The Internet has made it possible to do virtually anything from the comfort of your home. You can even trade on the NYSE, NASDAQ and the S&P 500 by simply pointing and clicking, Unfortunately, the freedom isn't as convenient as it might initially seem.
Pros and Cons of Online Trading
Pro: Nearly Unlimited Freedom
There are several different firms that permit an individual to trade online without the use of a traditional broker. There's usually a flat rate for each trade that the user makes which is more affordable than paying broker fees. This freedom makes the investor feel empowered, giving citizens more independence. However, it's important to remember that investing can be difficult, especially for people with little to no experience.
Con: Nearly Unlimited Freedom
You wouldn't perform surgery on yourself, nor would you attempt to fix your own circuit breaker. Stock brokers have to take lots of difficult tests to become professionals, and they understand market trends and which stocks are projected to do well. You may have a notion of which stocks will do well, and it's possible to make wise decisions. However, a stock broker is there for a reason, and a part of their job is to make sound decisions for the investor. Therefore, online investors can be like children running wild without parents. It takes lots of discipline to invest online, and this is a trait that some online investors lack.
Pro: No Brokerage Fees
Anyone who has ever had trouble contacting a broker might feel inclined to dump the middle man and go digital. The money that's paid to the broker could be invested for additional income. It's easy to become frustrated by these fees, especially when the investor feels underserved or under appreciated. However, selecting another broker (or even another firm) might be a better idea. The fees paid to a broker are expensive, and someone with an eye for investing might be better served to break away.
Con: No Professional Help
It can be difficult to get in touch with a broker, and many online investing firms even mention this in their ads. However, brokers are typically so busy, because they're answering the many questions of their clients. This is probably the biggest disadvantage to going solo, because an type of ripple in the market is going to generate a multitude of questions from investors. An independent investor has no one to whom he or she can turn for professional financial advice.
The value of a broker is measured more in peace of mind than in dollars and sense. Only someone with years of investing experience should consider braving the waters without a lifeguard. There are a number of investment rules with which most people are unfamiliar. An investment portfolio needs to be diverse, including at least 1/5 of all assets invested into precious metals. There are other such unwritten rules that all reputable brokers will already know. Some people prefer the freedom of investing online, but there's no one there to tell an investor when a golden opportunity is actually glitter.