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Dave Says: Is Online Trading Okay?

by | Oct. 04, 2011

Finances

Dear Dave,

How do you feel about online trading for building a stock portfolio? Assuming that someone has done their homework on which stocks to buy, is there anything else to know about do-it-yourself trading?

Kevin

Dear Kevin,

There’s one very important thing to know – don’t do it! This kind of thing is one rung below day trading on the ladder of stupidity.

Here’s the problem. When most people talk about “doing their homework” on single stocks they’re just barely skimming the surface. And most of the time this involves just talking to their broke friends. There’s no way you and your golfing buddy are going to dig up and decipher the kind of solid, reliable information you’ll need to be successful at this kind of thing.

I’d much rather go with a mutual fund that’s spent millions of dollars analyzing companies and doing real research. What you’re talking about is a million times riskier than using good growth stock mutual funds – selected by professionals – with 90 to 100 different stocks. 

—Dave

For more financial help, visit daveramsey.com.

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