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Levitt warns about online investing

Internet trading has taken on such an importance in the current stock market that SEC Chairman Levitt is now warning investors about the pitfalls of online investing.

The SEC estimates that one quarter of all stock trading is now done through online brokerages. The commission expects there to be ten million online brokerage accounts by the end of the year.

"I believe that investors need to remember the investment basics and not allow the ease and speed with which they can trade to lull them either into a false sense of security or encourage them to trade too quickly or too often," the chairman said in a statement last week. "An investor's consideration of the fundamentals of a company - net earnings, P/E ratios, the products or services offered by the company - should never lose their underlying importance."

Levitt cautioned investors about the limitations of online brokerage systems, dramatic stock price swings and risks involved in buying on margin.

He said that the number of complaints that the SEC has received regarding online investing has increased 330 percent over the past year.