Digital technology and the internet in particular have made investing far more accessible and straightforward than it was in the past. Whereas before, it was a time-consuming process, often kept deliberately shrouded in mystery and obscure jargon by financial gatekeepers, now the markets can be accessed 24 hours a day by anyone with a broadband connection, and reputable brokers will help you to make informed decisions about your present and future investments.
The advent of online investing has also brought with it new kinds of risks, however. Playing the stock market has always had an element of risk, and the types of investments you make should be tailored according to your personal risk tolerance. The value of your investment may go down as well as up, with some being more volatile and risky than others. It’s also unfortunately true that there have always been fraudsters ever ready to ensnare the unwary with scams and dishonest schemes.
How to avoid scams
If a scheme or investment looks too good to be true, then it usually is. Most of us think that we would never fall for an investment scam, but fraudsters go to great length to make them seem as plausible as possible, and even experienced investors can sometimes be fooled. To avoid being taken for a ride, never rush into anything, even (or especially) when you’re told that you have to decide quickly or miss the boat.
Do your own independent research. Check and double-check the credentials and history of the party offering the investment opportunity, and/or the company in which you’re being asked to invest. What is their financial history? What is their current standing? Never take any claims at face value but verify them yourself, using reputable sources. If you do discover that you’ve been scammed, don’t be afraid or embarrassed to back out and report them to the relevant authorities.
Choose a reputable broker
Most online brokers offer an honest service at competitive rates, but the nature of the internet is that anyone can set up a legitimate-looking venture and then disappear without trace six months later – sometimes taking their clients’ funds with them. Using an authoritative referral site, always compare brokers before deciding which one to use. Not only will this keep you safe, but it will also help you to save money.
Make sure that your computer is protected
Before you start making any kind of financial transactions online, you should make sure that your own computer security is fit for purpose and up to date. Having a high level of anti-virus protection and a strong firewall is essential, as unscrupulous cyber-criminals can use malware to gain access to your account details to steal either your money or your identity. Only use secure, trusted sites, and beware of phishing emails, which are not from the source they appear to be.
Develop a trading strategy
If you’re actively involved with managing your investments, and this involves trading on the financial markets on a day-to-day basis, then it’s important to develop an appropriate strategy and stick with it. Different strategies suit different markets, so an effective forex trading strategy may look quite different from one developed for buying and selling stocks and shares. Your chosen strategy should also reflect your personal risk tolerance, and should take into account the possibility of losing money, and what you will do if this happens.
Build a diverse portfolio
This has always been the golden rule of investing since day one: don’t put all of your eggs in one basket. A healthy portfolio will contain a number of different commodities – stocks and shares, currencies, bonds and perhaps others – and will be spread across different industries and countries. The idea is that if you lose money in one area, then you will be covered by gains in another. Mix safe investments that are unlikely to gain or lose value suddenly with more risky ones. Also, make sure that you retain enough liquidity to see you through when your other resources are spoken for.
Staying safe when you’re investing online is much like staying safe in any other area. Don’t believe everything that you hear or read. Only work with people and organizations that you trust. Do your own independent research using reliable sources. Finally, always exercise due care and attention, and never rush blindly into anything. If you follow these rules, then you’ll find that online investing is a safe and potentially very profitable venture that will help you to manage and grow your finances for decades to come.