Walking Safely Through Broken Glass3 min read

Have you ever dropped a glass or broken a window? The first instinct is to tell people to stay way because there is broken glass on the floor and we don’t’ want anyone to step on the glass and get hurt. Then we do the ridiculous. Someone will get a broom and start sweeping up the mess while standing on the very floor that was declared unsafe.

Why? Because it’s the only way to clean it up. Someone has to take the risk. Online investing is a similar paradigm. We know and have plenty of evidence that the world of investing money is fraught with risk. There is no such thing as a risk free investment. However we walk on the broken glass and put our money with a broker anyway, because it’s the only way to make the money. When you sweep up glass, you can take safety precautions like good shoes and watching your step. When you invest the same willingness to be careful must occur.

Investigate The Broker

Anyone with a website can set up what looks like an investment firm. In fact, many of the so-called “independent” investment sites are doorways to investing with major firm under another name. You wouldn’t hand a stranger your credit card and you shouldn’t hand over your investment without thoroughly checking out your broker. http://Keynote.com is the website of a company that offers performance reviews of internet and communication businesses. Their E-brokerage page lists their resources of brokers and whether they keep their promises and offer good service. Online brokers that are connected to banks or businesses apart from online sales also offer at little more accountability and safety.

Read The Prospectus Carefully

Every brokerage, by law, has to offer their clients a complete disclosure of their plans, investment strategies, corporate structure, credentials and investment history. Often the size of a notebook, the prospect is a block of financial data and legalese that is easy to throw in a folder and sign a box saying you read it. However, this is one document you should read carefully. Make sure the strategy is something in line with your values and investment ideas. If you don’t want a company that invests in tobacco and weapons, then you should investigate the prospectus of a socially responsible brokerage firm. If you want a brokerage firm that hasn’t had SEC problems, the prospectus can advise you of that status. Keep your prospectus and any changes sent to you so you know exactly who you trust your money with.

Start Small

For the new online investor, don’t sink your life savings into online investing in the first month. Start with a small amount of money, usually the minimum initial investment and see what happens to it for six months or a year. In that time you will find out if the company communicates clearly, manages your money wisely, and gives you a satisfied feeling for your financial future. Then you can add more money to the account. There is no reason to “shoot out of the gate”. Investment is designed to happen over time.

There is always a little danger in investment, but with the right precautions in place it should be as easy as cleaning up after spilled milk.

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