4. Make sure you understand market dynamics. You'll also want to get a firm grip on how stock prices are set and what causes them to fluctuate. You need to know how the supply and demand cycle works with stocks to have a better shot at realizing the investor's key objective of buying low and selling high.

5. Plan for taxes. Taxes are an integral part of investing. When you sell a stock for more money than you paid for it, the IRS is going to want its share. While you'll probably want to have a good tax accountant prepare your return after you begin investing, you'll save yourself unpleasant surprises by setting aside the amount you estimate you'll owe from each trade in a separate account that you can draw from before April 15th.

Starting to grow your net worth by investing in stocks online doesn't have to be intimidating. Set yourself up for success by starting a basic library of reference books, drawing up an investment plan and making sure that you set aside what you'll need for taxes at the end of the year.

For more information, check out some beginner online stock market investing books.