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Invest in online investing | March 31, 2009
Five tips to get your portfolio online
By Jason Rodham
We send e-mail, surf the Web and carry multi-feature cellphones, but most of us still trudge down to the bank every quarter or so to make the investments required to qualify for a decent tax refund. But every day more people are seizing control of their investments by going online.
“The reason I got into it was that I was sick of buying mutual funds and looking at all these stocks they had in them,” said Paul Lee, a teacher in Vancouver. “I thought: ‘why have someone charge me 2 or 2.5 per cent, when I could just buy them online myself and do the trade in an instant?’”
If you’re thinking of making the transition to online investing, here are five rules of the game to keep in mind.
1. Understand the basics. Joel Bernard, vice-president of business development with independent brokerage Qtrade Financial Group, said that not everyone is suited for the world of online investing. If potential clients have “zero knowledge” he recommends they take some time to educate themselves “and understand the fundamentals” first.
Basic fundamentals include knowing when you should buy and sell a stock, understanding the differences between a penny and a blue chip stock, and assessing the fees different mutual fund providers charge for managing their funds.
2. Know thyself, and make a plan. Rick Kelln, senior vice-president at HSBC InvestDirect, said his company urges clients to create an investment plan and set basic objectives for how and when they invest. This means “understanding your own risk tolerance” and what level of market volatility you’re willing to accept.
For Lee, that advice means “sticking to things you know and not following the herd.” He has been managing his investments online for more than a decade. When he started, Lee purchased “lots of blue chip stuff” like steel, gas and bank stocks. “Then, when the tech boom came I bought a bunch of those—and lost all my money. So now I have bank stocks again.”
3. You’re on your own. HSBC’s Kelln said investment houses like his are “a non-advice channel” and that clients are on their own when trading online. “While we’re providing the tools and mechanisms to do the trading, ultimately the decisions are up to the individual client.”
The advantage of both planning and independence, Qtrade’s Bernard said, is investors have a tendency to be more committed to their stocks, especially when the market goes south. “No one is going to watch over your investments closer than you are.”
4. Do your homework. “You’ve got to have discipline and you have to do your own research,” Lee said. “You’ll get hammered if you don’t do the research.”
Although the time required to manage online investments depends a lot on the size and breadth of the portfolio, HSBC’s Kelln said the average investor need only spend “a couple of hours a week” doing research. This includes researching quotes and perusing financial reports.
5. Security is your responsibility. No bank or independent brokerage is going to win customers by stating that their security is not up to scratch. Ask and you’ll get some rigamarole about how bulletproof their system is. However, they will also point out that any vulnerability of your information or account lies squarely on your desktop. HSBC’s Kelln said it’s up to clients to ensure they have at least basic virus protection. His company has a security guarantee that will further protect investments but only “as long as the client is taking the necessary precautions.
How-To Archive
By Jason RodhamWe send e-mail, surf the Web and carry multi-feature cellphones, but most of us still trudge down to the bank every quarter or so to make the investments required to qualify for a decent tax refund. But every day more people are seizing control of their investments by going online.
“The reason I got into it was that I was sick of buying mutual funds and looking at all these stocks they had in them,” said Paul Lee, a teacher in Vancouver. “I thought: ‘why have someone charge me 2 or 2.5 per cent, when I could just buy them online myself and do the trade in an instant?’”
If you’re thinking of making the transition to online investing, here are five rules of the game to keep in mind.
1. Understand the basics. Joel Bernard, vice-president of business development with independent brokerage Qtrade Financial Group, said that not everyone is suited for the world of online investing. If potential clients have “zero knowledge” he recommends they take some time to educate themselves “and understand the fundamentals” first.
Basic fundamentals include knowing when you should buy and sell a stock, understanding the differences between a penny and a blue chip stock, and assessing the fees different mutual fund providers charge for managing their funds.
2. Know thyself, and make a plan. Rick Kelln, senior vice-president at HSBC InvestDirect, said his company urges clients to create an investment plan and set basic objectives for how and when they invest. This means “understanding your own risk tolerance” and what level of market volatility you’re willing to accept.
For Lee, that advice means “sticking to things you know and not following the herd.” He has been managing his investments online for more than a decade. When he started, Lee purchased “lots of blue chip stuff” like steel, gas and bank stocks. “Then, when the tech boom came I bought a bunch of those—and lost all my money. So now I have bank stocks again.”
3. You’re on your own. HSBC’s Kelln said investment houses like his are “a non-advice channel” and that clients are on their own when trading online. “While we’re providing the tools and mechanisms to do the trading, ultimately the decisions are up to the individual client.”
The advantage of both planning and independence, Qtrade’s Bernard said, is investors have a tendency to be more committed to their stocks, especially when the market goes south. “No one is going to watch over your investments closer than you are.”
4. Do your homework. “You’ve got to have discipline and you have to do your own research,” Lee said. “You’ll get hammered if you don’t do the research.”
Although the time required to manage online investments depends a lot on the size and breadth of the portfolio, HSBC’s Kelln said the average investor need only spend “a couple of hours a week” doing research. This includes researching quotes and perusing financial reports.
5. Security is your responsibility. No bank or independent brokerage is going to win customers by stating that their security is not up to scratch. Ask and you’ll get some rigamarole about how bulletproof their system is. However, they will also point out that any vulnerability of your information or account lies squarely on your desktop. HSBC’s Kelln said it’s up to clients to ensure they have at least basic virus protection. His company has a security guarantee that will further protect investments but only “as long as the client is taking the necessary precautions.
How-To Archive
