Investing online can be an easy way to trade stocks, mutual funds and other items once you learn how to get started. How to invest online will help you decide if it is right for you and choose the right company.

Investing online allows an individual to trade stocks without going through a traditional broker. Trades are placed with an online site that executes the trades directly. While commissions are low, the investor is not provided with the personalized investment advice that a broker can usually provide. As a result, an online investor needs to be informed enough to make educated decisions about which investments to buy and sell.

• Online investing is not for everyone. It requires self-discipline and a commitment to keep on top of the economy, the markets and your portfolio.TheStar.com: Full Service vs. Online Investing (February 13, 2008) Before you consider it, review these general tips, as well as the benefits and disadvantages of online investing.

1. Online investing is not an all or nothing situation. You can invest online and with a full-service broker.TheStar.com: Full Service vs. Online Investing (February 13, 2008)
2. Make sure your expectations meet the offerings of the brokerage firm.Office of New York State Attorney General: Report on the Problems and Promise of the Online Brokerage Industry
   1. Online investing is not instantaneous.
   2. Making frequent online trades in hopes of turning a quick profit is extremely risky.NASAA.org: Get the Facts About Online Investing

1. Less expensive.Yahoo! Finance: Choosing a Broker

2. Less pressure to buy and sell just to rack up service charges for a third-party broker.Yahoo! Finance: Choosing a Broker

3. Some online investment services offer advisory and account management services that are cheaper than full-service brokers.Yahoo! Finance: Choosing a Broker

4. Good for experienced investors who are ready for more control.Investopedia.com: 10 Things To Consider Before Selecting An Online Broker

5. Online brokers can provide a faster mechanism for placing orders.Office of New York State Attorney General: Report on the Problems and Promise of the Online Brokerage Industry

1. They require you to do your own research about investment opportunities.Yahoo! Finance: Choosing a Broker

2. Clogged servers can cause extensive trading delays.Yahoo! Finance: Choosing a Broker

3. Long waits on customer service lines.Yahoo! Finance: Choosing a Broker

4. Your relationship with your broker may be limited to email and phone contacts.Yahoo! Finance: Choosing a Broker

5. Management may be too complicated for novice investors.Investopedia.com: 10 Things To Consider Before Selecting An Online Broker

6. There is some risk of online fraud and having your account hacked.TheStar.com: Full Service vs. Online Investing (February 13, 2008)

• One of the biggest concerns that people have regarding online investing is how to protect their identities and personal information.RedOrbit: Identity Theft and Fraud Fears Over Online Trading (August 19, 2005) Therefore, you should take some care to protect yourself:

1. Create unpredictable, unique passwords.Investing Online Resource Center: Arm Yourself With Knowledge
   • -Check out Mahalo's How to Manage Your Passwords for more information.
2. Regularly change your passwords.Investing Online Resource Center: Arm Yourself With Knowledge
3. Use a security token when available.OnGuard Online: Online Investing
4. Do not store your usernames and passwords on your computer, neither in the browser nor in a file anywhere on the computer.Investing Online Resource Center: Arm Yourself With Knowledge
5. Avoid using any computer except your own to log into your account. If you must, clear the Temporary Internet Files and History when you are finished.Investing Online Resource Center: Arm Yourself With Knowledge
6. Terminate each online session by clicking the "log out" link; do not simply close the browser.Investing Online Resource Center: Arm Yourself With Knowledge
7. Be careful when using your computer at "wireless hotspots" such as airports, coffee shops and hotels.Investing Online Resource Center: Arm Yourself With Knowledge They may not be as secure as you think they are.OnGuard Online: Online Investing
8. Keep an eye out for over-the-shoulder snoops when using a computer in public.Investing Online Resource Center: Arm Yourself With Knowledge
9. Regularly use and frequently update your anti-virus software.US-CERT: Avoiding the Pitfalls of Online Trading
   • -Check out Mahalo's How to Protect Your Computer from Viruses for more information.
10. Protect your computer from spyware and malware.US-CERT: Avoiding the Pitfalls of Online Trading
    • -Check out Mahalo's How to Protect Your Computer from Malware for more information.
11. Make sure your firewall is running and up-to-date.OnGuard Online: Online Investing
    • -Check out Mahalo's How to Install a Free Firewall for more information.
12. Evaluate your computer's security settings to ensure that you are protected.US-CERT: Evaluating Your Web Browser's Security Settings
13. Frequently check your account for any unusual or unauthorized activity.US-CERT: Avoiding the Pitfalls of Online Trading
14. Make sure any information sent over the Internet is encrypted.Investing Online Resource Center: Arm Yourself With Knowledge
15. Make sure your home wireless connection is secure.

• • For more information on protecting the personal information you submit online, make sure to read Mahalo's complete guide on How to Prevent Identity Theft.

• Once you have decided that online investing is for you, your next step is to thoroughly check out any company that you are considering using. There are four areas of a company you should evaluate:

1. Is the company legitimate?
2. What are the company's policies and services?
3. Is the company's technology fast and reliable?
4. Is this firm right for you?

• Before you hand over any money, you should check out the legitimacy of the investment firm and/or the broker. You want to make sure that the company is who they say they are and if they have any history of complaints or legal troubles. Here is how you can check a company or broker out. Don't assume that because a company claims they are regulated that they are. Disreputable companies have been known to use fake seals, phony numbers and false claims to look legitimate.U.S. Securities Exchange Commission: Fake Seals and Phony Numbers: How Fraudsters Try to Look Legit

1. See if the company or person has a history of complaints or fraud by going to FINRA BrokerCheck.FINRA: Check the Background of Your Investment Professional
2. Check the Investment Adviser Public Disclosure website. However, remember that they only regulate investment advisers that manage over $25 million in assets.U.S. Securities Exchange Commission: Checking Out a Brokerage Firm, Individual Broker, Investment Adviser Firm, or Individual Investment Adviser
3. Smaller investment advisers are regulated by the state. To contact your state's regulator, go to NASAA's Contact Your Regulator page.NASAA.org: Contact Your Regulator You will want to request a CRD report, which offers background information about stockbrokers or brokerage firms.NASAA.org: Check out your Broker
4. You may also want to contact the Attorney General's office or the National Association of Securities Dealers, Inc. at (800) 289-9999 to find out if the brokerage firm or sales agent has been disciplined or had trouble with the authorities.Office of New York State Attorney General: Tips on Investing
5. If you are looking at an international company, a list of international securities regulators can be found on the International Organization of Securities Commissions (IOSCO) website.OICU-IOSCO: IOSCO Membership and Committees Lists

• Once you are reassured that the company is legitimate, you can start looking at the policies and services of the company.

1. Find out if they are a member of the the Securities Investor Protection Corporation (SIPC). SIPC offers some customer protection if the firm becomes insolvent.Office of New York State Attorney General: Tips on Investing
2. Check how long the firm has been in business.U.S. Securities and Exchange Commission: Questions You Should Ask About Your Investments
3. What is the company's privacy and security policy?NASAA.org: Get the Facts About Online Investing
4. Are there any conditions that apply to discounts they are advertising?NASAA.org: Get the Facts About Online Investing
5. Is there a charge for contacting the company by phone?Yahoo! Finance: Choosing an Online Broker
6. Is the broker able to get the best price for the investors? This information should be on the website.NASAA.org: Get the Facts About Online Investing

• Because this is an online company, its technology must be reliable and up-to-date. You don't want to find yourself left out in the cold because of a server overload.

1. Check out the company's website during peak times.Investopedia.com: 10 Things To Consider Before Selecting An Online Broker Does it load quickly or are there delays?
2. Are the stock quotes and account updates received delayed or in real-time?NASAA.org: Get the Facts About Online Investing
3. Find out if there have been any significant website outages, delays, and other interruptions that affected trades. Was there an alternative way to trade during that time?NASAA.org: Get the Facts About Online Investing
4. How easy is it to enter and cancel orders?NASAA.org: Get the Facts About Online Investing
5. Ask for information that substantiates any claims that they have made regarding the ease and speed of their services.NASAA.org: Get the Facts About Online Investing
6. Can you contact customer service if there is a problem? How long does it take?Investopedia.com: 10 Things To Consider Before Selecting An Online Broker

• In the end, choosing the right company is a matter of personal choice. Therefore, you will need to evaluate the following options to see if the company you are considering matches your needs:

1. Check the interest rate on uninvested cash sitting on your account. Companies that offer lower costs per trade typically offer less interest on this money. If you leave a large amount sitting in this account unused, it could end up costing you.USAToday.com: Online Brokers Step Up Competition with Free Trades (January 15, 2007)
2. If you are interested in investing in options, mutual funds, foreign stocks bonds, IPOs or similar items, make sure the company offers them.Yahoo! Finance: Choosing an Online Broker Not all do.
3. How much is required to open an account? Some firms have set minimums while others have no limits.Yahoo! Finance: Choosing an Online Broker
4. Look at the information that they provide you regarding potential investments. Will you be able to use this information?Yahoo! Finance: Choosing an Online Broker
5. How frequently will you make trades? If you plan on making frequent trades, then a company that charges less per transaction will be better for you.HowStuffWorks: How Online Trading Works - Choosing a Broker and Opening an Account
6. Will they allow you to buy stocks on margin (credit)?Yahoo! Finance: Choosing an Online Broker
7. How much guidance and support do they offer? If you are new to stocks, you will want more support.HowStuffWorks: How Online Trading Works - Choosing a Broker and Opening an Account

• Below you will find a list of various sites that have provide reviews for online brokerage companies. Please note, the reviews have been placed in chronological order with the most recent review first. Circumstances may have changed since the reports were issued. Use these reports as a guide and not as your only source of information.

1. Keynote Systems: Transaction Performance Index for Broker Web Sites
2. Kiplinger.com: Best of the Online Brokers (November 2008)
3. J.D. Power and Associates: 2007 Online Investor Satisfaction Study (October 24, 2007)
4. SmartMoney.com: Online Stock Investing: Manage and Trade Stocks (July 10, 2007
5. ConsumerReports.org: Online Brokers: Ratings, Services (June 2007)
6. Barrons.com: Tools of the Trade (March 5, 2007)
7. USAToday.com: Online Brokers Step Up Competition with Free Trades (January 15, 2007)
8. ConsumerSearch: Best Online Brokers Full Report (November 2007)

• Once you have chosen the investment firm that is right for you, you will need to open an account. This will vary depending on the company, but will involve giving out personal information and transferring funds.HowStuffWorks: How Online Trading Works - Choosing a Broker and Opening an Account Once you have your account, you are ready to invest.

1. For the best results, start small and gradually increase your investments.TheStar.com: Full Service vs. Online Investing (February 13, 2008)
2. Make sure you know the types of securities you are purchasing, how they fit in with your investment goals and the risks before you do any investing.NASAA.org: Get the Facts About Online Investing
3. Check out Mahalo's How to Buy Stocks, How to Invest or How to Choose a Mutual Fund for more information.

• Investing online can be a great way to make money, but it can also be a great way to lose money if you don't use your head. Learning to invest wisely is as important as choosing where to invest. Remember, investments that sound too good to be true, usually are. As the saying goes, "the easiest way to make a small fortune in any venture is to start with a large fortune."

The content in this page is not a substitute for professional financial advice. Please contact your financial adviser before using the information presented here.