Investingonline org

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Not too long ago, when investors wanted to buy or sell securities or to conduct research on different investment options, they called their full-service stockbrokers. Those brokers charged relatively high (by today’s standards) commissions for processing customers’ orders, but they also had access to a great deal of information that was either very expensive or completely impossible for individual investors to acquire. The fees that customers paid compensated their brokers not only for executing trades but also for providing access to information and research.

Today the Internet is a major force in the investing environment. It offers an extremely low-cost means for executing trades and provides access to tools formerly restricted to professionals. With these tools you can find and process a wealth of information and trade many types of securities. This information ranges from real-time stock prices to securities analysts’ research reports to techniques for investment analysis. The time and money savings from online investing are huge. Instead of wading through reams of paper, you can quickly sort through vast databases to determine appropriate investments, make securities transactions to acquire your investments, and monitor the progress of your investments—all without leaving your computer. In this section, we introduce the wide range of options that you have for conducting investment research.

Getting Started in Investment Research

Although exceedingly valuable, the vast quantity of investment information available can be overwhelming and intimidating. The good news is that this chapter can help you begin to work through the maze of information and become a more informed investor. Educational sites are a good place to start. By mastering the basic concepts presented by these sites, you will be better prepared to identify the types of information that you will need to improve your investment decision-making skills.

Investment Education Sites

The Internet offers many articles, tutorials, and online classes to educate the novice investor. Even experienced investors can find sites that will expand their investing knowledge. Here are a few good sites that feature investing fundamentals.

· Investing Online Resource Center ( http://www.investingonline.org ) provides abundant information for those getting started online as well as those already investing. It includes an online quiz that, based on your answers, will categorize your readiness for trading. There is even an investment simulator that creates an interactive learning experience that allows the user to “test drive” online trading.

· InvestorGuide.com  ( http://www.investorguide.com ) offers InvestorGuide University, which is a collection of educational articles about investing and personal finance. In addition, the site provides access to quotes and charts, portfolio tracking software, research, news and commentary, and an extensive glossary of investment-related terms.

· The Motley Fool ( http://www.fool.com ) has sections on investing basics, mutual fund investing, choosing a broker, and investment strategies and styles, as well as lively discussion boards and more.

· Investopedia ( http://www.investopedia.com ) features tutorials on numerous basic and advanced investing and personal finance topics, a dictionary of investing terms, and other useful investment aids.

· WSJ.com  ( http://www.wsj.com ), a free site from the Wall Street Journal, is an excellent starting place to learn what the Internet can offer investors.

· Nasdaq ( http://www.nasdaq.com ) has both an Investing and a Personal Finance section that provide links to a number of investment education resources.

Other good educational resources include leading personal finance magazines such as Money, Kiplinger’s Personal Finance Magazine, and Smart Money.

Investment Tools

Once you are familiar with investing basics, you can begin to develop financial plans and set investment goals, find securities that meet your objectives, analyze possible investments, and organize your portfolio. Many tools once used only by professional investment advisors are now free online. You can find financial calculators and worksheets, screening and charting tools, and stock quotes and portfolio trackers at general financial sites and at the sites of larger brokerage firms. You can even set up a personal calendar that notifies you of forthcoming earnings announcements and can receive alerts when one of your stocks has hit a predetermined price target.

Planning

Online calculators and worksheets help you find answers to your financial planning and investing questions. Using them, you can determine how much to save each month for a particular goal, such as the down payment for your first home, a college education for your children, or a comfortable retirement at age 65. For example, the brokerage firm Fidelity has a number of planning tools: college planning, retirement planning, and research tools. One of the best sites for financial calculators is the Financial Industry Regulatory Authority (FINRA). It includes numerous tools that enable investors to perform tasks such as evaluating mutual funds, determining how much money to save for college expenses or retirement, or calculating the monthly payment on a loan. Figure 3.1 shows the Tools & Calculators page of FINRA’s website. For example, if you click the Loan Calculator link, the site will ask you to submit a loan amount, an interest rate, and a term for the loan (in months), and then you simply click the CALCULATE button to find the monthly loan payment.

Screening

With screening tools, you can quickly sort through huge databases of stocks, bonds, and mutual funds to find those that have specific characteristics. For stocks, you can select stocks based on their price-to-earnings ratios, market capitalizations, dividend yields, revenue growth rates, debt-to-equity ratios, and many other characteristics. For bonds, you can create screens based on the bond issuer’s industry, as well as the bond’s maturity date or yield. For mutual funds, you might identify funds based on the required minimum investment, a particular industry or geographic sector, or the fees that a fund investor must pay. For example, one tool asks you to specify the type of stock or fund, performance criteria, cost parameters, or other characteristics and then it provides a list of securities that meet your investment criteria. Each screening tool uses a different method to sort. If necessary you can do additional research on the individual stocks, bonds, or mutual funds to determine which ones best meet your investment objectives.

Zacks Investment Research provides some of the best free tools on its website. Figure 3.2 shows the opening page of Zacks “Stock Screener” and some of the ways you can sort stocks based on their characteristics. For example, you could identify a set of very large, dividend-paying companies by using the “Market Cap” item to select only those companies with a market capitalization (price per share times number of shares outstanding) greater than $100 billion and the “Div. Yield %” item