How to Start Trading and Investing Online

If you're interesting in becoming an online investor now is a great time to start. If you've got the time, it only makes sense to take control of your own finances. You can find all of the resources you need to research a stock, right at your fingertips! Before you dive headfirst into this pool of risk you'll need to analyze a few things about yourself and your budget.

Do you understand the importance of diversifying your portfolio? As with anything in life, we must not put all of our eggs in one basket. The same goes for stocks. You must not put all your money into technology, despite the fact that the sector has a projected high growth rate for 2007. Nor should you invest all of your money into "value stocks". Spread your money into different sectors, and different stocks. This reduces the amount of risk you take.

Do you know how to research stocks? Relying on analysts is not a common practice of successful investors. You want to be a successful investor", so it shouldn't be a practice of your either. There are different methods of analyzing different types of stocks. Do not venture to throw any amount of money into any stock, until you understand the company and understand what makes that company a good investment.

After you've picked your stocks, understand what the catalysts are for that sector. Are there any natural disasters that could impact your stock? Prospective new products that could make it sky rocket; or perhaps fierce competition that could cause it to plummet? You need to understand exactly how your company makes its money in order to begin to understand what will have an affect on its share price.

Once you're ready to invest you must choose a stock broker. There are a plethora of options when it comes to choosing an online brokerage, but there's probably only one that suits all of your needs. Many online brokerage firms such as Charles Schwab, E*Trade, or Fidelity require either a minimum account balance or a certain amount of activity. Many beginning investors are not able to fund an account with $2,500 or more, nor make 30+ trades a month.

That's why I'd like to direct your attention to TD Ameritrade, Sharebuilder and Scottrade. To open an individual account with TD Ameritrade there is no minimum account balance and no maintenance fees. According to their website some "notable account features" are advanced, analyzer, streaming news, S&P Reports, MarketEdge Daily, Gain/ Loss Tracker (free to Apex clients) and GainsKeeper (reduced rate to TD Ameritrade Clients, just to name a few. They have a flat rate of $9.99 for internet trades.

Sharebuilder is where I first started investing. I would not recommend this brokerage to the individual who is interested in making frequent trades. However, if you're interested in long term investing this could be just the right place for you. Opening a basic account is totally free and requires no maintenance fees, like TD Ameritrade. Automatic investments, with which you can schedule weekly or month investments, offer a very low $4 commission fee. However, a "real time trade" with a Sharebuilder basic account will cost you a pretty steep $15.95! Of course, if you upgrade your account to standard or advanced the price will go down, but then you'll be paying a monthly fee. The standard and advanced accounts also come with more features and tools. You'll have to decide if the price is worth the service for yourself and your own budget.

Finally, there is Scottrade. I recently opened a Scottrade account for myself, but have not funded the account so no trades have been make as of yet. So what attracted me to open an account at Scottrade? I'm making the move from sharebuilder to scottrade because I've become a more active trader, and with Scottrade offering all online stock trades over $1 for just $7 it's a great choice for me. Scottrade can also brag that they are number 1 in customer loyalty, among all online brokers.

Decide what kind of investor you want to be, and then you'll know exactly what you're looking for in an online broker. Here's to a prosperous New Year!