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