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Top Regulator Warns Investors
To Use Caution in Electronic Trading

By Marcy Gordon  Associated Press
WASHINGTON — As the Internet transforms investing, people should exercise the same caution trading electronically as when going through a broker, the government's top securities regulator warned today.

The remarks by Arthur Levitt, chairman of the Securities and Exchange Commission, came amid regulators' concern over the recent wild swings of the Nasdaq Stock Market. The concern led the brokers' group operating the Nasdaq market to warn investors Tuesday they may lose money from delays in executing trades when the market is volatile and overburdened from heavy trading volume.

"Investing in the stock market will always entail risk, no matter how you do it," Levitt said in an interview with The Associated Press. "It is just as easy, if not more so, to lose money through the click of a button as it is to make it."

An estimated 5 million amateur investors now do at least occasional trading over the Internet, a trend that prompted Levitt to deliver a rare message to ordinary investors.

While urging caution in electronic trading in general, Levitt also made his first public comments about day trading, a risk-prone endeavor used by a small but growing breed of investors, many of whom have abandoned their regular jobs for the prospect of quick riches.

Strategies such as day trading can be "highly risky" for the Main Street investor, Levitt said. He said he was "very, very concerned" by stories he had heard of people putting up their student loans or mortgages to finance their day trading.

"Investment should be for the long run, not for minutes or hours," he said.

In all kinds of trading, investors should adhere to three "golden rules," Levitt advised: Know what you are buying, know the ground rules under which you buy or sell a stock or bond, and know the level of risk you're exposing yourself to.

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