E-Trade is arguably the most popular and well known online discount stock brokerages. Boasting over 4000 employees and having a net income over 600 million dollars per year (2006), E-Trade clearly is sitting high on the list of top online brokerages. I personally use E-Trade for all of my investment needs and do recommend it to anyone who is considering opening an account with an online stock broker. Here is how it E-Trade ranks among their competition:

Site Layout – 4 out of 5
E-Trade’s site layout is effective, intuitive, professional, and easy on the eyes. Compared to some of the other online stock brokers I’ve used in the past, E-Trade easily ranks the highest in this category. Finding my portfolio’s allocation is just as easy as finding quotes for a stock.

Tools – 3 out of 5
E-Trade has powerful and easy use tools for just about everything you’d need as an investor. It has fully customizable market and trading platforms, along with other useful tools such as asset allocation, account performance, income estimator, risk estimator, and more. The only complaint I have is that some of their more effective and desired tools are not free to users unless you pay a fee or have a minimum numbers of trades per quarter.

Security – 5 out of 5
E-Trade really sets itself apart from its competitors because they offer a free SecurID product to ensure that your account stays in your protected and in your possession at all times. I love the SecurID product, it’s extremely easy to use, creates an incredibly strong second layer of protection on my account, and of course it was free thanks to E-Trade. This feature alone is enough for me to stay with E-Trade, because I like sleeping at night knowing that I have added protection on my account.

Customer Service – 5 out of 5
E-Trade’s customer service is extremely good, especially in a time where most customer service departments are full of outsourced employees who are reading off a page of specified things to say. Customer service employees are friendly, knowledgeable, and extremely helpful. I’ve made countless numbers of calls to their customer service phone number and had my questions and issues resolved instantly. In fact, E-Trade was recognized for outstanding customer service in 2007 by Smart Money (a financial magazine).

Commission Fees – 2 out of 5
This is really the only downside to E-Trade. With E-Trade your commission fees are higher than most online discount brokerages unless you make a minimum number of trades per quarter. I tend to overlook this part of E-Trade as it is obvious that the higher commission fee is definitely worth what I get in return compared to other brokerages.

Overall – 4 out of 5
E-Trade is a great online discount brokerage, and I truly believe E-Trade leads the industry with their superior tools, outstanding customer service, and ease of use for investors. Their commission fees are definitely higher than their competition, but if you want the best, you should expect to pay a little more than usual.

Have you ever played a game of poker with just chips and no money on the line? In those games players bluff, they call hands they know they have no chance at winning, and will ultimately play in a manner that displays one huge underlining problem: they don’t care because it’s not real money. Well, that’s paper trading in a nut shell.

Paper trading is usually recommended as a training prerequisite before investing/trading in the stock market. It works by pretending you own X amount of shares of Y stock that you selected and tracking your results in a set period of time to simulate being in the stock market. Paper trading is simply a waste of time though and I wouldn’t recommend anyone bother with it.

Yes, paper trading has its benefits for the extreme beginner, but it’s ability to teach you how to invest or trade is incredibly limited. Paper trading will give you a basic idea of how the stock market functions, but beyond that it just doesn’t make much sense to bother doing it. Simply put, there are much better ways to prepare you for the stock market than paper trading. Here’s why:

Builds false confidence
Let us suppose you had a rather lucrative paper trading experience. You feel good about yourself and think you’re ready to invest or trade the stock market. You open your brokerage account, and find out after a few bad trades (which are inevitable) that the only thing you know is that you know nothing. This is because paper trading is so one dimensional compared to the real thing that you don’t get much of an education.

Fails to Simulate the Stock Market
The problem here is that you just can’t simulate the stock market, or what it feels like to be in the stock market. The variables that influence the stock market are practically limitless that I find myself unable to truly explain the depth of this issue. Economic forecasts, hedge fund influences, media headlines, market confidence, etc.; Paper trading just can’t capture all of those little things that compose the stock market, and without that you aren’t getting a real simulation.

Lacks Market Psychology Lessons
This is a huge issue as well. Regardless of whether you are a trader or an investor, being successful in the stock market is largely dependant on how well you can control your emotions. If you remember only one thing from this article let it be that paper trading will completely mislead you in terms of how it feels to have your money on the line. There is no substitute for learning how to discipline your emotions than to battle it out in the real stock market.

Wastes time that could be used for real learning
If you want to prepare yourself so you can get into the stock market, buy some credible investing books and read them front to back, check out my beginner articles, and subscribe to a credible financial media newsletter/paper.  It will definitely be more time consuming than paper trading will be, but what you will learn will be so much more in depth than what paper trading has to offer.

Every day the stock market tempts me to be a gambler and not an investor. Each day that I become a better investor, I am tempted to throw it all away for some risky trade. Becoming successful in the Stock Market is never something that is easily accomplished, and one of the main reasons is because it is just too easy to get caught up in the quest for fast and easy money. You make a few good investments, and just like that you feel like you are ready to take on some of the more riskier positions. The irony of it is that you built up most of your gains and confidence through conservative investments. So why would it make sense to go against what is working for you?

The answer is it makes no sense at all, but it sure does sound tempting! Who wouldn’t want to start investing more aggressively when they see that they are successful and profitable? It seems like a good enough idea, but in reality it’s just asking for trouble. It is crucial that you stick to your rules for investing success (you do have a set of rules to invest by, don’t you?), otherwise you are just increasing your risk for losses to your portfolio. This is easier said than done, especially in a market that is exploding with volatility. So here is a list of things to remind yourself when the temptation becomes unbearable:

1. You are going against what has been working for you
2. You are increasing your risk
3. Are the potential profits so desirable that you need to ignore your own rules for long term investing?
4. Has more aggressive investing worked for you in the past?

Remember that as an investor, your chances for success over the long term are significantly higher when you take on a conservative strategy. Avoiding the risky moves for your overall portfolio will be your ticket to long term success. This doesn’t mean you need to have your entire portfolio consist of boring low risk, low reward stocks, but it does mean that the majority of your portfolio should be positioned so that you can weather any financial disaster that could happen in the stock market.

Every investor needs a self created list of rules to invest by so that they stay disciplined and successful. Many investors learn the hard way what the do’s and don’t’s of the stock market are, but fail to write them down so that they don’t repeat these mistakes over the course of their investing career. You need to make a list of rules to invest by yourself, and this article will show you how to do that.

But before we get into the process of creating a list of rules, you may be asking yourself “why do I need to make the list on my own?”. No, it’s not because I’m too lazy to give you a specific rule list, it’s because each investor has their own strategies, goals, and styles that make them different. So a list of rules that might work for one investor might be terrible for another. With a list of rules to invest by created by yourself, you can use your own experience to identify what works and doesn’t work for you. If you have no experience in the stock market, scroll down to the section titled “My own rules” to see my personal set of rules for investing to give yourself an idea of where to start when creating your rules.

Creating Your List of Investing Rules

Creating the Do’s…

Think of all the investments you made this year that were both rational and successful. What similarities did these investments have in common? Try to isolate these similarities and find ways that they can be made into rules. For example, if you made several investments in stocks with good fundamentals and they were all successful, a good rule to create would be “only invest in stocks with good fundamentals”. Your list of “Do’s” should consist of rules that will always be a good foundation for choosing stocks to invest in.

Creating the Don’t’s…

Now think of all the investments you made this year that were unsuccessful and/or irrational. Think about what made these stocks poor investment choices and what was ultimately wrong with them. As an example, suppose you invested in a stock just because you heard about it from some market analyst on television and invested solely by that analyst’s advice. So your rule would be to “never invest by analyst opinion alone”. Opposite to the list of “Do’s”, your “Don’t’s” list should consist of rules that contain all of the wrong reasons to invest in stock.

Remember: You don’t need a list of investing rules that is longer than most fictional novels. Keep it simple and stick to the universal rules that will make you a successful and rational investor.

My Own Rules

Do…

1. Invest in stocks with strong fundamentals
2. Stay up to date with the stock market on a daily basis
3. Do research on a stock before buying/shorting it
4. Diversify your portfolio
5. Sell some shares on a high performing stock that may have peaked
6. Stay unemotional under all circumstances

Don’t…

1. Go by your gut feeling
2. Let momentum be the only reason for investing
3. Attempt to trade market volatility
4. Rely on analysts’ opinion alone
5. Let the fear of failure become an obstacle

Oh, and the golden rule for investing: Buy low, sell high.

Many if not all of the blog sites in the stock market niche are more than happy to offer you with their opinions and stock picks for your portfolio. This is something The Investor’s Journal does not and will not ever offer. Some might see this as a disadvantage for the website, but to me it’s just not worth the hassle. The goal of this website is to teach you how to invest, not to tell you what you should invest in. I want you to learn how to invest so that you can free yourself from relying on others to help you grow your portfolio. Why is that? Because no one cares about your money like you do!

Aside from that, there are some other significant issues I have with providing stock picks:

Legal issues
I’m not a laywer and I’ve never studied law, but I know that providing stock picks is just asking for legal issues that I don’t have time to deal with. This site is just a hobby for me, it’s not my main source of income, so it’s just not worth the hassle for me.

I change my mind often
Even though I consider myself as a successful investor, I am willing to admit that I can be wrong often. When the market reaches pivotal points where it could rally or plummet, I often change my mind on my feelings towards our short term future in the stock market. It would be incredibly time consuming and confusing to my readers if for example one day they read an article where I explain why I feel like the stock market is poised for a correction, and then the next day I write another article dismissing the former while giving more well thought reasons for my beliefs.

Psychological Reasons
One thing that’s rough for stock market analysts is that you are expected to never be wrong. People look up to you and expect that with your higher knowledge you are somehow infallible. This just isn’t the case. In some cases, analysts who make bold predictions that never come into fruition begin to go into denial. In these cases analysts attempt more than ever to convince people that their original prediction is simply ahead of the market, when in reality it just isn’t going to happen. These analysts go through depression, embarrassment, and all kinds of emotions because of the disappointment and disapproval the readers show for that analyst. As I said before, this site is just a hobby of mine, investing is my main source of income, and the last thing I need is stress from my stock picks leading to me becoming an irrational or emotional investor.