Stock Market - Online Investing Tips
When You Invest Online, Be Sure To
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* Obtain information before trading about entering and canceling orders (market, limited and stop loss) and the details and risks of margin accounts (borrowing to buy stocks).
* Investors are wise to stay away from thinly-traded, little-known stocks sold strictly on the basis of online hype. Unlike blue chips or stocks with a substantial number of shares available, the price of low-volume stocks can be moved through relatively small strategic trades. Even if the hyped stock starts to edge upward, it may simply be part of the manipulation scheme.
* Some investors use the Internet to conduct relatively simple transactions such as buying and selling stocks, bonds and mutual funds. Others use the Internet to monitor the market, research companies, trade information with other investors and actively trade their portfolios. It can offer simple access to a wealth of reliable information including business and financial publications, annual reports, SEC filings and securities regulators.
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What Stock Market Returns to Expect for the Future ?
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There are two equity-premium concepts: the realized equity premium, which is measured by the actual rates of return; and the required equity premium, which investors expect to receive for being willing to hold available stocks and bonds.
Some critics argue that the 7.0 percent projected stock returns are too high. They base their arguments on recent developments in the capital market, the current high value of the stock market, and the expectation of slower economic growth.
Increased use of mutual funds and the decline in their costs suggest a lower required premium, as does the rising fraction of the American public investing in stocks. The size of the decrease is limited, however, because the largest cost savings do not apply to the very wealthy and to large institutional investors, who hold a much larger share of the stock market's total value than do new investors.
Also, a declining required premium is likely to imply a temporary increase in the realized premium because a rising willingness to hold stocks tends to increase their price. Therefore, it would be a mistake during a transition period to extrapolate what may be a temporarily high realized return.
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