Log On and Profit

A beginner's guide to online investing

me to see where my money is going and how I’m doing.”

Ledyard appears to be typical of many online investors.

Mike Anderson, spokesman at Ameritrade, one of the nation’s fastest-growing online brokers with the recognizable “Stewart” TV commercials, says an active customer has a long-term capital-growth investment plan, an average account of $39,000 and buys and sells stocks slightly more than once a month. He says 40% of these investors own homes worth $200,000 or more and have personal income of at least $100,000. Ameritrade typically charges an online customer about $8 to execute a trade. “Our clients like the value, speed and customer service they receive,” Anderson says. “These are self-confident investors who are comfortable doing the research and executing trades on their own.”

Anita D’Aguilar, vice president and senior financial consultant with the Private Client Group at Merrill Lynch in Los Angeles, whose company began offering online trading last June, agreed. She says more consumers are trading online because of the growing number of online brokers and discount companies pushing the service, and the growing sophistication of investors who are confident enough to research stocks and execute their own trades.

Merrill Lynch offers online trading services ranging from $29.95 per transaction to a service that carries a set annual fee based on the size of your investment. The service covers all trades and provides a financial consultant. “As a broker in this industry, I’m glad we have products with set fees,” she says. “This is a big thing for us, and many of our clients like the convenience and amenities that come along with it.”

But D’Aguilar, who still handles most of her clients’ trades, says online trading is not for everyone. She maintains that most investors concentrating on retirement want experienced brokers who can provide them with personal advice and research. Hence, some investors aren’t as concerned with price.

Still, a growing number of consumers like the appeal of investing online. Take Winston P. Thompson, a 50-year-old certified public accountant and financial consultant from New York who has an E*Trade account. An investor for five years, his holdings include America Online (NYSE: AOL), NetZero (Nasdaq: NZRO), Novell (Nasdaq: NOVL) and Tyco International (NYSE: TYC). He enjoys investing electronically because of the lower cost, convenience and market data provided on the site. He considers his online investments small, worth about $15,000. But Thompson says the key disadvantages to online investing are the lack of access to personal professional advice and periodic systems failures.

At Datek Online Brokerage Services in Iselin, New Jersey, virtually all of the trades are done online, says Mike Dunn, the company’s spokesman. He says those investors primarily want fast executions with lower fees than they can get from traditional brokers and just enjoy making trades themselves.

Carolyn J. Fowler, 52, likes to invest online because of the low fees and the ability to buy and sell stocks and make easy trades among her mutual funds. Fowler, president and chief executive at Fowler Group International Inc., a marketing, sales and learning

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