Bytes To Bucks - Black Enterprise

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Black Enterprise Magazine July/August 2018 Issue

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Their ads are everywhere. From network television, to splashy animated banners on the Internet, to the personal finance section of your online service, high finance has gone high-tech with online trading. ETrade’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 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, 30, a former engineer for Intergraph Corp., a workstation and computer graphics firm in Huntsville, Alabama. Now an M.B.A. student at Alabama A&M, Barnes has been trading online, primarily in high-tech and biotech companies, for two years.

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 avenue for your investment activity. If you’re computer literate, fairly Internet savvy and unafraid of electronic commerce, online trading may be for you. Advances in encryption and other customer authentication 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-time quotes to price per trade–with your trading habits and philosophy.

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 projections by the Cambridge, Massachusetts, consulting firm of Forrester Research (www.forrester. com). Also, of all the households online, 17% will be involved in online investing by 2001, according to Forrester’s report on the industry. The surge, the report states, can be attributed to the explosion of online connections, a strong bull market in stocks and aggressive price slashing.

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

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