Is Online Investing Safe?

You can do just about anything online - often saving yourself time, money and headaches in the process. Investing online promises much the same attraction.

An increasing number of financial service providers are offering online investment services that have the potential to make investing simpler, give you more control over your investments and even save you money. Unsurprisingly, a lot of investors love the idea of being able to keep a closer eye on their investments. But, is investing online safe and what can you do to protect yourself from online fraud?

Is Online Investing Safe?

In short, the answer is yes. Provided you invest via a reputable firm and take some simple precautions, investing online is as safe as online banking or paying your bills online.

To begin with, you should do some research into the company behind the service. The normal rules about selecting a financial services supplier apply: check references, make sure they are registered and in good standing with the relevant regulators (usually the FSA), speak with them in person and find out what experience they have. You should also enquire as to the security arrangements on their site.

If they are unable, or hesitant, to answer any of your questions then you should probably go elsewhere.

Once you have chosen your firm, it is important that you take precautions yourself to ensure that no-one will be able to access your account. Choose a username and password that are unique to you and keep them safe. Avoid common passwords like your name or ‘password’ as well as any words that can be found in the dictionary - combining numbers with letters is usually a sound idea. You should also consider changing your password from time to time.

Just like online banking, online investment services do not email asking for you to confirm your details. If you receive any correspondence via email, confirm it by phoning the company directly before clicking on any links or taking any action.

What Else Should You Look For?

Online investing services can vary widely in terms of costs and features. With that in mind, it is always worth comparing your options - specifically in terms of fees payable. You may also consider what kinds of investments are available via the system.

If you are considering investing in unit trusts, ISAs or funds then you probably will not need access to the same kind of ‘day trading’ account that would allow you to buy and sell individual shares in real time. A ‘fund supermarket’ may be more appropriate for your needs. If this is the case, then you should enquire about the funds available via the site or if they have any ready-made investment portfolios for you to consider.

Some firms will offer access to all the funds on the market (there are well over 1000) whereas others may select just a small number of these funds - some do both. Other firms will have investment portfolios that they have developed themselves - often targeting different types of investor. The more questions you ask before you get started, the more useful you are likely to find the service you choose. Some firms can even arrange for you to trial the service as a guest.

Finally, being able to access good investment advice is hugely important - especially for the less experienced investor. Find out if the firm in question provides offline investment advice.

If you take a few commonsense precautions and do your homework, investing online can not only be safe but it can also be a great way to keep an eye on your investments 24/7, save on charges and take more control of your investments.

How to Find the Best Stock Market Training Program

You can find in the stock market training program for you relatively quickly and easily by following a few simple guidelines. These guidelines will help you avoid the pitfalls that many encounter while searching for stock market education.

One of the best places for you to start would be with a friend or colleague who is already a successful stock trader. The best stock trading education you will ever get will be from someone who is trading stocks successfully and has been doing so for some time. This is nothing new, it simply follows the time-tested, age-old formula of duplicating success.

There those that would suggest that you first start with your stockbroker as a source of information. Your broker may be able to point you in the direction of some good educational material that will help you out.

Stock trading courses can be an excellent source of training. Some are available as home study courses where you conveniently view the information on your television set. Online courses are also available and can give you the convenience of getting the information from any computer.

Stock trading seminars have become more and more popular. You can usually find them in most all major metropolitan areas. Look for free introductory seminars to give you a better idea of what will be offered in the paid version of the seminar.

Whichever route you take to find the best stock market training program make certain that you keep in mind that they are not all created equal. As a simple rule of thumb if the program that you’re interested in is making claims that sound too good to be true or it sounds like a get rich quick scheme, then simply avoid it like the plague.

It’s wise to take your time to evaluate any source of stock market education as the training programs you choose will form the foundation for your stock market success.

401k Investing Advice - Make Sure You Avoid These Mistakes

The recent economy has created an opportunity for learning for all investors. Despite the access to quality 401k Investing Advice, many investing mistakes have been made that could have been avoided. The good news is you now can take advantage of these mistakes of others so that your retirement plan is better protected. Here, are a few of the most popular:

1. Loading up on company stock.

This creates a problem where you are actually increasing your risk to a very high and unreasonable level. You are basically betting everything your job and retirement plan on the company and if things go bad, you can lose everything. These employees are the ones who lose the most when the economy goes bad. Part of the blame is the employer pushing their stock on employees where they really do not necessarily have the employee’s best interest at heart.

2. Fail to diversify their funds among various asset classes.

Diversification is important to help reduce the risk of losses on any one investment class. Although this diversification changes depending on market conditions, diversification is one of the better strategies to help protect investors for long term investing.

3. Fail to check benefits plan for mistakes.

Many people fail to realize that mistakes can easily be made regarding contributions you wanted made or how you wanted the assets to be allocated. For this reason, it is a good idea to review your information on the personal benefits statements to make sure your information is accurate.

4. Fail to buildup an emergency reserve.

An emergency reserve fund is simply money set aside in savings account to pay for emergencies like car repairs. It should have about 3 to 6 months worth of living expenses in it. The failure of having an emergency reserve causes many people to have to borrow or withdraw from their 401k plan. This measure kills the advantage of compounding and can potentially invoke early withdrawal penalties. You should not invest in a 401k plan until you have established an emergency reserve fund. This is one of the most important rules in 401k investing advice as it provides a base for all your investing.

5. Fail to move funds to safer options when bad news starts appearing.

In the two recent recessions of 2000 and 2008, many people failed to act quickly to the bad news appearing in the market. This resulted in greater than necessary losses whether it was due to lack of appreciation for the impact of the news or indifference. This is one reason why it is so important to keep up to date on the market and how your funds are allocated. 401k participants should not be afraid to move funds to cash investments like a money market fund when bad news starts to appear. This can help safeguard your funds against everything but inflation.

6. Relying only on your 401k plan as the sole retirement plan.

This is a dangerous game to play because most 401k plans do not offer enough options for the best gains and diversification. For example, if your 401k plan fails to have an international fund, this creates a potential problem as you will have limited your opportunities to protect your 401k funds across the board in times of higher home inflation. Instead, it is a very good idea to make other investment options that can supplement and support your existing 401k. In this case, you should consider investing in other investments that allow you to potentially have access to an international fund. Other retirement plan options can range from investing directly in stocks, mutual funds, or using IRAs, Self Directed 401ks, or Roth 401ks or Roth IRAs.

By avoiding these common investing mistakes, you can help increase the odds of making good decisions. The best 401k investing advice will always be to learn from the mistakes of others so that you will not make the same mistakes in your own investing.

What Are ETFs (Exchange-Traded Funds)?

Exchange-Traded Funds, or ETFs, are basically like mutual funds that trade on stock exchanges, with a few important differences. This gives them many of the benefits of stocks while removing some of the disadvantages that mutual funds have.

Purpose of ETFs
Have you ever wanted to trade shares of an index like the Dow Jones Industrial Average or the S&P 500? Well, you can’t do that directly but you can do it indirectly through ETFs. The managers who run ETFs usually invest in the same stocks or futures that make up an index or commodity in an effort to make the ETF’s value per share track a certain index or commodity up and down. This allows anyone with access to stock trading the ability to easily trade indexes or commodities indirectly.

Example: SPY - SPDR Trust Series I:
One of the most popular ETFs, its goal is to track the price and performance of the S&P 500 index. It will not be the same price as the index but its chart should have the same shape as the index, within one or two percent most of the time.

Example: QQQQ - PowerShares QQQ Trust, Series 1:
The goal of this fund is to track the Nasdaq-100 index by issuing and redeeming shares of all the stocks that make up the index.

Example: EEM - iShares MSCI Emerging Markets Index Fund:
This ETF seeks to track the price and performance of the MSCI Emerging Markets index, which tracks performance of international stocks. This fund is actually non-diversified, which means it is not as safe as other funds because it is focused on a specific sector.

Example: USO - United States Oil Fund LP:
This commodity ETF attempts to track the price and performance of oil prices, West Texas Intermediate light, sweet crude oil, to be exact. This is accomplished by continually trading futures contracts for oil, natural gas, and several other things. It is also non-diversified but a very convenient way to make trades based on oil prices.

Benefits of ETFs
The main benefits of ETFs include diversity, the same tradability as stocks, low costs, tax efficiency, and transparency of assets.

What are ETFs
ETFs are somewhat complicated to explain, but they are funds that can be structured in a few different ways. They are usually passively managed, which means the managers do not have to constantly decide which investments need to be bought and sold in order to increase the value of the fund. Instead, the managers simply have to make sure the fund tracks a certain index or commodity as closely as possible, which can be as simple as owning the stocks that make up an index and adjust the shares accordingly so that the price follows the index’s chart.

Where to Find Them
Many financial websites, including brokerages, offer a free stock screener, along with an ETF screener. Yahoo! Finance has a good one that lets you view a list of the best performers in several different categories.

Money Market Funds Explained

Money market funds are mutual funds that feature safety, high liquidity and current income or interest in the form of dividends. They are the safest of mutual funds, but have not been insured in the past by the government. Millions of folks have parked trillions of dollars in these funds as a safe place to sit while awaiting other investment opportunity. When the stock market scares investors they tend to move their assets to money market funds.

Do not confuse these funds with money market accounts offered by banks. These are insured, and pay depositors an interest rate that is at the discretion of the bank. Money market funds pay market rates, or prevailing rates (short-term rates), minus modest expenses.

Except for a notable exception in 2008, retail investors (like you and me) have never faced the threat of losing money in these funds. Why? Let’s take a closer look.

Money market funds invest in high quality short-term IOU’s issued by the U.S. government, banks, and major corporations. Examples include T-bills, commercial paper, and short-term CD’s. Average maturity of this short-term debt is less than 90 days. So, when one IOU is paid off with interest, it is replaced by another.

Money funds have historically been viewed as very safe investments. U.S. T-bills are considered the safest investment in the world. High quality short-term debt has a great record for safety. No major corporation issuing debt can afford to default on any debt. That would lower their credit rating and make future borrowing more expensive and difficult.

Money market funds peg the value of their shares at $1. Share price does not flucuate. They pay investors interest in the form of dividends. As short-term interest rates in the economy change, the rate these funds pay track these changes. Money funds are very liquid. You can pull money out of them quickly and easily with no charges or fees. There are no sales charges to invest.

Remember, these funds do not declare interest rates like banks do. They are replacing their portfolio holdings on an ongoing basis. When money rates rise they are buying higher paying securities. When rates fall they are replacing higher rate paper with lower rate paper. They pass the interest onto investors, minus expenses which can be considerably less than one half of 1%. Thus, what they pay investors tracks or follows what money is actually worth in the money market.

So, if rates in the economy go up, investors automatically benefit from these higher interest rates. For example, my money market fund paid 13% in 1980, 17% for 1981, and 13% for the year 1982.

And then there’s the flip side. In early 2009 interest rates were at historical lows and money market fund rates were down to about one-fourth of 1%. The 3-month U.S. T-bill rate was even lower. Meanwhile, many banks were offering higher rates to attract and keep customers.

Some money funds specialize and invest only in U.S. government securities. Others invest in short-term municipal debt and offer tax-exempt income.

Keep in mind that money market funds in early 2009 were paying super low rates because interest rates were at record lows.

Next Page »