| Online Investing - Opening Your First | | | | Different Levels of Authorization For |
| Online Account | | | | Online Investing Accounts |
| The commercials on TV make it seem so | | | | Did you know that your credit history |
| easy - open your investing account, | | | | comes into play when you want to open an |
| begin trading that day, and in no time, | | | | online account? This is because some |
| you'll be able to retire a millionaire. | | | | forms of investing pose a financial risk |
| Well, online investing is easy - but it | | | | to online investing companies. For |
| isn't quite that easy. | | | | example, when you buy on margin, you are |
| The online companies don't tell you that | | | | borrowing money to buy stock. |
| there's an application, and an account | | | | If you have less than stellar credit, |
| approval period that can be rather | | | | online companies may deny you the use of |
| frustrating for a newcomer to online | | | | margin. Furthermore, shorting stocks |
| investing. | | | | (selling stocks which you don't own in |
| The Online Investing Account Application | | | | the hope that they will decline in |
| Common sense tells you that online | | | | value, and then buying them back at a |
| companies are going to need your name, | | | | later date) also poses risk for online |
| address, phone number, etc., but you | | | | investing companies. |
| might be surprised at just how much | | | | What happens if you short 100 shares of |
| information they do need to know. | | | | a stock that's trading at $40 and it |
| For example, they'll need your birth | | | | goes to $200? Do you have $200,000 to |
| date, social security number, employment | | | | buy back the stock? If not, then the |
| information, liquid net worth, total net | | | | investing company loses, so if you have |
| worth, annual income, tax bracket, and | | | | poor credit or limited liquid net worth, |
| much more. | | | | you may be denied the right to sell |
| Why do these online investing companies | | | | short. |
| need so much information? One reason is | | | | More troubling is the idea that online |
| that they are required by law to verify | | | | investing companies can limit you from |
| your identity. Following the events of 9 | | | | doing things that don't directly pose |
| 11 and the passage of the Patriot Act, | | | | financial risks to them. For example, |
| the government has called upon financial | | | | buying call and put options poses no |
| service companies to help stem the flow | | | | risk to an online broker, but the |
| of money to terrorist groups. | | | | company may still deny you the right to |
| In practice, this is nothing but a big | | | | buy options on the grounds that you lack |
| hassle for the 99.99+ percent of people | | | | experience. |
| engaged in investing who have nothing to | | | | Why should the online company care? |
| do with terrorism. It depends on your | | | | Because theoretically, you could sue |
| political persuasion as to whether or | | | | them for not protecting you from |
| not it's all worth it. | | | | yourself - blame the trial lawyers for |
| Regardless of your political views, the | | | | this one. |
| fact is that the Patriot Act is the law, | | | | Don't Be Scared Off |
| and because of it online investing | | | | The vast majority of people who want to |
| companies will go to great lengths to | | | | open online accounts are able to do so |
| verify your identity. For example, if | | | | with relatively little trouble. Some |
| you're a married woman who has recently | | | | people, however, get a lot more of a |
| taken her husband's surname, investing | | | | hassle than they bargain for. The |
| companies might delay the approval of | | | | important thing is to be prepared to |
| your account. | | | | disclose a lot of information, and to |
| You will have to prove to them beyond a | | | | wait while your account application is |
| shadow of a doubt that you are who you | | | | being processed. The more you know going |
| say you are, and this is sometimes more | | | | into the situation, the less frustrating |
| difficult than you would presume. | | | | it will be. |