SMALL INVESTORS BEATING A PATH TO THE INTERNET.

Byline: Ilana DeBare Scripps-McClatchy Western Service

R.J. Pittman could be a living, breathing advertisement for on-line stock trading.

Of the four computers on his desk, one is always logged on to an Internet site that displays his portfolio and how its value is rising or falling. Whenever the market looks right, the 26-year-old computer consultant touches a few keys to place a trade order - no phone calls to a broker, no waiting, nothing to interrupt his other work.

Best of all, Pittman has managed to earn more than $70,000 in a single year of electronic trading.

But even he admits that the process was a little disorienting at first.

``You press a button and your order sort of disappears into cyberspace, and then at some point it comes back to you,'' he mused. ``You haven't spoken to anyone, you haven't talked out loud, or jumped up and down - yet 15 minutes later, you have $10,000 that you didn't have before. It's that way when you lose money too. . . . It's kind of tough to warm up to.''

Today, more and more investors like Pittman are experimenting with - and warming up to - trading by computer.

Lombard Institutional Brokerage - the small San Francisco discount broker that handles Pittman's electronic trades - estimates it is adding 800 new Internet customers each day. And Charles Schwab & Co., the nation's biggest discount broker, has seen on-line trades rise from 8 percent to 15 percent of its total business over the past year.

Nationally, the number of on-line investment accounts is projected to jump from 412,000 in late 1994 to 1.3 million in 1998, according to Forrester Research.

``More and more people are managing their portfolios or doing their investment research on line, and this is a natural extension,'' said Paul Garverick, on-line editor for the American Association of Individual Investors. ``The ease and the cost savings, both to users and to brokers, are pushing the industry toward this.''

The marriage between computers and small investors isn't completely new. For years, computer owners have done investment research, shared stock tips and done some limited trading through commercial on-line services like CompuServe. Some discount brokers like Schwab have also allowed their customers to place electronic trades with special in-house software programs.

But computerized trading is taking on a whole new life with the spread of the World Wide Web - and on-line trading sites that can be accessed for free, from any kind of computer anywhere.

Lombard inaugurated its trading site on the Web last fall, after plowing more than $1 million into developing customized software that allows users to track changes in individual stocks and in their portfolios, as well as place trades.

ETrade Securities - an on-line brokerage firm that is opening a 30-person customer service facility in Rancho Cordova this summer - recently added a Web site to its other electronic trading options. And in May, Schwab also plans to add Web-based trading to its other trading choices.

Fans of on-line trading say that encryption software and other safeguards have virtually eliminated any risk of hackers breaking into investors' accounts. They say that on-line trading offers investors several big advantages:

Lower fees and transaction costs.

Instant response, at any time of day or night.

An ability, through graphic displays and links to other World Wide Web sites, to make a wide variety of investment information accessible as customers decide whether to make a trade.

``There are certain things we just can't provide you over the phone - an inter-day graph, a historical chart, a chart of your portfolio - that are just perfect for Internet display,'' said John MacIlwaine, the 26-year-old dynamo behind Lombard's on-line initiative. ``This technology empowers you to do your own research, at work, at home, whenever you want.''

On the downside, some warn that on-line trading may give small investors an illusion of empowerment - without all the information that real insiders have.

``The explicit cost of on-line transactions is very low, but the hidden cost can be kind of high,'' said Michael Murphy, publisher of the California Technology Stock Letter. ``When you call a broker, he may say, `Let's get it sold by the end of the day but not at this minute.' If he gets you a quarter-point move in a stock, that can be worth a lot more than saving 10 cents on the commission.''

For some investors, the biggest drawback to on-line investing may be psychological - the absence of a warm, human voice on the other end of the transaction. Schwab for one, plans to keep expanding its branch offices even as it ventures onto the Internet.

``We're dealing with people's life savings in some cases,'' said Schwab spokesman Tom Taggart. ``A lot of people want to see a representative in the flesh and bring their money to a place they can touch and feel.''

At Lombard, John MacIlwaine also acknowledges that not all investors will want to do their trading on line. But he can almost feel the pulse of the growing market on his computer keyboard.