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
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
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.