Online Investing For Dummies Cheat Sheet

Are you the impatient type? Do you just want to get started investing online right away? Here’s a quick step-by-step list to get you going:

1. Save your money.

   You don’t need much to get started investing, preferably $50 or more. Find an online broker with no minimum deposit.

2. Learn the terms.

   Investing is full of jargon. You’ll need to know basic words just to get started. Get up to speed with websites such as Investopedia and InvestorWords (to make sure you have a good grasp of the language of online investing.

3. Practice with fake money first.

   Before you start playing around with your real money, test your investment strategy with fake money first using Investopedia’s Stock Market Game or Wall Street Survivor’s Stock Market Game.

4. Choose an online brokerage firm.

   Your online broker should be your wingman when investing online, so pick one you like and can trust. No one broker is best for all investors.

5. Keep saving money.

   You’ll want to keep adding savings to your brokerage account so you can put more of your money to work.

6. Study.

   The preceding steps will get you online and investing online. But there’s so much more to it if you want to be successful.

When you’re buying and selling investments online, it pays to be extra careful to make sure your personal and financial information doesn’t get stolen by cyberthieves. At the very minimum you should protect yourself by

• Locking down your computer.

You’ll want to make sure your computer is running antivirus software, which protects your files from malicious code, at the very least. Most modern operating systems — including Windows 10 — come with antivirus software installed. Make sure these security features are turned on.  Windows 10 also comes with a firewall that you should also make sure is activated. A firewall puts a fence around your computer, letting you control what data comes in and what goes out.

• Be extra careful of wireless connections.

If you’re online using a public wireless internet connection, you need to be especially cautious.

• Checking up on your brokerage.

Before you give money to anyone, be sure to run the broker or brokerage firm through the Financial Industry Regulatory Authority’s BrokerCheck. This simple search will only take a few moments and will tell you if the broker or brokerage firm is permitted to sell you securities.

• Knowing what’s reasonable.

You should have a grasp of what kind of returns you can expect from investments. At the very least, know that U.S. stocks roughly generate 10 percent returns, a year, on average. Knowing what legitimate investments return will help you smell a scam a mile away. If someone promises “guaranteed” or “risk free” returns that exceed the return of stocks, or 10 percent, you know you’re most likely being lied to.

• Getting familiar with regulators’ resources.

The Securities and Exchange Commission offers free and tremendously helpful tools and tips to investors. Taking the time to check out the site will make you a much more informed investor. The North American Securities Administrators Association puts you in touch with your state regulator in two clicks. Just click the Contact Your Regulator option on the menu bar and then click your state in the list that appears.

Before you start investing online, take a look at the following three tips. These tips are short, but they might save you some time and trouble later on.

• Quickest way to get stock information.

  If you’re in a hurry and want basic information about a stock, fast, hit the search engines. Enter a stock’s ticker symbol into the search field in all the popular search engines including Google and Bing. You’ll immediately get the basic information about the stock, including a chart of the stock price, price quote, and market value.

• Don’t assume you have to pay commissions.

  Online commission are low — but you may not have to pay them. If you have an existing banking relationship with a large bank, such as Wells Fargo, you might qualify for free trades. Also, if you stick with certain exchange-traded funds, many brokers will give you free trades. And apps such as Robinhood offer free trades.

• Knowing how to invest online is important, even if you have a financial advisor.

There’s no question that you can save money if you manage your own portfolio online. Many advisors charge 1 percent of your portfolio annually to run your money, which can add up over time. That’s not to downplay the role of the advisor, though. Many advisors are skilled and may help you make financial decisions that more than make up for their fee. But even if you do hire an advisor, it’s important for you to understand how to invest online so you can understand the moves the advisor is making with your money.

When you first start investing online, you’re bound to run into some terms or concepts with which you’re unfamiliar. Don’t sweat it. Following are some key terms you should become familiar with before investing.

Active investor: An investor who tries to routinely beat the rest of Wall Street by a wide margin. Active investors have many different strategies, including trying to buy stocks when they think they’re cheap or stocks that have been rising rapidly in the recent past.

After-hours trading: Regular trading of stocks ends at 4 p.m. EST, but investors can continue to buy and sell stocks after that time.

Ask price: The lowest price a prospective seller is willing to accept for a share of stock.

Bid price: The price a prospective investor is willing to pay for a share of stock.

Bond: IOUs issued mainly by governments, agencies of governments, or companies to finance their operations or projects. Buyers of bonds are given a promise they’ll get their money back, plus interest, over a preset period of time. Bonds are often called fixed-income investments because interest payments are fixed.

Earnings season: The period of about three weeks following the end of a quarter when companies report their financial performance. Earnings reports contain information about a company’s profits and financial standing.

Fundamental analysis: A method of evaluating investments by studying a company’s earnings, growth rate, or other data related to the performance of the company’s operations.

Index: A basket of stocks or other investments selected to represent a certain market, style of investing, or market. The three most popular stock market indexes are the Dow Jones Industrial Average, Standard & Poor’s 500, and NASDAQ composite.

IPO: Short for initial public offering. IPOs are shares of companies offered to public investors for the first time and are the way that a private company becomes a publicly traded one.

Online brokerage: An organization that works on your behalf to buy, sell, and hold your stocks and other investments and allow you to access your account online. Brokers, including online brokers, must be registered with the Securities and Exchange Commission.

Options: Financial tools that give their owners the right, but not the obligation, to buy or sell a stock or other investment by a certain date at a prearranged price. Options can be used to guard against large losses or by speculators to enhance returns.

Passive investor: An investor who generally believes it’s impossible for most people to consistently beat the stock market and therefore buys investments and hangs onto them. Many passive investors invest in broad and diversified index funds, which are highly tax-efficient and outperform many investors who try to beat the market with market timing and stock picking.

Phishing: A type of cybercrime where the bad guys tempt computer users to click on seemingly legitimate websites and enter personal information, which is then stolen and sold or used.

Prospectus: The in-depth document required to be filed with regulators by mutual funds, exchange-traded funds, and companies going public for the first time in an IPO.

Regulatory filings: Financial reports required by regulatory bodies, most typically the Securities and Exchange Commission, that give investors access to material information. Annual reports, quarterly reports, and proxy statements, often known by their technical names 10-K, 10-Q, and DEF 14, are available online and give investors information about a company.

Short seller: Investors who are betting that the value of an investment will fall. These investors borrow an investment, sell it immediately, and then buy it back later at a hopefully lower price in order to return it to the person they borrowed from.

Stock: A piece of ownership in a company that can be bought or sold to other investors. Stocks are sometimes referred to as equities.

Technical analysis: A method of evaluating investments based on the movements of the stock price in the past. Technical analysts generally study stock charts and look for patterns they say can help predict future price movements.