While online stock investing makes it easier for you and me to multiply our money, it also makes it easier for people to lose money.
In order to make a profit from online stock investing, there are a few things you must do.
1. Pay off your credit card debt
Credit card debt incurs the highest interest rate. There is no way you can produce a better profit margin than the credit card interest rate.
If you use the money for online stock investing instead of paying off credit card debt, you are likely to lose on both ends.
In most cases, the stock marketor the stock you buy do not perform up to your expectation in the short term. You may see the value dropping.
As long as you can hold until the share price is high, you can make a profit from online stock investing. If you sell in your panic, you will lose money.
That is why you must be financially free from credit card debt before you start investing in stock market.
2. Have an emergency saving
You need to have an emergency saving of at least six months your monthly salary.
You do not know when you need to spend the money on medical care, or when you are going to lose your job. You do not know when the roof is going to leak, and how much is the repair cost.
That is why it is good to have an emergency fund.
You must not use the emergency fund for online stock investing.
3. Capital for online stock investing
You need capital for online stock investing. It is very risky to use margin.
Using margin means you borrow money from the brokerage house. You need to pay interest on the borrowed fund.
If the share price goes down, and you do not have money to top up your account, the brokerage house will force sale your holding.
In this case, you will lose a lot of money, even the whole of your capital.
That is why you must have a large enough capital for online stock investing. You can check the transaction cost before you buy anything.
It is better to buy just one stock if you do not have large capital. In this case, you pay for one transaction cost for buying and another transaction cost for selling.
If you buy into three different stocks, you are going to pay for a total of 6 transactions. That is why you must consider the transactioncost before you invest.
4. Use online stock trading demo account
If your capital is not large enough yet, you can use online stock trading demo account to learn online stock investing.
At least you are not using real money. You can afford to test different strategies, and buy different stocks from different sectors.
You can get a feel of the market sentiment when you are investing. You will learn to conquer the panic that arises from seeing the stock market collapses.
It is good to use the stock trading demo account until you have a working strategy for stock picking, entry price and exit price.
You can make use of this time to sign up for technical analysis seminar and read books about stock investing.
By the time you pay off credit card debt, save enough money for emergency fund, and have working capital for online stock trading, it is at least three years later.
Since you have waited so long for the moment, and you have acquired enough knowledge and experience through the usage of the demo account, you can make a better profit than the others.
It is better to wait rather than to lose money in your desperation to get rich. You have to know that online stock investing is not easy. Stock investing is never easy. More people lose money than make money.
However, for those who make money, they do make a lot of money.
You can get rich from online stock investing.
Scheng1 is a passionate blogger from Singapore. Rich in every sense reveals my deep desire in enjoying life, and be rich in every possible ways. Personal Finance is about money, from making money to investing money. Retirement in Asia contains resources on retirement planning.