Personal Investing with Computer Technology
Computer technology has revolutionized the way people can invest their money. Online trading has become the newest fad for people trying to get more bang for their buck. Virtually anyone with access to the Internet can set up an online brokerage account. With just a click of the mouse people can buy and sell stocks. This advanced computer technology for personal investing has its pros and cons. It has made it much easier for the average person to take care of his/her finances in an inexpensive manner. It has alos made it easier for people to become addicted to trading, which can become an expensive habit.
Trading Stocks Inexpensively
Online trading is easy and inexpensive. In comparison with traditional brokers, Internet brokers charge flat rates for transactions. The traditional full service broker usually charges the investor fees depending on how much stock they buy or sell, not to mention the commission they charge for handling the investors portfolio.
Small-time investors with the know how of managing their own finaces have found online trading to be very beneficial. They now have found ways to buy individual stocks at a cheap price without paying all the fees asociated with the full service broker. These investors can go into numerous web sites to get information on any particular stock they are interested in. Many of these web sites are designed for the invstor just learning how to analyze a potential stock. For example, BigCharts.com is a technical analysis web site that will create a chart using any stock symbol and comparing with any other stock symbol. It can also compare a stock symbol with the S&P 500 Index and the NASDAQ Composite Index to give an investor an insight how a stock is doing in comparison with the industry average. These tools are very valuable for an investor to be successful in their analysis of companies, industries, and the economy.
Just five years ago, not one person invested over the Internet. But now, by one acount, more than 7million Americans trade online, making up to 25 percent of all trades by individual investors (Fritzlen, 2000). With this trend, more and more people will be using the Internet to do most of their investing.
Addiction to Online Trading
The growth of online trading has generated a new breed of addicts: the average day trader. The average day trader looks at the stock market in the same manner as they would a casino. With the stock market, many believe they have a higher probability of winning than in a Las Vegas casino. By winning, I am referring to generating a return from their investment. The stock market seems to be in a more controlled environment than a casino. But if the investor does not actually know what he/she is investing in, the stock market can become a gambling table.
The fact is, stock market gamblers stand to lose far more money than casino gamblers, say Devin O’Neil, deputy director of New Jersey’s Council on Compulsive Gambling. Day traders contacting the organization have losses of between $50,000 and $250,000, which is significantly more than the $38,000 average debt of casino addicts, O’Neil said (Jones, 1999).
An investor needs to be knowledgeable in the company or industry they are investing in. Without knowing a firm” financial risk, an investor can loose a lot of money.
Serious addiction to stock market speculation is growing at an alarming pace, securities regulators and gambling experts say, and becoming more cute (Jones, 1999). Many Internet investors do acknowledge they’re hooked on trading online. This inability to stop trading has cost many online investors more than their bank accounts. Many report that they lost their jobs, spouses, house, and even incurring outstanding credit card debt.
Computer technology has definitely transformed the way people handle their finances. It all ultimately lies on the individual on the way he/she decides in what to invst in. Computer technology will continue to improve as Moore’s Law predicts; that is, microprocessors and other miniature circuits will double in density every 18 to 24 months (Meyer, Baber, & Pfaffenberger, 1999). It will ultimately lie on the individual with what and how they ultimately use this technology. If they are ready for it, the Internet will be the most poerful tool they have in handling and investing their money.
Cruz, H. (2000). Web Makes Investing Cheaper. http://CNNfn.com/2000/12/20/strategies
Jones, R. (1999). Hooked on Stock Trades. TheStreet.com