Through online stock investing, it is possible to establish significant wealth over the long term. As a Missouri resident, you may put portions of your online trading profits toward tuition payments at the University of Missouri or a retirement cabin in the Ozarks. Before trading online, you must select the type of brokerage account that matches your expertise. From there, you can learn to navigate through the trading tools of your online interface.
Online trading accounts may be categorized further into cash and margin accounts. With a cash account, your buying power for investments is limited to your cash balance. As a beginning investor, you should open up a cash account to avoid large losses. As you gain investment experience, you may consider a margin account. With a margin account, you can borrow against your cash balance and double your buying power. For example, you can purchase $10,000 worth of investments after depositing $5,000 into your margin account. You must also open a margin account to sell stocks short. When going short, you will borrow shares from another investor and immediately sell them off for cash. At a later date, you will buy the same stock back and replace the original loan. You profit when the stock has lost value in the interim.
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After opening up your account, you can become familiar with the online trading interface. The website will display tabs to research investments, retirement plans and business terminology. After navigating the research tools, you may be ready to begin trading. To trade securities, you will click on the trading tab and enter a ticker symbol for the investment you wish to buy or sell. If you do not know an investment's ticker symbol, you can look up that information through the trading platform. From there, you will enter in the amount of the investment that you wish to purchase or sell off. You can submit a market order to accept a current trading price, or set your own price for the trade with a limit or stop order. For example, you may place a limit order to buy Stock Z at $20. Because of the limit order, your purchase will only be executed if Stock Z were to trade for less than $20.
The online trading platform will account for your balances and trades in real time. For each trade, the brokerage earns a commission, which it will subtract from your cash balance. Beyond real-time accounting, your online brokerage will also generate monthly statements that summarize the size of your account, your cash deposits and your investment orders. At tax season, you will receive 1099 forms from the brokerage in the mail, which document your investment income and capital gains. With this information, you can complete your Federal and Missouri tax returns.
The U.S. Securities and Exchange Commission (SEC) warns investors against phishing scams. Through phishing, a criminal will steal your personal information and break into your online account to place unauthorized trades and balance transfers. To protect your investments, you should install anti-virus software onto your computer.
- U.S. Securities and Exchange Commission: Tips for Online Investing
- U.S. Securities and Exchange Commission: "Phishing" Fraud
- U.S. Securities and Exchange Commission: Online Brokerage Accounts - Safeguard Your Money
- U.S. Securities and Exchange Commission: Invest Wisely
- U.S. Securities and Exchange Commission: Holding Your Securities - Get the Facts
- U.S. Securities and Exchange Commission: Determine Your Risk Tolerance