Bytes to bucks: trading stocks on the Internet can save savvy investors a bundle.THEIR ADS ARE EVERYWHERE. From network television, to splashy splash·y adj. splash·i·er, splash·i·est 1. Making or likely to make splashes. 2. Covered with splashes of color. 3. Showy; ostentatious. See Synonyms at showy. animated banners on the Internet, to the personal finance section of your online service, high finance has gone high-tech with online trading Online Trading Making trades via the Internet. Notes: The use of online trading increased dramatically in the mid to late 1990's with the advent of high-speed computers and Internet connections. Stocks, bonds, options, futures, and currencies can all be traded online. . E-Trade's "Boot your broker" and "Don't let high commissions bite your assets" are the slogans of the most creative ads for online brokerage companies. If you consider yourself a fairly independent-minded investor with a pretty good idea of where you want your money to go, then these firms are scrambling to attract your attention. Touting touting the making of personal representations by a veterinarian to persons who are not clients in an attempt to solicit their business. the dismantling of the traditional investor/broker relationship with savvy, creative announcements of their services, online brokers are riding the wave of one of the fastest growing areas of Internet commerce. These firms want you to look at traditional brokers with a slightly raised eyebrow and question why you should pay enormously higher commission rates when there is a cheaper, more convenient alternative online. "I wanted to control my own money, so I looked at online trading to save on [commission] fees," says Richard Barnes Richard Barnes could be
Whether you are an active investor who trades every day or an occasional investor interested in a conservative growth mutual fund, online trading can provide a venue for your investment activity. If you're computer literate computer literacy n. The ability to operate a computer and to understand the language used in working with a specific system or systems. computer literate adj. , fairly Internet savvy and unafraid of electronic commerce, online trading may be for you. Advances in encryption and other customer authentication (1) Verifying the integrity of a transmitted message. See message integrity, e-mail authentication and MAC. (2) Verifying the identity of a user logging into a network. technology are helping to make security concerns less of an issue in Internet commerce. The key to being successful is a three-pronged approach: have an investment strategy so that you aren't distracted by the volume of information and resources available on the Net; investigate the kind of services offered online; and determine how those firms fit--from real-rime quotes to price per trade--with your trading habits and philosophy. SURVEYING THE CYBER-LANDSCAPE The growth of online trading has exploded in the past few years with a surge in the number of start-ups. As business has grown online, so have the number of traditional brokers who have jumped on the bandwagon. In 1996, there were 1.5 million online trading accounts; that number is expected to jump to 10 million by 2001, according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. projections by the Cambridge, Massachusetts This article is about the city of Cambridge in Massachusetts. For the English university town, see Cambridge, England. For other places, see Cambridge (disambiguation). Cambridge, Massachusetts is a city in the Greater Boston area of Massachusetts, United States. , consulting firm Noun 1. consulting firm - a firm of experts providing professional advice to an organization for a fee consulting company business firm, firm, house - the members of a business organization that owns or operates one or more establishments; "he worked for a of Forrester Research Forrester Research is an independent technology and market research company that provides its clients with advice about technology's impact on business and consumers. Corporate facts
Just two years ago, there were only 12 online broker firms. Currently, there are more than 30, many of which are start-ups whose only business is online trading. Now some traditional firms have started cutting in on the action, offering online trading to their services. There are also hybrids--small online companies that have been acquired by older brokerage houses. "Most large firms are looking at online trading or to purchase other online trading firms," says Renford Bernard, a trader at National Discount Brokers (www.ndb. com). "We expect that online trading will be 90% of the business within the next two years. It's a lot cheaper and very fast." With the influx of new players in the field comes heightened competition, which in turn rewards investors in the form of lower trading prices Trading price The price at which a security is currently selling. and more "value-added" services. Indeed, cost has been a primary driving force in the massive growth of the number of online investors. With discount brokerage firms discount brokerage firm A brokerage firm that discounts commissions for individuals to trade securities. Most discount brokerage firms offer limited advice but reduce their fees by 50% or more compared with full-service brokerage firms. , fees for placing telephone orders can range from $25-$55. While with full-price firms, rates can reach as high as $110. "The great thing about it is the price," says Janell M. Lee, a 35-year-old self-employed C.P.A. in Oakland, California “Oakland” redirects here. For other uses, see Oakland (disambiguation). Oakland (IPA: /ˈoʊklənd/), founded in 1852, is the eighth-largest city in the U.S. , who has been trading online since last fall. "And you're not tied to the phone talking to Noun 1. talking to - a lengthy rebuke; "a good lecture was my father's idea of discipline"; "the teacher gave him a talking to" lecture, speech rebuke, reprehension, reprimand, reproof, reproval - an act or expression of criticism and censure; "he had to a broker which entails higher fees." Lee says while security concerns linger in the back of her mind, overall she is confident and checks her online portfolio often "to make sure everything is OK." Most brokers use secure servers and service-only customers who use browsers that connect to secure Web sites. Both Netscape and Microsoft browsers are equipped with this capability. WHO DO YOU CALL? There are a wealth of options when shopping around for an online broker. The most common way to trade is directly on the Web. Online proprietary services like America Online See AOL. and CompuServe also offer access to brokerage firms. Some companies like Charles Schwab Charles Schwab can refer to:
But brokerage firms basically fall into three categories full-service, discount and deep discount. Full-service or full-price firms like American Express American Express (NYSE: AXP), sometimes known as "AmEx" or "Amex", is a diversified global financial services company, headquartered in New York City. The company is best known for its credit card, charge card and traveler's cheque businesses. Financial Direct (www.americanexpress.com/direct) and Charles Schwab are primarily for investors who want to trade online but are still timid about the idea. They are the "hand-holding firms." Many of the traditional brokerage houses that have set up online trading divisions offer the most help to wary investors who are unsure about investing online Investing online has become the norm for investors and traders over the past decade with many, if not all brokers now offering online services with unique trading platforms. In the past, investors had to call up their brokers and place an order on the phone. or don't have the time to nurse their accounts. The' provide premium services combined with generous customer support and phone advice backup. They are also a bridge to their current customers who want to trade online but don't want to change brokers. As a result, their commissions are heftier than discount and deep discount brokerages A discount brokerage is a business that charges clients significantly lower fees than traditional brokerages, typically offering comparatively fewer services and/or advice. . American Express Financial Direct has a minimum commission of $26.95 per trade, compared to under $15 per trade for many discount brokers with similar services. Schwab's commission per trade is even higher at $29.95. However, many discount brokers offer just as many services as the older firms do--with much lower commissions. In addition, the online trading sites of traditional brokers are not necessarily more user-friendly or better designed than the discount firms. For example, the American Express Financial Direct Web site looks nice, but takes too long to download--even with a 28.8 kbps modem. If you're looking to make real time trades, it can cost you the difference in getting a stock at your preferred price. Discount firms are the most common and the fastest growing sector of online trading companies. Both Lee and Barnes trade with discount brokers directly on the World Wide Web. Lee is a customer with Discover Brokerage Direct (www.lombard.com), and Barnes uses E*Trade (www.etrade.com). These two firms offer competitive trading paces and comprehensive research, data and portfolio services. They both offer a $14.95 commission rate for market orders on listed stocks Listed stocks Stocks that are traded on an exchange. Up to 5,000 shares. (E*Trade requires $1,000 balance for cash accounts for market trades and 52,000 for options.) Discover Brokerage is consistently rated as the No. 1 brokerage firm, while E*Trade is one of the best known. BLACK ENTERPRISE recommends both of these services for overall excellence, ease of use and customer service. Lee has been investing for over 15 years and is really enthusiastic about trading online. She chose Discover Brokerage for her online transactions because, at the time, it had the lowest prices. "It is easy to access and you can do your own research and look up real-time quotes," says Lee. Dean Witter Dean Witter may refer to:
 To comply with Wikipedia's , the introduction of this article needs a complete rewrite. in February. Now, online trading accounts for
55% of Discover Brokerage's total trades.Lee gives the firm high marks for customer service. "They are responsive when I have questions and issues regarding my account. They're always quick, right there on the phone." Although she is happy with her account, Lee has been checking out other firms that offer lower fees and other types of services. Barnes prefers E*Trade's slick, user-friendly site. The company is a pioneer in online investing and has been in business since 1992. It provides many services for its customers, including breaking news, customized investing pages, market charts and commentary and the ability to devise a dummy portfolio. Although many firms advertise and highlight low-cost trading--meaning cheap and/or flat-fee commissions--beware that these appealing prices may not apply to all types and quantities of trades. While some firms offer flat-fee commissions for equity trades, others vary their prices depending on the number of shares you trade. The more you trade, the lower the price. Also, some low prices are tied to a minimum balance requirement. Deep discount firms such as Empire Financial (www.lowfees.com) offer very low fees and not much else online. These no-frills services are limited to offering investors the ability to trade online and not much more, except links to ocher ocher (ō`kər), mixture of varying proportions of iron oxide and clay, used as a pigment. It occurs naturally as yellow ocher (yellow or yellow-brown in color), the iron oxide being limonite, or as red ocher, the iron oxide being hematite. services that you must pay to give you research and data. You are completely on your own. These brokers are designed for extremely savvy and experienced investors who have access to up-to-dare information elsewhere. Some brokerage firms offer "zero-cost" trading, but there are many restrictions involved with no-cost trading including high account balances and order minimums. Empire Financial's restriction for commission-free trading is a $10,000 minimum account balance. That's the low end of the spectrum. Others require $500,000 minimums and at least 1,000 shares traded at a minimum price of $5 per share. To open an account, an investor must send, wire or transfer funds from other accounts to a broker. You must have sufficient funds in your account prior to placing orders. Each broker has detailed procedures on trading depending on the type of account and trades. DO YOUR RESEARCH ON COMPANIES AND BROKERS Investors can look to the financial exchanges themselves--Nasdaq (www. nasdaq.com), NYSE NYSE See: New York Stock Exchange (www.nyse.com) and AMEX AMEX See: American Stock Exchange (www.amex.com)--for up-to-the minute information. The Securities and Exchange Commission (SEC) (www.sec.gov) also offers a gold mine for investors searching for information available via its EDGAR Edgar or Eadgar (both: ĕd`gər), 943?–975, king of the English (959–75), son of Edmund, king of Wessex. In 957 the Mercians and Northumbrians rebelled against Edgar's brother Edwy and chose Edgar as their king. database. It provides information on forms public companies are required by law to file with the government, including chose derailing company finances, mergers and acquisition plans. Lee takes full advantage of the services her firm, Discover Brokerage, offers as well as other sources of information on the Internet, including The Motley Fool (www.fool.com), an online investor newsletter. She also subscribes to the Value Line Investment Survey (a year's subscription on CD-ROM CD-ROM: see compact disc. CD-ROM in full compact disc read-only memory Type of computer storage medium that is read optically (e.g., by a laser). is $595) and The Technology and Stock Newsletter, based in Half Moon Bay, California "Half Moon Bay" redirects here. For the geographical feature in California, see Half Moon Bay (California). For other uses, see Half Moon Bay (disambiguation). Half Moon Bay is a coastal city in San Mateo County, California, USA. . Barnes relies on E*Trade's research and data offering but scours scour, scours 1. the chemical and physical cleaning of fleece wool. 2. diarrhea. dietetic scour see dietary diarrhea. peat scour see secondary nutritional copper deficiency. the Web for other information. "All the information I get on the Inter-net is free," he says. A good search engine is Daily Stocks (www.dailystocks.com), which offers financial databases, brokerage research, analysis and projections, and provides links to magazines offering information on heavily traded public companies. In researching online brokerage firms, potential investors should familiarize themselves with industry jargon and the kinds of features that are most important to them. Surf the broker's Web sire for detailed information on their services and prices. The Yahoo! Finance Center (www.yahoo.com) provides an up-to-date list of links to brokers. From there, you can hop from sire to site comparison shopping. Researching the types of trades and orders the firm accepts should also be on your checklists. Many firms offer a variety of trading besides stocks, including mutual funds, options, precious metals Precious Metals Valuable metals such as gold, iridium, palladium, platinum, and silver. Notes: Investing in precious metals can be done either by purchasing the physical asset, or by purchasing futures contracts for the particular metal. and bonds. Most brokers, except for the rock-bottom, no-frills deep discounters, offer an array of value-added services A value-added service (VAS) is a telecommunications industry term for non-core services or, in short, all services beyond standard voice calls and fax transmissions. such as news feeds, "real-rime" quotes, portfolio tracking options, up-to-date charts and graphs of market and stock activity, historical dare and company reports. If they don't offer these services directly, they may offer links m others that provide the services for free or for a fee. Real-time quotes are a must when making investment decisions. Many brokers such as E*Trade offer unlimited quotes, while others charge for the service. Once you make a trade, your account information should be updated. Determining how soon this occurs and how you receive confirmations of your trade is also very important. Free customer service is usually limited to e-mail and online FAQs (Frequently Asked Questions), but some brokers do offer telephone help for free. Check message boards and investor news groups like misc.invest.stocks to evaluate the customer service reputation of a broker. But, do not invest based on gossip and unsubstantiated rumors that spread online in chat rooms and news groups and on message boards. Online accounts should be insured by the Securities Investor Protection Corp. (SIPC (Simply Interactive PC) An earlier umbrella term from Microsoft and Intel for a PC that works like a home appliance. For example, it has a sealed case, uses external connectors for expansion and boots in just a couple of seconds. ), and most usually say so on the home page or within the first screen. You may also want to check what kind of insurance the broker provides beyond that of the SIPC. Insurance information should be easy to find on the company's site or the firm should be able to provide that information to anyone who calls them. While you are surfing a broker's site, make sure you pay attention to the design and content. Was the sight easy to navigate or was it low on content and bogged down with heavy graphics? For many investors, time is money and getting test in a Web site or having your screen freeze while downloading heavy graphics is not conducive to maximizing your investment potential. Several sites allow surfers to make demo or mock trades. This allows potential investors to go through the motions and get a feel for what actually happens when they want to trade. Once you have opened an account, you are given a customer ID and PIN, which allow you to log in to the trading area. You can then look up real-time quotes for the stocks you are interested in trading, their positions and their daily value gain or loss. You can also check the status of orders that you have already completed. You decide what kind of order you are going to make, such as an equity trade or an option, and then fill out an online order form. Soon after the trade is executed, you should be able to check your account balance and your portfolio should be updated by the end of the day. Online investing can be a rewarding and exciting experience, but there are drawbacks. Every potential investor should read Possibilities & Pitfalls: The Internet as an Investment Tool, which is published by the regulatory branch of the National Association of Securities Dealers National Association of Securities Dealers (NASD) Nonprofit organization formed under the joint sponsorship of the investment bankers' conference and the SEC to comply with the Maloney Act, which provides for the regulation of the OTC market. . It can be retrieved online at www.nasdr.com/ 2580.htm. The individual Investor's Guide to Computerized Investing computerized investing See automated stock trading. ($24.95) by the American Association of Individual Investors American Association of Individual Investors (AAII) A not-for-profit organization to educate individual investors about stocks, bonds, mutual funds, and other financial instruments. (625 N. Michigan Ave., Chicago, Illinois 60611; 800428-2244 or www.aaii.com) takes a thorough look at building an investment portfolio, from the nuts and bolts nuts and bolts pl.n. Slang The basic working components or practical aspects: "[proposing] of investing, to software, assessments of individual services and free research sources. Computer systems at some firms have crashed in the past, but this has become increasingly uncommon since many companies have upgraded their systems. Lee says she has only encountered minor technical problems when the system is down for maintenance. "It's usually only at night or on the weekend, but they usually let you know ahead of time," she says. Busy signals from Internet service providers Internet service provider (ISP) Company that provides Internet connections and services to individuals and organizations. For a monthly fee, ISPs provide computer users with a connection to their site (see data transmission), as well as a log-in name and password. can also hamper investors and delay trading activity. But the onus of investment decisions rests squarely on the investors--they must take responsibility for bad decisions. "You make your own decisions, good or bad," says Barnes. "No one is there to stop you from making bad choices." However, for Lee and Barnes, the rewards and personal satisfaction far outweigh the pitfalls and disappointments. For Lee, it's a hobby that's fun and challenging. "This is the way to go if you want to keep the fees low and not be on the phone," she says. For Barnes, online trading is a venue for financial empowerment and independent decision making: You trade at your own pace with no high pressure from salespeople. But these two traders have age-old advice to those who want to increase their chances of success and rewards. Stick to what you know and continually educate yourself about the market. "Buy into companies that do things you know about," says Barnes. "Don't be emotional about it or fall in love with companies you own." RELATED ARTICLE: Trading Online Company Web Address Deep Discount Empire Financial www.lowfees.com J.B. Oxford www.jboxford.com Investex www.investexpress.com PC Financial Network www.pcfn.com Discount Discover Brokerage www.lombard.com Direct E*Trade www.etrade.com National Discount www.ndb.com Brokers Datek www.datek.com High Cost American Express www.americanexpress.com/direct Financial Direct Bull & Bear www.bulbear.com Quick & Reilly www.quickly-reilly.com Wall St. Access www.wsaccess.com Company Basic Commission Minimum Balance Deep Discount Empire Financial $22.00 -- J.B. Oxford $15.90 $5,000 Investex $13.95 -- PC Financial Network $20.00 -- Discount Discover Brokerage $14.95 $2,000 Direct E*Trade $14.95 $1,000 National Discount $14.75 $2,000 Brokers Datek $9.99 $2,000 High Cost American Express $26.95 -- Financial Direct Bull & Bear $19.95 $5,000 Quick & Reilly $26.75 -- Wall St. Access $25.00 $10,000 |
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