A Trade A Day Now you can put your fortune on the line at the push of a button.
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It was at the center of a recent multiple homicide. It'sreceiving close scrutiny from the U.S. Securities and ExchangeCommission (SEC). It's made millions for some, lost fortunesfor others. Yet day trading continues to entice Americans--and,yes, even entrepreneurs who may be juggling online trading withrunning their businesses--to take a chance with their personalfinances.
"There's a blurred distinction of what a day trader is,depending on whom you talk to," explains the SEC's JohnNester. According to the SEC, those individuals who invest onlineare dubbed "day traders light"--they execute a lot oftrades but don't have real-time access to the marketinformation that traditional, offline day traders do. Why thedistinction? Because if you can't trade in real time, youdon't know the most current prices and changes--and thatamplifies the risk of buying and selling. Still, these risks oftrading online aren't stopping day traders light from choosingthe Internet as their investment medium.
According to SEC Chairman Arthur Levitt, 25 percent of alltrades made by individuals are done online. That's 7 millionU.S. investors, up from not one Internet trade a mere five yearsago.
"A lot of people try to trade on the Internet in hopes ofmaking a quick profit on short holding periods, but they don'talways understand the nuances of the decisions they make,"says Nester, adding that many--if not most--online day traders haveinadequate investment knowledge.
"Successful investing takes time," Nester explains."To make intelligent decisions, you need to look at companyfundamentals, learn about the industry, check to see if revenuesmeet expectations, and read about management decisions and analysisin the annual reports." In many cases, Nester adds, peoplewager large sums of money on companies they know nothing aboutother than their ticker symbols.
According to the Electronic Traders Association (ETA),there's a steep learning curve when you start trading online,and you can expect to lose money during your first three to fivemonths of trading. And as with small businesses, the failure rateamong day traders is high: approximately one-third. Consequently,you need to go into day trading armed with information, informationand more information, advises Bill Lauderback, vice president ofcorporate affairs at Momentum Securities Inc., a firm that provideselectronic access to securities markets and private tradingsystems. Before you start, you should ask yourself: Is it worth mytime and the risk to my business?
Count It Up
How's your Social Security?
You may have your doubts about the solvency of Social Security,but you should still keep track of how much you're due. To helpwith the task, the Social Security Administration has begun mailingout annual Social Security statements to workers and self-employedpeople 25 and older who aren't already receiving benefits.
Look for your statement every year about three months beforeyour birthday. Carefully check the earnings-history portion, whichnotes your income for every year in which you paid Social Securitytaxes. Be sure the numbers jibe with yours so you get whatyou're entitled to.
The statements also show how much Social Security income you canexpect once you're retired. Not happy with the numbers? Makesure you've got a good retirement plan.
Gotta Have It
Check the warning signs. Are you addicted to the Net?
Strange as it may sound, there is such a condition as Internetaddiction, and according to clinical psychologist Kimberly Young,the consequences can be unemployment, bankruptcy, divorce orworse.
Young, author of Caught in the Net (John Wiley &Sons) has found that roughly 5 to 10 percent of online users areaddicted, and she believes this number could increase. Among thesigns to look for are preoccupation with the Net, hiding or lyingabout your level of Internet use, trying to cut down usage butbeing unable to do so, and using the Internet to escape from otherproblems.
Acknowledging the irony of treating online addiction via her Website (http://www.netaddiction.com),Young says the goal is not to stop usage, but to teach moderation.She provides counseling via e-mail, chat rooms, phone and officevisits. She also works with businesses and recently began providingservices for National Discount Brokers' online investors.
Contact Sources
Center for On-Line Addiction, (814) 362-7045
Momentum Securities Inc., info@soes.com, http://www.soes.com
U.S. Securities and Exchange Commission, help@sec.gov, http://www.sec.gov
