The IT Professional’s Guide to Online Investing
In the “Roaring ’90s,” it seemed like everyone was getting into the investment game. The Dow Jones Industrial Average (a traditional gauge of the U.S. economy) was climbing like a Tibetan sherpa, the dollar was strong, and inflation was practically nonexistent. What’s more, an unprecedented amount of people were getting in on all of this action due to the introduction of Internet trading, giving investors greater access and wealth liquidity than ever before. In addition to a myriad of other functions, the World Wide Web had become a gigantic virtual trading floor.
Unfortunately, the bottom fell out in 2000. The tech bubble in the economy burst, affecting all other realms of business and leading to a recession. The IT industry also was affected by massive layoffs caused by business failure, outsourcing and budget cuts. Additionally, the 9/11 attacks damaged overall consumer confidence and curtailed the spending and investing habits of millions of Americans. These and other factors caused the Dow to fall hundreds of points to around the 10,000-mark, where it has hovered ever since.
However, there is no time to get back into investing like the present, particularly for IT professionals. Many organizations are hiring new IT personnel again—a movement driven largely by niches such as storage and security—and seasoned, proficient workers are getting paid as much as they ever have. Also, the economy is recovering, but slowly, so there are still a lot of relatively inexpensive, high-quality investments out there. And what better way for IT professionals to invest than through a medium that they’re familiar and comfortable with: the Internet? CertMag EXTRA has some tips for all of you virtual traders out there:
- Diversify, diversify, diversify: This means a few different things. First of all, if you’re new to this, you can begin shopping around by investing small amounts through various Internet trading providers. Figure out which of them has the lowest trading fees, the fastest service, the best online research and so forth. Additionally, you shouldn’t put all of your eggs in one basket; avoid an all-or-nothing investment plan by purchasing several different kinds of stocks, and perhaps even include bonds, commodities or foreign currencies. Mutual funds, which are essentially aggregates of several different stocks, are a good way to invest if you don’t have a great deal of time to research what you ought to buy.
- Trading is not in real time: Even though you might be able to use your online trading account any time, your orders to buy and sell don’t necessarily go through right away. Like any business, these stock markets have hours of operation, in which all of the buying and selling gets done. Thus, your investment activities will not go through until the order reaches the market. Also, it’s important to remember that this isn’t an instantaneous process—the actual purchase/sale happens when the order gets to the market, not when you click a button on your browser. Think of it as like being at the grocery store: Even though you’ve picked up that bag of potato chips and put it in your shopping cart, you haven’t actually bought it until the cashier scans it and takes your payment.
- Be patient: This can be taken two ways. When the stock market took a sizeable dip back in 1987, Wal-Mart shares were some of the hardest hit. In an interview with the press shortly thereafter, reporters asked owner Sam Walton how he felt about what he’d lost. Since he hadn’t sold any of his shares, he replied that he hadn’t lost anything. Sure enough, Wal-Mart stocks rallied and then some. So be sure to stick with your investment plan (assuming it’s well thought-out). Don’t get jittery and sell at the first sign of a decline. In another sense, patience applies to online investing in particular. If your computer or the trader’s server is running slow and it takes a little while for the order to go through, don’t click the “Submit” button more than once, or else you might end up with a lot more stock than you intended to buy.
- Understand what you’re investing in: It helps to know a lot about the company and/or industry you’re investing in. Additionally, you should have faith in what you’re buying. For example, Warren Buffett, an investment expert and chairman of Berkshire Hathaway, was derided in the 1990s for avoiding the tech stock bonanza. Some observers said he was behind the times; his response was he simply didn’t know enough about the industry to justify investing large amounts of money into it. Time proved him right: Because Buffett stuck with what he knew, he largely avoided losses to his personal fortune when the market began to sink.
Want to learn more about online investing? Check out www.investingonline.org, which features a quiz on Internet trading, a number of helpful suggestions and even an online investing simulator. Other good resources on the Web include the U.S. Securities and Exchange Commission’s tips page, www.sec.gov/investor/pubs/onlinetips.htm and www.investorguide.com, which offers advice, news and commentary.