|
It
is this fanaticism that makes me wonder why even more people do
not want to trade online. Perhaps I can explode some concerns they
and even those who do trade online may have.
Europeans
are net trading
For those worried that such an activity may be a little risky for
its 'frontier-type' nature, you are definitely not going to one
of a few online traders trying out untested technology. According
to IDC, there were 6.4 million online broker accounts in the US
alone at the end of 1998 and there will be 24.7 million by the end
of 2002.
Top
| In
Europe, we like to follow the American lead, and so here too
online trading is going to have an exponential increase. According
to JP Morgan, 2 years ago fewer than 100,000 people were connecting
to an online broker. Now there are 900,000 and by 2002 there
will be some 8 million people trading online in Europe. The
message must be - there is going to be a mad rush, join in or
be left out. |
|
There
is going to be a mad rush, join in or be left out. |
Online
Trading Accounts in Europe
| 1997 |
1999 |
2002 |
| Under
100,000 |
900,000 |
Over
8million |
Top
I
don't do that kind of thing
Of course online trading is not for everyone. But a common misconception
is that you have to trade short-term to justify opening an online
account. Wrong! Even if you only buy shares once a year, you could
save in commission charges.
Even
if you have never bought shares before, it does not exclude you
from opening an online trading account. Most Europeans, unlike their
Yankee cousins across the puddle, have traditionally invested in
cash through pensions, banks and building societies. According to
Morgan, only 25% of Britons own shares directly. If you think that
is bad, only 4% of Austrians do.
Top
However,
it appears that internet trading is breeding converts to share ownership.
For instance, only 7% of Germans own shares, yet it is one of the
most active online share trading markets, with some 400,000 online
accounts. By 2002 that is predicted to reach 3 million online trades,
more than any other European country. In Britain will come second
to Germany, and it's not even soccer. It seems online trading is
creating a demand for share ownership, rather than shifting it from
offline to online accounts.
Top
Tax
across borders
I get the impression some people do not trade online because they
are unsure of their tax position. Others think that since it is
an internet trade, maybe there are no tax implications.
Your
tax situation is the same whether you trade online or offline. So
if you pay capital gains tax, as most share investors would, on
your offline trades you will also on your online ones. Because of
double tax treaties you would not pay tax in both the country of
the stock (eg. US) and your own country if different. More about
tax in a future column.
Top
Don't
have to be a big trader
You need not be put off from opening an online account by the false
believe you should shift your entire holdings to your online account.
In the US, according to one recent survey most people trade online
with less than $10,000 in their accounts. In the UK for example,
the Association of Private Client Investment Managers and Stockbrokers
found that the average online trade was for £4,730. So, there
is nothing stopping you testing the online brokerage waters with
a small amount of capital.
Top
What
Next?
There is little problem finding a good list
of online brokers - check out www.uk.gomez.com;
again more about choosing
an e-broker in a future column.
Alpesh
B Patel is the author of Net Trading: Get online with
the new trading strategies; Trading Online: A step by step
guide to cyberprofits. The Mind of a Trader: Lessons in trading
strategies from the world's leading traders.
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