An increasing number of financial service providers are offering online investment services that have the potential to make investing simpler, give you more control over your investments and even save you money. Unsurprisingly, many small investors have jumped at the chance to see how their investments are performing on a more regular basis, but, is it safe and what can you do to protect yourself from online fraud?

Is Online Investing Safe?

In short, the answer is yes. Provided you invest via a reputable firm and take some simple precautions, investing online is as safe as online banking or paying your bills online.

In the first instance, you should do your homework into the firm offering the service. The normal rules about selecting a financial services supplier apply: check references, make sure they are registered and in good standing with the relevant regulators (usually the FSA), speak with them in person and find out what experience they have. You should also enquire as to the security arrangements on their site.

If they are unable, or hesitant, to answer any of your questions then you should probably go elsewhere.

Once you have chosen your firm, it is important that you take precautions yourself to ensure that no-one will be able to access your account. Choose a username and password that are unique to you and keep them safe. Avoid common passwords like your name or 'password' as well as any words that can be found in the dictionary - combining numbers with letters is usually a sound idea. You might also consider changing your password regularly.

Just like online banking, online investment services do not email asking for you to confirm your details. If you receive any correspondence via email, confirm it by phoning the company directly before clicking on any links or taking any action.

What Else Should You Look For?

Beyond simple safety considerations, online investing services can vary widely in terms of costs and features. With that in mind, it is always worth comparing your options - specifically in terms of fees payable. You may also consider what kinds of investments are available via the system.

If you are considering investing in unit trusts, ISAs or funds then you probably will not need access to the same kind of 'day trading' account that would allow you to buy and sell individual shares in real time. A 'fund supermarket' may be more appropriate for your needs. If this is the case, then you should enquire about the funds available via the site or if they have any ready-made investment portfolios for you to consider.

Some firms will offer access to all the funds on the market (there are well over 1000) whereas others may select just a small number of these funds - some do both. Other firms will have investment portfolios that they have developed themselves - often targeting different types of investor. The more questions you ask before you get started, the more useful you are likely to find the service you choose. Some firms can even arrange for you to trial the service as a guest.

Finally, being able to access good investment advice is hugely important - especially for the less experienced investor. Find out if the firm in question provides offline investment advice.

If you take a few commonsense precautions and do your homework, investing online can not only be safe but it can also be a great way to keep an eye on your investments 24/7, save on charges and take more control of your investments.