Online Stock Trading for Serious Investors

Serious investors have enormous power trading online

The internet revolutionized investing for the average American. In the days before the internet, trading stocks was a very expensive and time-consuming proposition. You would have to call a broker, who would then call a trader on the floor of a stock exchange to make the trade. The transaction could take hours to execute and you'd pay as much as $150.00 as commission on a trade. Even before getting to the trade, actual research was very difficult to conduct properly. Investors were mostly limited to information provided in complicated quarterly reports. While investment analyst predictions were available, they were often very expensive and most investors could not afford them. Most people took a casual approach to the stock market; leaving serious investing to the professionals.

Casual versus Serious Investors

Casual investors tend to invest in large companies that are well-known, have a long history behind them, and provide a relatively conservative manner in which capital can grow. They don't have the time or interest to research and monitor investments the way a serious investor does and are more likely to use a full-service broker.

Unlike the casual investor, a serious investor is someone who takes investing as seriously as his own job. He has learned how to read financial statements and interpret them. He need not understand the economy as a whole, but needs to understand the economics of a given business. He researches a company he's interested in by examining the company's financial statements. He reads expert analyst reports on the company. He uses tools like a discounted cash flow calculator to help determine future earnings, and can place stock trades himself without a broker's help. Finally, a serious investor has a price target and time frame for his investment. He sticks firmly to it, and only alters it if the company's story changes.

Today, almost anyone can become a serious investor because of the wide availability of investment resources on the internet. Modern investors can consult the opinions of other investors on sites like The Motley Fool or SeekingAlpha or research company information using a wide variety of online tools that are either free or cost next to nothing. Stock trading can now be conducted using an online discount broker where commissions are well below $10 on many sites. For example, Firstrade online stock trading only charges $6.95 per trade.

Action Steps

The best advice for serious investors to find the best brokerage.

Research, Research, Research

There are many online brokerages to choose from. Some offer pricing discounts based on volume. Others may offer great pricing on stocks, but not have features you'll need such as checkwriting. Still more may have great stock trading prices, but have very high prices to trade mutual funds. If you want to trade options, that will be another price set to grapple with.

I recommend: There are many websites that compare brokerages side-by-side and offer reviews. Check those out.

Try the Demo

Any discount online brokerage worth its salt will have a demo where you can simulate trading. Some interfaces work better than others. Some platforms only work on PC's, and don't work on Macs, or vice-versa. Some interfaces may make intuitive sense for some investors, but be clumsy and awkward to others.

I recommend: Try them all out! The time you spend finding the interface you like the most will more than pay for itself that one time you want to buy or sell a stock quickly, and have to struggle with an interface that is confusing. Sometimes there's a reason why a company offers very cheap trades -- their interface is terrible!

Tactics to Use

Some useful advice when you get close to a decision.

See how good customer service is. Do they know answers to all your questions? Do they set up your account correctly? Do they fix problemsquickly? Poor customer service can cost you money in the long run.
Remember you can always move. It can be a pain in the neck to move all your assets to a different brokerage, but if you can't trade and manage your stocks online very simply and easily, it costs you time, and time is money.