3 Steps to Online Investing

An introduction to the world of online investing for beginners.

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Neda Jafarzadeh
The world of online investing is expansive, and if it's uncharted territory for you, it can be overwhelming if you try to absorb too much or get in over your head. The simplest way to ensure a successful online investing experience is to start slowly, build your comfort level and confidence, and above all else, know what you're getting into.

To start investing online, take the following steps:

1. Decide what type of trader you're going to be.

To achieve success in investing – as in most areas of life – you're going to need a plan, and the easiest way to start in this case is by first deciding what kind of investor you're going to be. Are you going to be an active trader with multiple transactions per day? Or do you prefer the conservative buy-and-hold route? Figuring out the answer to this question will help you pick an online broker that best suits your needs. An involved day trader, for example, might want to consider signing up with a discount brokerage firm that has cheap transaction fees (some offer rates as low as $1 per trade).

2. Choose the right broker.

Not all brokerage firms offer the same services. If you think you will want to do your own research, you will need the right tools such as research reports or analysis software. If you will require additional assistance like a physical branch location you can visit or 24/7 support, be sure to choose a broker that will provide that to you. Know in advance if you are looking to invest into any additional asset classes such as bonds, futures or mutual funds. Lastly, keep in mind that some brokerage firms charge annual or inactivity fees on accounts, so read the fine print.

2. Fund your account – responsibly.

Once you have decided on an online broker, you must endow that account with the funds you're going to use to trade. Know exactly where that money will come from – whether it's a savings account, a check that you've received or a portion of your paycheck. Decide on an exact amount to start with, and keep in mind that many brokers have minimum balance requirements. While some brokerage accounts can require an initial account balance of $10,000, you can find a broker with a $0 minimum deposit if you shop around.

3. Stick to your principles.

Once you have an active trading account, it's important not to lose sight of your goals and strategies. It's always a good idea to diversify your investments. Focus on markets that you find interesting and easy to understand, and carry out diligent research.

Neda Jafarzadeh is a financial analyst for NerdWallet Investing, which helps investors learn how to manage their money and compare total costs to find the best online brokerage accounts.