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Investing money via the Web can save you time, money


I've been keeping tabs on developments related to the Internet in this column since 1995, and I've never stopped being surprised by the growth of this new communications medium.

While preparing for a presentation about online investing, I again was surprised at the meteoric growth in the number of brokers turning to the World Wide Web.

At the beginning of 1997, there were about a dozen online brokers.

As of this past week, there are now more than 100 online brokers holding assets worth upwards of half a trillion dollars.

What's fueling the growth? There are several factors.

• The first is simple economics -- lower commissions. Commissions for online brokers run from as high as $25 to a low of $5. Chances are, you can find an online broker that can save you money on commissions. After all, you can use the money as well as your broker.

• Control of your investments is another reason. While you are still calling the shots when you use a full-service or discount broker, you can access your account 24 hours a day, seven days a week. You can execute trades in your bathrobe at night and expect them to completed at the start of the next business day.

But using the Internet to conduct your investments has some possible hazards as well.

• The technology is still fairly new.

Regardless of how much money a broker like E*Trade spends to upgrade its network, you're going to be facing a Web site meltdown if 10 percent of your broker's 1 million customers suddenly go to their computers to change their investment mix at the same time you're there.

Online brokers typically have a backup plan for busy trading days, most often the telephone.

But even phone banks have limits, which only goes to prove the point of the investment gurus -- avoid the "herd" mentality when the market jumps.

Remember, investing for the long haul means not leaping to buy or sell at the first sign of trouble.

• Avoid constant tinkering with your portfolio.

Having instant access to your account is great, but it also means that you can tinker your portfolio to death. And while Ameritrade offers $8 trades, it won't matter much if you get socked for dozens of trades each quarter.

PICKING YOUR BROKER. Saving money on commissions is important when you select an online broker, but there are a number of other points to ponder.

• Check the commission and fee schedule carefully; will it save you money to make it worth your while? And are there any additional fees for services or features you'll want to use?

• Security. I doubt there's a single online broker that would operate without a secure Web site. But if you're concerned about the safety of your account and the trades you plan to conduct, read what steps they use to ensure a secure Web site.

Insure the broker handles the investments you want. Some brokers handle stocks and options but not mutual funds or IRAs. Shop wisely and compare.

• Check the type of order a broker can handle.

• Check the broker's order execution speed. Some are faster than others.

• How does a broker confirm your order? Probably via e-mail, but check so you won't be wondering.

• What kind of customer support is offered?

When you're at your PC looking at your portfolio after supper, is there a real, live person to turn to for questions about your account?

TEST DRIVE. If you think an online broker has the features you want, visit their Web site and examine their demo. Most will have screen shots or live examples of how you enter your account and conduct the transactions you want.

One of the best online demos is found at the E*Trade Web site at www.etrade.com.

The E*Trade Game is what it is called, and the premise sounds simple: Invest $100,000 of "play" money using E*Trade's Web site for one month and create as much wealth as possible in one month.

The beauty of the E*Trade Game is that you can use it to get a feel for "real world" investing. Player's portfolios follow the current market, so everyone's chances are equal. It becomes a real game of investment skill, too.

How successful can you be? The March winner in the Stock Only game at E*Trade ended up with a portfolio worth more than $400,000.

That's not too shabby -- until you consider the Stock and Options winner for March amassed a portfolio worth more than $3.3 million!

Yahoo! has a similar stock market simulation game that can be found in their Finance section called Investment Challenge.

Both games award prizes to the monthly winners. E*Trade's prize to the top player is $1,000 in each game; Yahoo offers their top player a cool $5,000.

FREEBIES. As competition gets more intense for customers, online brokers are adding services and investment tools to make their Web sites more useful.

These features include chat, free real-time stock quotes; research tools; pager alerts for timely information on stocks you own or follow; access to analyst reports and various financial and investment calculators.

If you're interested in learning more about online brokers and investing, you can visit InvestorGuide.com.

InvestorGuide has a wealth of high-quality, reliable information on how to get started in buying and selling stocks, as well as reviews and lists of the top online and "bricks and mortar" brokers.

Visit their site for details at www.investorguide.com.

• Another invaluable resource for investors is The Investment FAQ, which lists numerous Frequently Asked Question lists on many important topics.

Visit the site at http://invest-faq.com/ for more information.

• For reviews of online brokers, you can visit Don Johnson's collection of information on how well brokers meet the demands and needs of customers.

Johnson's Web site is an informal sounding board, but he seems to keep his finger on the pulse of the customers of the major online brokers. You'll get a feel for which brokers are pleasing their customers at his Web site, www.sonic.net/donaldj.

CYBER SIDE. The nation's largest department store chain has unveiled its new Web site.

Sears.com is now online, offering 2,000 brands as well as parts for most makes and models of appliance.

Sears is promising good service to its Web-based customers, with delivery available for appliances within 24 to 48 hours of an online sale.

Visit Sears' growing Web site at www.sears.com.

Comments and questions about this column may be sent to jbrooks@myoldkentuckyhome.com, or visit www.myoldkentuckyhome.com on the World Wide Web.

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