First, Learn the Basics of Stock Trading

Trading in stocks isn’t simply making purchases and sales. That’s because the prices go up and down, and the profit is in correctly working these changes. Because the value is in the pricing fluctuations, it’s important to watch a prospective stock for a long enough time to get a feel for which way those prices are likely to move. It’s a good idea for new investors to practice by making pretend trades (often called “paper trading” or simulated trading) and following the stocks to see if those trades would have made money if they were real. When the success rate is good enough, it’s time to move to actual trading. Keep in mind that success with simulated trading does not guarantee success trading real money.

What Is Online Trading?

Online trading is simply the act of trading stocks and other securities online instead of in person and over the phone. As with many other types of e-commerce, people typically find it easier once they get used to it. Therefore, a large number of investors prefer to use online methods once they’re ready to trade with real money.

Learn about the Most Common Types of Trades

All of these trading types are available at both traditional brokerages and their online equivalents. Since they can be used to either increase profits or decrease losses, it’s a good idea to get a handle on how they work.

Market Orders

These are the most common types of trades. They’re also the most basic. When a market order is placed, the trade is carried out as soon as possible for whichever price is prevailing. Note that in securities trading, the word “order” is not a synonym for “buy.” Brokers can be ordered to sell just as easily.

Limit Orders

When an investor expects a stock price to move in the direction that is opposite of profitability, he or she can place a limit order. This instructs the broker to sell or buy stocks when they hit a specific value. If the broker can’t sell (or buy) all of the required shares at the specified price, it will trade as many as possible. Any that can’t be traded at the specified price won’t be sold or bought.

Stop Limit Orders

These are hybrid orders that have both a start and a stop price. They’re triggered after the stock price passes a specified amount, but trades don’t take place until a different amount is reached. For example, a $50 stock could be set to have a stop limit order activate upon reaching $45, but only convert into a limit order at $35. If the stock goes below $35, no more trades will automatically be made. This allows for a window of trading, but still maintains a floor to keep trades from happening at overly disadvantageous prices.

Trailing Stops

Normally, limit orders expire if the trade cannot be made. Trailing stops remove the expiration. This can be good if a stock price was expected to change, but didn’t do so quite as soon as was originally predicted.

Can All of These Trade Types Be Fulfilled Online?

Yes, but as with physical brokerages, there may be extra fees involved for all but the most basic version. As with most businesses, brokerages will also each have their own pricing schedules instead of a single industry standard. Therefore, it’s important to read the terms before giving the go-ahead.

Are There Other Customizations That Can Be Done?

Yes. Investors can place restrictions on trades that specify extra conditions that need to be in place for a trade to happen. For example, “all or none” tells the brokerage to only trade if all of the desired amount of shares can be moved at the same time. Time frame restrictions specify which day(s) trading can take place. Stock purchases can also be set up in lots of equal amounts.

The online brokerage will have an interface set up to allow investors to trade with no need to directly communicate with the staff. All it takes to set up a trade is to log in, select the stock to trade, check off any customized features required, and hit submit. Online brokerages also have plenty of site-specific tutorials to make everything as simple as possible.

Online trading has inherent risks due to loss of online services or delays from system performance, risk parameters, market conditions, and erroneous or unavailable market data.

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How to Save at the End of the Year

Defer Income

Many companies pay out bonuses at the end of the year. If possible, make arrangements so you get these payments after January 1. This will put them into the next tax year, so the full amount can be enjoyed until that year’s taxes are due.

Those who are self-employed can sometimes use this strategy as well. If customers pay on an invoice basis, make the year-end invoice due sometime in January. Some of the customers will take the opportunity to pay more slowly, and these payments will go into the next year’s accounting.

Give to Charity before January 1

The end of the year is a great time to clean out the house and give away unused items. Get a receipt for everything to comply with current tax law. Then deduct any allowable donations.

Contribute to a Tax-Deferred Retirement Plan

Certain IRA accounts and other retirement plans allow taxes to be deferred until withdrawal time. Make sure to max out the yearly allowable contribution before the end of the year to get the full benefit of this feature.
Retirees: withdraw the minimum allowable amount from your IRAs. Once investors reach age 70.5, tax law demands that a certain amount be withdrawn from traditional IRAs every year. Make sure to take at least this much out by the end of the year, or else there’ll be a 50 percent excise tax on the amount that should have been withdrawn.

Harvest Losses

Consider selling off losing investments by the end of the year and deduct the allowable losses. This offsets gains made from other investments. Be warned that the deduction will be disallowed if the same or a substantially similar investment is repurchased as soon as the New Year starts.
Avoid buying into mutual funds at the end of the year. It may seem like a good idea to buy funds right before they pay out their dividends, but the benefit is diminished by the fact that the share price will drop by the paid amount. The IRS will also charge taxes on those dividends. This may make these funds poor choices for year-end investing.

Give Money Away

Those who really hate the idea of paying taxes might prefer to give money to people they know instead. In certain situations, up to $14,000 can be given to each recipient without triggering the gift tax.

Give Securities

Gifts of this nature often go to minor children, but be careful: If a minor makes more than $2,100 of investment income, it will be taxed at the parents’ rate. Since children’s investment income isn’t taxed at all below that amount, it makes sense to be sure that the gifts won’t kick them over that limit.

Make sure tax withholding closely matches the amount due. Tax withholding is standard for employees, but how much is withheld depends on the amount of allowances taken. If the amount is too high, there’ll be a fat refund at the end of the year. Refunds, however, represent money that could have been invested elsewhere if it had been paid out at the time of earning.

Under-withholding is also a problem. If less than 90 percent of tax due was withheld in the typical employee situation, the IRS can charge an underpayment fine. Therefore, it’s a good idea to make sure that enough money is being held back from paychecks.

Pay Deductible Expenses Early

Certain expenses, such as mortgage interest and retirement account payments, are deductible. Pay them before the end of the year to get the deduction on this year’s return. Note that some deductions are disallowed for those who pay under the Alternative Minimum Tax regimen.

Talk about investments often makes those without them wonder how to get started. The first thing these people should concentrate on is how to save money for investing. One good way is to follow these tips for lowering tax expenses. With lower taxes, more money will be available for other things.

Other Ways to Save for Investing

Lowering everyday expenses through the use of coupons, efficient purchasing habits, and choosing lower-cost entertainment options. It’s important to resist the urge to just spend the money saved this way on other things. Instead, squirrel it away so that it adds up. Soon, there will be enough money saved up to get started on proper investing, and it’ll be time to put the investment-related tax tips to use!

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What Is an Online Broker?

An online broker is a firm that has systems in place that allow customers to place their own trades through a website-based interface. It will typically offer the ability to trade in stocks, options, and other securities. The details of the offering may vary between firms, but it’s a safe bet that they will all provide basic trading capabilities.

The Advantages of the Online Broker

The most obvious advantage is the lower cost. Many online brokers specifically refer to themselves as being “discount,” and this is important for those who make frequent trades. An online broker can charge as little as $3 per trade, while traditional ones can charge as much as $75 or more. It’s easy to see how high commissions can destroy the profit for people who trade even every few years.

Brokerage houses normally offer the results of research to their customers. Years ago, this was a feature that only applied to traditional firms. While traditional firms still provide their own proprietary research for their customers, today’s online equivalents may offer good research as well. Therefore, the knowledge gap between the two has been greatly narrowed if not eliminated.

Are There Any Disadvantages?

According to The Motley Fool, there is one disadvantage that may be important to some investors. Traditional brokerage houses offer better availability to the IPO market. It’s possible to get in on first-day IPO trading at some of these firms. Online brokerages, on the other hand, often don’t get new stock offerings into their systems as quickly.

Getting Started with Online Trading

As with many other internet services, it can be easy to figure out how to trade online. The first step is to choose a brokerage. U.S. News & World Report’s Money suggests that fees should be on the top of the list of selection criteria. This is because most online brokerages use the same services for the actual execution of trades. That said, they’re not all the same. Differences in costs, user interfaces, and overall site stability set them apart and make it worth digging a little deeper before opening an account. Look for firms with good reviews and solid histories. Also, keep in mind that not all of them use powerhouse execution services like Citigroup, Knight, or Citadel. This makes it worth checking out exactly how they go about fulfilling trade orders.

Once a brokerage is chosen, look for a tutorial on its site. Most if not all will have a FAQ, videos, or both that will explain exactly how to execute trades on their platforms. Since all sites intentionally make themselves somehow different from the others in the field, it’s a very good idea to watch these intros to learn the intricacies of any particular one.

Online brokerages also offer plenty of other information on their sites. It’s possible to find FAQs that answer questions as basic as “what is online trading” and as advanced as in-depth explanations of specific investment strategies. This allows investors of various levels to find the information they need to get good starts.

Thanks to the fact that more people are familiar with the internet in general, the idea of trading securities online isn’t the shocking thing it once was. Since discount online brokerages have been around for a long time now, they have also matured and can meet the needs of their customers very well. Thanks to the convergence of these two factors, now is a great time to take another look at switching to online trading. Doing so won’t just bring increased convenience. Since online brokerages typically charge much lower fees than physical ones, profit from trades could immediately increase.

The post Why Use an Online Broker? first appeared on eOption.

Prior to Entering the Workforce

It’s a good idea for children to start saving money as soon as they get any. In grade school, kids usually get funds as allowances or holiday-related gifts. When they are instructed to save some of this money, they learn good habits and get to see how saved funds add up over time. Once they get to withdraw the money to purchase something they couldn’t have afforded before, they see how the practice can be rewarding.
At this age, a passbook savings account is usually enough because the amount of money involved is relatively small. Even though the interest on these accounts is low, it is enough to demonstrate the principles that will be involved in future interest-bearing investments.

Upon Beginning Employment

First jobs tend to have low pay, but that doesn’t mean workers shouldn’t save. By following tips for saving money such as using coupons, avoiding expensive practices like dining out too often, and making a set budget, entry-level workers can have enough money left over to put some away. At this stage, two or three types of savings accounts should be activated:

During the Career Years

At this time of life, the low-paying “teenage” jobs are usually things of the past. Now may be a time to get into more serious investments. The IRA or other retirement account should be kept, but it may be time to add to it. Start a stock portfolio or get into other advanced investment strategies to help grow those retirement funds.

Remember the Risk Factor

It’s important to remember that there is no such thing as a totally risk-free investment. Even U.S. government bonds are subject to factors like the national credit rating.

Some investments, however, are far riskier than others. These have the allure of the potential of riches, but come with the chance of losing up to 100 percent of the money involved. To avoid overly-regrettable situations, you may want to make sure to keep retirement funds in investments that aren’t very risky.
Important Factors Helping to Save Money

The Retirement Account

There are several options for retirement savings. One of the most popular is the IRA. The most popular form of IRA allows savers to defer taxes on the funds until withdrawal. These and other retirement accounts typically have penalties for withdrawing funds before a certain age, and this encourages long-term savings. While this is great for retirement, it may not be not good for goals that will involve faster access to the funds.

The General Savings Account

This is the account that will usually hold funds for a relatively short period of time. Someone who needs to save for a down payment on a house or car, collect money for an extravagant vacation, or otherwise pay for a short-term goal should have one of these accounts. Passbook savings accounts may be needed at first if customers don’t already have some seed money accumulated. Other easy-entry savings accounts include CDs and similar products offered by local banks.

Intermediate Savings Plans

Money that isn’t being saved specifically for retirement shouldn’t all go to short-term goals. Look into some other possible investments like real estate, mutual funds, and similar things to grow some of those “extra” funds into something big.

What if Expenses Are Too High to Allow Savings?

The easy answer is to cut the expenses. Unfortunately, many people in this situation don’t see any way to do this without substantially lowering their current quality of life. Here are a few tips that are often overlooked:

Purchase in Bulk

It may seem like a deal if a small item is $1 and the big one is $5, but running the numbers will almost always show that the larger size costs less per ounce. It will also last longer!

Avoid Off-Brands

They seem cheap, but may actually cost more because some may be low-quality and force users to buy them more frequently.

Look for Coupons and Sales

It’s possible to get good, name brand items at shockingly low costs if one is diligent about checking store fliers and other sources of coupons and sales.

Buy Raw Food and Cook at Home

Claims that fast food is cheaper than raw grocery store fare aren’t always true. The same goes for TV dinners. Home-cooked meals made from scratch can be are cheaper and promote better health.
These are just some of the ways that savings can be started at a young age and continued throughout someone’s lifetime. Talk to a financial advisor for even more ideas and to get a detailed savings plan.

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