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Access to more information

One of the advantages of having an advisor was, ostensibly, to have someone who could give required information on your investments to put it into a comprehensible form. The problem with this is that it assumes the broker will be effective at condensing and conveying complex information and will know what information you want. If you understand what kind of investment strategy you want to take, there may be key details that get left off or that the broker simply does not want to share.
With online trading, these problems disappear entirely because you are relying entirely upon your own abilities to find the information you need. The difference, however, is that these brokerage sites provide a wide range of research tools that can help you collect information and present it in a digestible format. Some of these systems might even have access to important research reports. New investors could use these facilities to learn about the market, provided they act as disciplined investors.

What should investors be cautious about?     

• There is a temptation to ‘overtrade’ by trading too frequently or impulsively without considering their investment goals or risk tolerance. This is commonly seen with new investors. They go with the flow and get immersed in technology and actually temporarily forget that they are actually using their real money. Overtrading can affect investment performance, raise trading costs and complicate your tax situation. It is vital for investors to be disciplined when trading on their own. Don’t make rash decisions and never try to grab all the opportunities as they might not be in line with your investment goals.
  
   
• There is also a tendency of online investors trading based on speculation especially when they lack sufficient knowledge about the market. Such form of investing could expose your portfolio to unwanted risk. Never enter or exist a stock simply based on drastic price movements unless there are reasons for such fluctuations.
  
   
• High Internet traffic may affect online investors’ ability to access their account or transmit their orders.
   
• Online investors should be sceptical of stock advice and tips provided in chat rooms or bulletin boards. Investors should do their own research before acting on these tips.
   
• Be careful when logging on to your account from a public computer or from a link that has come from an unknown source. Phishing and Torjan Attacks are key risks to your online account. It is best to change your password frequently.
   
• Investors should be cautious when they trade online. In most cases their stockbroker will also be executing transactions based on the client’s requirements. Certain irregularities in trading could occur if both parties do not communicate their transactions to each other. Both parties could buy the same stock. As a result, the investor will be loaded with excess quantity causing undue pressure on the portfolio.
   
• High traffic, market volume and other system issues may affect your ability to access your account, transmit your orders and may delay receipt of your order by the brokerage firm. It is best if you could inform your investment advisor on your online transactions at your earliest. It is also vital that you constantly check your brought/sold notes and statements sent by the Central Depositary System (CDS) to mitigate any form of technical errors that could occur.
   
• Online trading hands over a greater burden on the investor. Hence, it is vital that he makes informed decisions. This involves great commitment, which requires you to do your homework. In today’s world, it is questionable if investors actually have the time to put that much of commitment. It is important to have access to online trading but think twice before you start trading on your own. It’s best if you consult your advisor before making a decision.  

As stated above, online trading has its advantages that would assist you in becoming a successful investor. It is important that investors familiarize themselves with it and actively reap the benefits of online trading. However, it is vital for investors to be disciplined and cautious in all the transactions they make.
“Technology is a queer thing. It brings you great gifts with one hand and it stabs you in the back with the other.”

-Charles Percy