The internet is a great resource of information regarding stock trading, and one of the most popular sites is Investopedia. Is Investopedia reliable? Is it a good source?
Investopedia can be a reliable online source for trading information, especially for those new to the stock market. Investopedia.com provides useful guides about trading laws, terms, and jargon.
Read on to find out more about Investopedia, what makes it reliable, and how it can help you become an adept trader in no time.
Is Investopedia Reliable?
The reliability of websites like Investopedia can be quite subjective. Is Investopedia a reliable source for scholarly articles and information? Not really. If you are citing Investopedia as a resource for a college dissertation, then your professor may hand back your paper because it is not a peer-reviewed resource.
However, if you are an amateur trader or a beginner, you can consult Investopedia. This website is a great tool for beginners at stock trading to learn the ropes.
Will this website replace getting proper instruction like you would in a college course? Is Investopedia a credible source for scholarly articles? Of course not, but it helps those interested in getting into stock trading learn enough about it in the sense that it can motivate them to start doing it.
What is Investopedia? How did it start?
Investopedia first came about in 1999 during the infancy of the internet. Cory Wagner and Cory Janssen wanted to provide content that can teach people about the stock market and how they can start trading. Wagner focused on the business side of things, including research and development, while Janssen handled marketing and sales.
In 2003, the feature that made Investopedia a household name, the Stock Simulator, came online. This allowed people to try their hands in stock trading without risking their own money. They used the simulator to practice trading stocks, options, and ETFs using virtual money.
Since its launch, millions of people have used the simulator, and trillions of virtual currencies have exchanged hands. This tool launched the careers of many stock traders from all over the country.
In 2007, Wagner and Janssen sold Investopedia.com to Forbes Media for an undisclosed amount. At the time, the website attracted more than 2.5M monthly visitors. It also included a financial dictionary containing more than 5,000 terms and a whole slew of financial articles from numerous experts in the field.
After a couple of years, ValueClick bought Investopedia for a whopping $42M. By then, the site has grown to more than 30,000 pieces of content. Again, in 2013, Investopedia changed owners once again. ValueClick sold it and other properties to IAC for a total of $80M. Today, IAC merged Investopedia into their Dotdash media company, where it remains until today.
Why Is Investopedia so Popular?
Investopedia is so popular at present because of several great reasons. Among the reasons why so many people use Investopedia are the following:
Makes Trading Stocks Seem Simple
So many people are hesitant to trade stocks because they have a hard time understanding the terms involved. Through its videos and articles, Investopedia explains them using everyday common terms, so they are easier to understand.
Many financial experts say that Investopedia oversimplifies their explanations and that they often gloss over the important points. But then again, the users can do their research after getting a rough understanding of the concepts through the articles in Investopedia. You can look at it as a gateway drug to trading stocks. It hooks you in, and you get addicted.
It Has an Accurate Trading Simulator
Many people are not interested in trading stocks because they think it is just a complicated way of gambling. They think that winning in the stock market is all up to chance. However, experienced traders will tell you that it is not the case. The only way for you to get a feel on stock trading is to try it yourself.
However, not many people are willing to risk their hard-earned money to start learning about stock trading. It is the reason why Investopedia launched the Trading Simulator, an online app that allows users to create a mock portfolio so they can practice using virtual currency.
The simulator follows the same trends in the real stock market, so you can see how the market works without putting any real money on the line.
One of the reasons why so many people trust Investopedia as a credible source is that it is one of the least biased websites online right now. People from both sides of the political spectrum are glad that the website is neutral and does not mix politics in their articles.
Another thing that makes Investopedia a reliable and credible source is that it does not use wording that evokes the reader’s emotions. In other words, it does not use clickbait headlines. Most importantly, it does not resort to using rage-clicks. It means that it does not intentionally use words that rile up people that lean a particular way politically.
Investopedia Website Categories
The different categories on the Investopedia website are:
- Your Money
The Education section includes definitions of various terms.
The Markets section includes charts and financial information on various indexes, stocks, and other markets. The charts and financial information is provided by TradingView, a reliable charting and trading platform.
The Simulator section of Investopedia.com lets you compete risk-free, with $100,000 in virtual cash. It is a great stepping stone to the real markets.
The “Your Money” section of Investopedia includes smart strategies for budgeting, banking, loans, renting or buying, insurance, taxes, and more.
The Advisors section helps people manage their money through investing, estate planning, and retirement planning.
The Academy section of Investopedia includes self-paced courses that provide skills from world leaders in finance and investing.
Is Investopedia a good source for trading and stock market information? Investopedia is a good source of financial advice and market information. Investopedia does not cite scholarly sources and isn’t a scholarly source itself. However, financial experts have written Investopedia information in the industry and are peer-reviewed by independent experts before publishing.
Investing Vs. Trading
One of the reasons people are not too keen on trading stocks is that they do not know what the process means. Many think that stock trading is synonymous with investing, which is technically true since both methods aim to earn profit using the financial markets. However, take note that this is where the similarities end.
This is one of the topics covered by Investopedia  and is another reason why Investopedia is a more reliable source than many other sites. Investopedia’s info is backed up by sources and is written by industry experts.
The goal of investing is to build wealth gradually over a long time. It is possible to buy and hold a portfolio of stocks, mutual funds, and other investment instruments until they yield profits.
The amount of time an investor holds onto investments can vary. It can be a couple of years. Sometimes, you can hold onto them for decades. Investors take advantage of certain perks, like increased interest, stock splits, and dividends, to make their initial investment grow.
Unlike traders, investors would ride out the downtrends in the financial markets, expecting that stock prices will eventually rebound and recover all the losses. Investors usually only concern themselves with the market fundamentals, like management forecasts and price-to-earnings ratios.
If you have a 401(k) or a Roth IRA, then you are already an investor, even if you are not keeping an eye on the performance of your investments regularly. Since your ultimate goal is to grow your retirement account, which takes decades, the daily fluctuating prices of mutual funds hold less importance to you. It is true if you compare it with the consistent growth of your investment over the coming years.
As the name suggests, trading involves frequent transactions, including buying and selling stocks, currency pairs, commodities, and others. The goal of traders is to gain returns that are bigger than that of buy-and-hold investing. In a nutshell, traders are looking for bigger returns in a shorter amount of time.
Profits in trading come from buying stocks at a lower price and then selling them when their prices increase. Now, it may seem illogical, but the reverse also happens. This means you can profit from selling shares at a higher price and then repurchasing them when they get lower. This is what we call selling short. It is a way for traders to make a profit from falling markets still.
Compared to buy-and-hold investors who ride out the less profitable positions, traders aim to profit within a specific period. They will use a stop-loss order to close their trades when the price falls beyond a certain limit. Traders would often use analytical tools, like stochastic oscillators and moving averages, to predict and spot high-probability trades.
Again, is Investopedia reliable? Investopedia is one of the most reliable online sources for trading information, especially for those new to the stock market. Investopedia.com provides useful guides about trading laws, terms, and jargon.
What Is Unethical Trading?
If you are a beginner in stock trading, you may think that you discovered something that can make you a lot of money without any risk whatsoever. However, you need to rein in your enthusiasm a bit because what you think you just discovered is an unethical trading practice. As a beginner trader, you must learn about unethical practices, so you can avoid doing them.
Here are some of the most common unethical practices in stock trading:
Insider trading is one of the most serious unethical practices in the securities industry. It entails the improper use of insider information regarding the company issuing the security.
The problem with this concept is that its exact parameters are still murky even after going through innumerable litigation. However, we will assume that inside information includes any material information that the issuer has not made public for easier understanding.
Stockbrokers tend to have connections within the system through client relationships. They also know how to use the information their insiders give them and because the rewards are great, the temptation to trade based on them is quite great. However, the penalties involved are much bigger than the potential for illegal profits.
The SEC is particularly knowledgeable when it comes to abuses using insider trading. They launch elaborate market watch programs to keep an eye out for abuses. If you come across sources of information that seem sketchy or bear witness to trading abuse, then it would be helpful for you to alert the authorities.
This is another good topic to highlight Investopedia being a credible source.  Investopedia discusses unethical trading in this article, including the argument for and against unethical trading.
Conclusion – Is Investopedia Reliable? Is It a Credible Source?
Is Investopedia reliable? Yes, but only to a certain extent. If you are a newbie in the trading game, you will find plenty of valuable and yet easy-to-understand information held within the website. Seasoned traders, on the other hand, may think that they oversimplify their explanations. Some may even be borderline incorrect.
In any case, if you are planning to take the plunge and start trading in the stock market, then you can consult with Investopedia. Once you get a bit familiar with the game, you can start studying the finer concepts using other more reliable resources.