An introduction to is in order. A composite
investing in mutual sketch from sources in
funds through an the United States and
electronic broker Canada reveals the
typical online trader of
YOU'VE EARNED IT, FOUGHT stocks and mutual funds
for it, saved it. No one as male,
cares about your money college-educated,
more than you do. But if possibly self-employed
you're contemplating and wealthier than the
joining the ranks of the average investor.
do-it-yourself online
investor, the E-investing, short for
all-important question electronic investing,
is: do you have the has evolved along with
discipline, the time and the World Wide Web. The
the knowledge to emergence of discount
effectively manage your brokers and the
mutual fund portfolio? popularity of the
Internet as a credible
If you decide you have and seemingly bottomless
what it takes, a quick source of investment
look at your peer group
information have given broker:
rise to do-it-yourself
investing. The potential 1. Control. If you're
cost savings and knowledgeable about
practicality of the Web investments and are
easily lead to the comfortable making and
medium's transition from living with your own
a research tool into a decisions, control over
transaction tool for your portfolio should be
online investors. And an advantage. It's your
it's not just the big portfolio and it's your
banks and specialized job to make it grow.
electronic brokers who You're the one who
are offering online researches funds and
accounts. Many mid-tier initiates buy and sell
and full-service brokers transactions. You're
have created online responsible for regular
extensions of their re-balancing. And,
services, so customers depending on your online
can review their broker's level of
accounts and place service, free advice,
transactions from portfolio management
anywhere. applications and fund
filtering tools may be
Here are some of the available to help you
advantages of managing keep your portfolio
your fund portfolio focused and growing.
through an online
2. Accessibility. You As Forrester Research
can take stock of your predicted in 1997, the
investments, review considerable advantages
trading activity and of online trading will
initiate trades hook more and more
24-hours-a-day, not just investors of mutual
during daylight hours. funds and stocks in the
The benefits of 24-hour next few years. The
accessibility are U.S.-based research firm
apparent if your day job predicted that assets
limits you from keeping managed online will
on top of the markets reach $688 billion
and keeping in touch (U.S.) in 2002, while
with an investment the number of online
advisor. trading accounts will
jump to 14.4 million, up
3. Convenience. Online from three million in
brokers may promote and 1997. In Canada, the
sell no-load funds as a growth in the number of
value-added service, online stock and mutual
even though the broker fund accounts has been
receives no compensation rapid. As the Web grows
from the fund company if and online financial
you purchase these tools improve, the value
funds. of assets managed online
is expected to rise.
Setting up an account send while preventing
others from looking in.
You must meet three As a result, the
requirements before communication between
opening an electronic your browser and your
account with an online online broker remains
broker. First, a private.
computer with Internet
access is a necessity. The third requirement is
The second requirement money. Some brokers
is a 128-bit compatible require as little as
Web browser, such as $1,000 or securities of
Netscape 3.0 or Internet equivalent value to open
Explorer 3.0 or higher. an account.
When you log on to your
account, encryption Before opening an
technology encodes all account, you must
data you transmit complete an application
through your browser, form and mail it to the
much like a combination brokerage firm. You can
lock secures a safe. usually obtain an
Your browser and your application online or
broker's trading system request one by phone or
will agree on a "key" or email. A wide range of
combination, which accounts is typically
allows the broker to offered, including
unlock the messages you
cash, margin, electronically once an
self-directed RRSP and order has been filled.
U.S. dollar accounts. Depending on the broker
Once your application is and the funds being
approved, your online traded, a transaction
broker may equip you record and fund
with customized trading prospectus are usually
software, a username and mailed immediately or at
a login password. And month-end.
trading can begin.
All about fees
The typical interface
for conducting online Mutual fund fees are
trades is straight always a tricky subject.
forward and easy-to-use. As commissions can
You can search for or differ widely, compare
link to funds eligible fees charged by several
for trading and get the online brokers before
latest fund quotes. To making a decision to
place an order, you will open an account. Some
need the relevant fund discount brokers charge
codes and may need an zero commissions on fund
additional password. You purchases, but will
will also receive a penalize you if you sell
confirmation number for a load fund within 90
each transaction. days of
Account updates are made
purchasing it. Brokerage will be penalized if you
firms make money on the redeem earlier than
trailer fees paid out by scheduled. If you
load fund companies for purchase no-load funds,
providing advice and however, you do not have
service to fund holders. to contend with early
Ninety days is usually redemption penalties.
the minimum time-period
before a trailer fee Understanding your
payment is made. investment personality
Fees for switching, too, "If online investors are
are worth comparing. paying the same
Some brokers charge fees (trailer) fees as they
to investors who switch would pay an advisor,
between funds in the why would they want to
same fund family. Others buy the product without
don't charge, as long as the advice?" asks
both funds have a financial advisor Mardi
similar load structure Collins of Ottawa-based
and management fee. Sutherland Investment
Corp. "I can't see
As with all back-end and why."
deferred load funds, you
Collins has a point. If equity and fixed-income
you buy a load fund that funds that reflects your
pays a trailer fee from personality and
a discount broker, you investment horizon.
might not get the same Regular portfolio
quality advice that re-balancing and
could be offered by a reassessment are also a
financial advisor. Some must. To complement your
mutual fund companies own knowledge, you
that sell load funds, should determine to what
have complained in the extent you will need to
past that clients who lean on professionals
purchase funds through for advice, and choose
online brokers are an online broker or
phoning the company financial advisor
rather than the discount accordingly.
broker for handholding
when times are tough or Many online investors
uncertain. manage only a small part
of their portfolio and
The solution begins and leave larger portions,
ends with you, the perhaps their RRSPs, in
investor. Before the hands of an advisor.
choosing the Others manage all their
do-it-yourself route, investments themselves.
you should thoroughly But what's crucial is
understand your that you manage your
investment personality investments up to your
(conservative, level of comfort and
growth-oriented) and expertise.
craft a portfolio of
