What’s the Best Way to Invest in Stocks Online?

There are of course many different view points on this, but my view is that the best way to invest in stocks is to take a conservative long term view and use a good solid discount stock broker.

Why do I think it’s best to be conservative? One big reason is that it’s not very time consuming or labor intensive. You can find the stocks that you like best, then wait for them to hit a price that you find attractive. You can even set a limit order to automatically buy a stock if a particular price is hit.

Even average returns can become very attractive in the longer term due to the power of compounding. Warren Buffet, the worlds most successful investor has taken this approach. He has averaged around 23% on his money for over 40 years. It has made him one of the richest men in the world.

Many people are attracted to short term stock trading because of the thrill of all the short term volatility and profit potential. There are speculators who do extremely well out of this type of trading, but there are far more losers than winners.

Let’s take a quick look at how compounding your returns in the long run can help your investment pot grow significantly. If you invested $10,000 and made 15% per year, your investment would grow like this:

End of Year Value
1 11,500
2 13,225
3 15,209
4 17,490
5 20,114
6 23,131
7 26,600
8 30,590
9 35,179
10 40,456
11 46,524
12 53,503
13 61,528
14 70,757
15 81,371
16 93,576
17 107,613
18 123,755
19 142,318
20 163,665
21 188,215
22 216,447
23 248,915
24 286,252
25 329,190
26 378,568
27 435,353
28 500,656
29 575,755
30 662,118
31 761,435
32 875,651
33 1,006,998
34 1,158,048
35 1,331,755
36 1,531,519
37 1,761,246
38 2,025,433
39 2,329,248
40 2,678,635

As you can see, at the end of year 5, you would have more than doubled your money and at the end of year 10 you would have more than quadrupled it.

Obviously in reality, returns are highly unlikely to be a perfect number every year, but this chart gives you an idea of how compounding can make your money can really start to appreciate in the longer term.

So these are the two reasons why I think the best way to invest in stocks online is to a conservative long term approach, potential for excellent results with the power of compounding and a low time and labor requirement. I can invest whilst running my other businesses.

Stock Broker

Now onto the topic of finding a stock broker. If you want to be a successful trader, the broker you choose can have a massive effect on your trading results. Some brokers are damn right greedy and just want to extract as much money from you as they can. Clearly these are the ones to avoid.

For most traders I believe best way to buy stocks is with a discount stock broker as they tend to have significantly lower trading fees than full service brokers.